Financial uncertainty of government shutdowns
Christoph Herpfer, Ph.D., assistant professor of finance at the University of Virginia Darden School of Business, detailed how lapses in government funding can result in long-term economic consequences.
Dr. Herpfer explained that when government shutdowns occur, federal employees experience job instability that can encourage them to seek employment elsewhere, leading to a loss in human capital and morale, according to a news report from WTOP News. For instance, furloughed employees are more likely to leave their occupation within one year of a government shutdown. However, because of previous cuts to the federal workforce, Dr. Herpfer predicted that furloughed federal employees could make one of two decisions following the government shutdown. While some employees may choose to remain after surviving the cutback of 18,000 jobs in April and May, some could decide that the shutdown was “the last straw” and join the outflow of employees looking for greater job security.
Despite the outcome, employees who leave could be replaced by external contractors who cost about 2.5 times more than maintaining the federal workforce. Dr. Herpfer suggested that a solution to this exodus would require bipartisan support for a mechanism designed to continue funding federal employees in instances where a government shutdown is unavoidable.
Read more: WTOP News
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