Shutdown Shock May Endure for Federal Workers - a WSJ op-ed

[question everything]

(snip)

Any notion that federal employees will be relatively unaffected is misguided. Over the past decade, behavioral economists have explored the ways in which we make financial decisions and deal with financial shocks. They’ve discovered that even small and short-lived shocks can have large and lasting consequences... The cost of a traffic ticket, up to several hundred dollars, is relatively small as a share of annual income. But the study found that after a single traffic fine, people were more likely to have unpaid bills and even to be turned over to collection agencies. A traffic fine was enough to put many Americans into dire financial straits.

Financial struggles can also have a negative effect on psychological well-being and productivity. For a 2013 study published in the journal Science, a team of economists and psychologists recruited shoppers at a New Jersey mall to participate in an experiment. Before completing a certain task, a subset of shoppers were given prompts such as the following: “Your car is having some trouble and requires $X to be fixed. You can pay in full, take a loan, or take a chance and forgo the service at the moment... How would you go about making this decision?”

The prompt was intended to make the participants think about their finances. The researchers found that wealthier shoppers (who would have an easy time paying for a car repair) were largely unaffected by the prompt. In contrast, poorer shoppers experienced decreased cognitive performance when they are primed to think about their finances. Withholding paychecks is likely to have similar effects on cognitive functioning.

Perhaps the best way to understand the immediate effects of the current shutdown is to look at the federal shutdown of October 2013, when many federal employees were forced to go without pay or with reduced pay for two weeks. A forthcoming paper in the Journal of Public Economics explores the personal financial consequences of that “large, unexpected drop in pay” for those most directly affected. Federal workers did adjust, the study found, but it was a painful process. People responded to the sudden loss in liquidity by delaying mortgage payments or carrying a higher credit card balance. The impacts were largest for those with the smallest cash cushions, who were left carrying more debt even months after the shutdown.

More..

https://www.wsj.com/articles/shutdown-shock-may-endure-for-federal-workers-11547742617 (paid subscription)

Mr. Luca is the Lee J. Styslinger III Associate Professor of Business Administration at Harvard Business School.

[applegrove]

1. The book 'Enchanted America' goes into how financial anxiety results

in people being way, way more intuitive than rational in their voting (isolated from other factors). Way more so than income level. So people vote way more through emotion and other cognitive shortcuts when suffering from financial anxiety. So they vote against their best interests and thus for republicans. You have to wonder if health care insecurity and college loan repayment insecurity are purposeful on the part of the GOP to make non rich Americans less rational. Maybe that is why Mitch is so happy to let this shutdown continue.

https://press.uchicago.edu/ucp/books/book/chicago/E/bo28752049.html

[RainCaster]

2. So the impact is there - but what will it mean?

If I worked for the government right now, I would be interviewing. That idea of a government job being stable and reliable is gone forever.
That's just my own take on the issue. More critically, what does this change in thought patterns m mean for our economy? What will get cut back, and what echoes will occur through out our country's ecosystem?