Table of Contents
The paper is divided into the following sections, which together develop the argument intended.
a) Statement of the problem
The one-page problem statement identifies government job cuts as a problem within government that requires urgent decision-making. Recommendations and their justifications are also stated in the statement of the problem.
b) Background information
Having identified the problem, the paper proceeds to give relevant background information that helps indicate the precarious situation in which the contemporary job cuts have placed national economies. The USA is used as a case example for the paper's illustrations.
In this section, government job cuts are contextualized in such a way as can help to identify the typical effects they have to a number of stakeholders such as government agencies, the private sector and the socio-economic status of the nation in general.
d) Recommendations and their Justification
Having identified the problem, reviewed the contemporary scenario based on real facts and the contextualized the problem and its relevance, the paper proceeds to show why urgent decisions are due. More so, the paper details the appropriate measures that could revert the situation for the better and the justifications why the recommended course of action is the most fitting.
The paper finally draws the conclusion about why government job cuts are a contemporary problem in our society, pointing specifically to the stakeholders most affected by such job cuts. The recommendations are restated alongside their justifications.
Statement of the Problem
The global economy has been on recession for almost a year now. Taking the US case as an example, the recession has caused a detrimental reduction in government revenue, coupled by increasing expenditure. In 2009, almost all local government councils registered budget deficits worth billions of dollars (Ben, 2009). Even as the government tries to stimulate economic recovery, there has been an urgent need to reduce overheads and spending commitments of local governments. One way to achieve such measure intent on reducing government spending has been job cuts. As a traditional measure of reducing government expenditure, government job cuts are in themselves not a solution, especially in an ailing economy. It causes adverse ripple effects in the economy that actually aggravate the conditions rather than solve them (Beik, 2005).
Experts agree that the government should stimulate recovery instead of laying people off when revenues dwindle. The public sector is usually thought of as immune to job losses and when this immunity is broken, the economy is further affected. The economy is very reliant on public employment as a whole and job cuts have adverse repercussions for the entire economy. The best course of action would be to reduce costs of delivering essential services, to stop funding non-performing projects and to reduce funding for some long-term projects. The local governments should also focus in developing the projects that could create employment for some of their staff, such that employees are transferred instead of laid off.
Short-term loans and reserve funds could also help in paying the bills as the local governments seeks ways to amplify their revenue generation. The federal government should then focus in stimulating local private sector recovery and growth so that the local governments have adequate revenues for their budget. That done; government job cuts would be unnecessary.
In the recent past, governments all over the world have been hit hard by the global recession. The US in particular, has experienced a great reduction in revenues coupled by increased expenditure. There has been a 7.8% reduction in revenue generation from councils in the US since February last year, a consequence of low interest rates and depressed property market prices. This is equivalent to US$ 21 million daily (Ben, 2009).
Consequently, there has been need to downsize the civil service. This is especially so in many regional councils. Cash strapped councils have realized that the only way to remain functional is to reduce their overheads by first, job cuts for their staff. In areas where tourism is the main income earner, poor national economy has had a great effect on number of tourists arriving at the popular destinations. This has translated to reduction in revenues for local councils and businesses.
The US Local Government Association recently reported that town halls were already experiencing a US $ 4 billion (Ben, 2009). As a result, over 22, 000 workers lost their jobs in California, 200, 000 more are in the process. California only represents the scenario across the US for a period of six months beginning May 2009. Yet this trend did not start recently. For the last two years (since 2007 July), government revenue has been reducing significantly.
Job cuts are never beneficial. Currently however, the repercussions of job cuts are more pronounced than they have ever been in the past. Among those who are loosing their jobs are parents struggling with mortgage payments. Fore closures are becoming a daily routine, banks are making losses, property agents are on a forced, unpaid holiday since nobody is buying property now when they could loose their jobs tomorrow. Children have to change schools and drastically alter their lifestyles to fit the marginalized household incomes.
Illinois for instance had a budget deficit of US $2 billion in the 2009 fiscal year. The governor announced early this year that the state government would be taken measures to recover the deficit. Among these measures, was the elimination of over 1082 Illinois jobs from the state government. The same trend has been experienced across other states. California's deficit for the same year was US $11 billion while New York's was US $5.2 billion.
It is understandable sometimes why governments introduce job cuts. Sometimes the rationale for job cuts is the need to be fiscally responsible in such a way as facilitates payment of bills and provision of core services that the population is reliant on. That withstanding, experts have questioned whether job cuts are the smartest way to deal with a poorly performing economy. Indeed, many economic analysts feel that job cuts only exacerbate the economic situation to more severe levels.
This is mainly because job cuts do not only affect the individuals and their families. Rather, the government job cuts adversely affect a cross section of stakeholders in the country.
Relevance of Job Cuts to Assorted Stakeholders
As detailed in the foregoing section, government job cuts have adverse effects to a cross section of stakeholders in the country's economy. To begin with is the government agency from which the job cuts are implemented. When councils and other departments loose their staff in the down sizing program, they cannot serve their mandate effectively. Service delivery and efficiency is sometime sacrificed in favor of a leaner workforce. The workforce that remains is then overburdened with the responsibility previously entrusted to the eliminated work force.
The fact the individuals who loose their jobs have no other income sources for an extended period of time also overburdens local welfare and assistance programs. Some councils in America today offer mortgage assistance to their citizenly. Such programs become increasingly burdened when job cuts are effected in a particular jurisdiction. Social housing by local councils are impacted negatively by government job cuts since there is an increased need for council funding despite a slowdown in the development of housing projects. Social housing aids and grants become increasingly important due to the failures of private housing development.
