Friday, October 5, 2012

Military Sequestration and Employment

Likely  cuts in the military industrial complex's access to government money wioll kill employment they tell us. Years ago we were told civilian jobs multiplied at the rate of 20-to-1 compared to government military spending. Today the story is that without military spending there ar eno jobs.

With sequestration looming, the Obama administration told contractors to not warn employees that they may be laid off due to massive cuts to defense spending. The political calculus here is obvious, if contractors comply with the Obama administration’s directive, workers across the country —including those in the swing states of Virginia, Florida and Pennsylvania— will not receive notifications under the WARN Act.

The WARN Act is designed to protect “workers, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs.” Many commentators believe that such notifications, if sent, might impact the outcome of the presidential election.

Top Ten States Hit By Sequestration (Source: George Mason University/Chmura Report) Of course, sequestration will have an impact beyond politics, with economists predicting a devastating impact on the national economy and the economy of Virginia, Florida, and Pennsylvania. According to a research report published by George Mason University Chmura Economics and Analytics, total job losses across those three swing states would total 365,484 people.

On a national level, the report states that implementing the cuts in the Budget Control Act of 2011 “would severely impact the economy in 2013 with these losses reflected in reduced Gross Domestic Product (GDP) and a broad based loss of jobs that could add an estimated 1.5 percentage points to the current U.S. unemployment rate.”

The report continued, “[a]s currently formulated, the automatic spending cuts affecting DOD and non-DOD agencies’ discretionary spending authorities beginning January 2, 2013 will: Reduce the nation’s GDP by $215 billion; Decrease personal earnings of the workforce by $109.4 billion; and, Cost the U.S. economy 2.14 million jobs.”

The Virginia economy will be crushed by the cuts, suffering a loss of 207,571 jobs. Florida is expected to suffer a loss of 79,459 jobs while Pennsylvania is expected to lose 78,454 jobs. In light of these potential job losses, a strong argument can be made that contractors should send WARN Act notices even if doing so is purely out of self-interest.

If contractors can make voters aware of the impact of sequestration, it may swing the election in their favor and preserve jobs and contracts, benefiting their bottom line and the states in which they operate.

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