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Federal Employees’ Struggles More Urgent In Shutdown’s Second Month

Congress is now debating bills to fully reopen the government after the partial shutdown is now in its second month. Many affected workers face real hardships. Many families of public employees have few emergency savings and can’t borrow the money necessary to pay their bills. Naturally they will increasingly struggle to make ends meet. A month without a pay check quickly snowballs into serious financial troubles for these families’ future , even if they will eventually get paid.

Parts of the federal government have been shut down since December 22, 2018. An estimated 800,000 federal employees work without pay, while others have been told to stay home, again without pay. The impacted workers have gone a full month without a paycheck. They will eventually get paid, but in the meantime they will have to still come up with the money to pay their bills.

Many families will find themselves in financial trouble during this time. Most at risk are those that don’t have enough emergency savings and can’t borrow from family members and friends to help them out financially . From 2010 and 2016, almost two-thirds of public sector employees had liquid savings – checking accounts, savings accounts, and certificates of deposit, among others – worth less than one-month of their income. And almost one-third of those families with such little emergency funds report that they could not borrow money from family members and friends to pay their bills during that same time. As a result, one-in-six public employee families will quickly face tough financial choices.

These choices will undoubtedly hurt their future economic security. Many will delay paying some of their bills. This could harm their credit score and make it harder for them to get affordable loans in the future, for instance. Some families already started to borrow on their credit cards and some may even turn to payday lenders and pawnshops for money. After all, 22.3% of public sector employees with few emergency savings said in 2016 that they would borrow money in an emergency and not all of them will qualify for the low-interest rate loans that banks are offering to federal employees. High-interest rate loans like credit cards and payday loans, though, burden families’ already stretched finances even further.

Public Employees With Low Emergency Savings Have Few Good Options.Calculations Based on Federal Reserve’s Survey of Consumer Finances

Dipping into retirement savings will likely be another response for many public employees. They could access their retirement accounts either by borrowing from a 401(k) plan or, worse, by withdrawing money prematurely and ultimately paying income taxes and penalties. Pension loans for public employees already tended to be higher than for private sector employees in the past decade. As the shutdown now stretches into its second month, many more will undoubtedly borrow from their retirement savings to help them pay their bills.

401(k) Loans Have Become More Widespread In Public Sector In Last Decade.Calculations Based on Federal Reserve’s Survey of Consumer Finances

And the shutdown is just one financial emergency that federal workers could face. They could very well experience other emergencies, just like everybody else. Somebody in their family could get sick, especially in the middle of flu season. A car could break down, needing expensive repairs. And a spouse could lose their job, particularly as the fallout from the government shutdown ripples through local economies. Many federal employees are already struggling to deal with the mess created by President Trump. Another emergency would just make a bad situation that much worse because so many public employee families have little financial resources to fall back on.

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