The individuals who experience job cuts are themselves severely affected by the downturn of events. They are faced by a sudden loss of income, one they could not have considered in their financial plans at all (Disk, 1998). Government jobs are considered more secure and reliably buoyant even in recession times as compared to jobs in the private sector. Very few government employees ever factor in job cuts in their financial plans. That means that at the time of the job cuts, some are caught up in between mortgage payments, loans and other financial engagements reliant on the constant supply of income. The received benefits are rarely enough to offset such engagements.
In effect therefore, foreclosures and repossessions are a common trend. Families are faced with a drastic change of lifestyle with many of their expenses reduced or completely eliminated. Over 36% of all government job cuts victims usually register bad score credits six months after the job cuts. The financial future of such a family is seriously threatened, not just because of the job loss but also because of the suddenness that such job losses emerge.
The retail market is always affected by job cuts, national chains and small-scale retail stores loose their clientele as people restrain themselves from spending while others have no money to spend in consumables. Only a few people are affected by job cuts, a marginal percentage of the population. But the job cuts create an attitude of panic even in those who are not in the government payroll such that the entire economy suffers recoils and the adverse domino effect of lost confidence in the economy.
Once the families are financially unstable, they cannot honor their loan repay6ments. The private sector also experiences a down turn. Banks and other lenders register losses soon after. The financial sectors as a whole is severely affected by the job cuts since the demand for capital investment reduces, most stock and bonds owners place them on the market and the liquidity of the market gets lower.
The property market is also severely affected since the demand for new property is drastically lowered as people refrain from big commercial engagements such as buying homes (Ben, 2009). Even those who have not been affected by job cuts, usually become pessimistic of the investment market. If the government is cutting jobs, there is a high chance that the investors will judge the market conditions to be risky. The attitude spreads over the nation, almost straining the investment market to its deathbed (Ben, 2009).
The construction, manufacturing, financial retail sectors and many production sectors are severely affected by the job cuts consequent to reduction in consumer expenditure, not only for the laid off workers, but others who feel insecure (Schick & Couturier, 1977). Such job cuts usually stimulate a self-restraint in the general populace, which ends up affecting liquidity and consumer-based trades.
Recommendations and their Justification
Instead of resulting to job cuts as a means of reducing overheads, governments are better advised to take other measures that could be as effective and yet less detrimental to the economy as a whole. For instance, the states or councils with a budget deficit should initiate reduced expenditure in none-performing sectors. Any programs and sectors to which the government commits resources and which is not significantly beneficial to the economy at that particular time should be temporality halted.
Long-term capital investments that cannot be severely affected by a reduction of capital investment should also be considered. Reducing the capital allocation for such projects would only delay them but until make them achievable in the long run. Local authorities should primarily prioritize investments in capital projects. The most important projects during financial depressions are those that generate swift employment to which some government employees can be transferred to instead of being laid off (Clair, 2006).
The budgets of the local government agencies and state governments should also be revised in a bid to reduce spending. When Illinois introduced revisions of the US $4 billion deficit budget, the spending was reduced by 3%, bringing the deficit down with a significant margin. A typical spending reduction measure is freezing salary increment and recruitment for the government employees for instance.
Again, the government should also consider reducing the cost of some services offered such as energy provision and water treatment and distribution. With measures in place to reduce water use and save energy, the government can effectively reduce expenses without adversely affecting the market conditions (Clair, 2006).
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Activating an emergency budget is another viable alternative to government job cuts. Every council and state government has some contingency reserve on hold sometimes going to as much as 9% of total revenues. Activating such reserves in maintaining the Board of Education, the higher education expenditure, sate health programs, the state pension funds and other essential funding is important at a time of strains.
The streak of low revenues always recovers after a while and the economy pulls back. The reserves should be used to safeguard the jobs of the government workers during that time of hardship and when they need it most.
The federal governments always respond with swiftness to rescue the private sector during periods of economic downturn. Recently, the senate passed an over $700 billion bail out fund for the financial markets in the US (Adams & Brock, 2004). Yet the same federal government is always reluctant to help government agencies through instead of having job cuts as their cost reducing measure. Increased Federal stimuli should help the local governments to better deal with dwindling revenues than would cause job cuts.
Finally, the government agencies should result to short-term borrowing to cater for their budget deficits instead of laying people off. Short-term borrowing easily caters for the budget deficits. Recurrent and pressing expenditure like payment of vendors can be facilitated by short-term loans to the government on a solid borrowing plan based on the receiver prospects (Beik, 2005). This will help sustain a work force during hard economic times.
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Job cuts are usually not the best cause of action, especially when the general economy is in a down turn. If such job cuts are implemented, the ripple effects go beyond the individuals involved. The financial sector, investment trends, property markets retail businesses and many other sectors of the economy are also adversely affected (Adams & Brock, 2004). It is therefore well advised that the government result to other measures that could reduce their overheads without having to effect job cuts.
Reduced spending, postponement of capital-intensive investments, delaying long term projects, federal stimulus for government agencies and the activation of reserves are all measures that could easily offer an alternative to government job cuts. Even as the government focuses on the long term challenges of generating growth of the economy and sustaining prosperity, it is important that it takes swift short term actions such as redundancy support schemes for agencies that are in financial constrains. Job cuts should never be viewed as the first course of action or even as a course of action during economic turmoil.