A Quick Calculation of Shutdown Costs on Connecticut
Posted on by Sarah Ficenec, Ph.D.
As I write this blog, the partial shutdown of the U.S. government shows no signs of abating. Local and state news have covered the impacts on the state, with most of the focus on the federal employees who are furloughed or working without pay. As just one example, see this recent article from The Hartford Courant.
We can also investigate these effects using data available from the federal and state governments along with concepts such as economic multipliers to give us simplified estimates of the impacts that could be found though the more complex economic impact analyses that CERC undertakes for clients across the state.
In 2017, there were just under 8,000 federal employees in Connecticut (per the Connecticut Department of Labor statistics), once we subtract out military and postal employees since they are not impacted by the shutdown. While this total includes other federal workers who are not furloughed or working without pay, it also does not include the U.S. Coast Guard employees who are impacted (since USCG is part of the Department of Homeland Security, and so affected by the shutdown); for the purposes of this exercise, we’ll assume those two groups balance each other out.
The average weekly wage for a federal employee in Connecticut is just over $1,400, so those 8,000 employees have not received over $45.8 million in pay for the four weeks of the shutdown. Those employees will eventually receive their backpay, thanks to a bill passed by Congress and signed by the president, but until then they need to pare back their spending as many are living paycheck to paycheck. Even those utilizing personal savings, money borrowed from family, friends, or a bank, or businesses that are allowing them to postpone payment for services until the shutdown is over are still likely severely limiting their spending compared to when they receive their regular paychecks.
That “lost” spending can be estimated by economic multipliers, as every $1 in additional earnings by a federal civilian worker results in $1.87 in earnings throughout the state’s economy (including the initial federal earnings). Our back-of-the-envelope calculation, then, results in over $85.6 million in lost earnings throughout the state. This includes retail spending not made, child care not used, or meals not eaten at restaurants in order to save money.
The impact on federal contractors is likely even greater, as many of these individuals and their employees are also facing furloughs but, unlike the federal employees, many will not receive backpay once the shutdown is over (although some in Congress are trying to take steps to correct some of this). As demonstrated by this article in the CTPost, a range of nonprofits and businesses – and their workforces – face income losses.
Paul Light, an expert on public service, estimated that 4.1 million people have been affected by the shutdown because their work is funded by federal contracts or grants. If Connecticut has a share of this employment similar to its overall share of national federal employment, that would be over 26,000 workers. At Connecticut’s average weekly wage of almost $1,300, this would be total earnings of over $136 million for the four-week shutdown, with another $104 million in lost earnings as this spending does not ripple through the wider state economy.
In total, then, for every month of the federal partial shutdown, Connecticut could see lost earnings of over $182 million in earnings by federal employees and contractors and another $144 million in earnings in other businesses and nonprofits as the lost federal earnings are not spent in the wider economy. This is a total loss of over $326.6 million per month, or 3.5% of total monthly earnings in the state, and are only one piece of the shutdown’s impacts if it goes on much longer and programs such as SNAP, WIC, and HUD housing vouchers no longer receive the necessary federal funds.