Defense Companies Warn Thousands Of Layoffs Imminent Due To Shutdown
forbes.com
forbes.com
The basic gist is that if contractors that supply all of one component or product dry up, those former employees don't just stay unemployed, they go to work in other industries. But, if in 5, 10, or 20 years, you decide you actually need that component or product again, you can't just flip a switch and re-activate manufacturing. The knowledge is gone, all the workers you had who were trained in the process have gone into new fields, and rebuilding your military production infrastructure is very painful. For a good example of this in recent years, FOGBANK.
FOGBANK was a mysterious classified material critical to creating nuclear warheads. Following the turn-down of the cold war and missile reduction plans, the manufacturing plant was mothballed. And the process for creating it was so secretive that no one remembered quite how to make it. Decades later, when aging missiles needed replacements, the process for manufacturing was lost and scientists couldn't reproduce the process based on the information left behind. The US government ended up spending a decade and over eighty million dollars just to research and rediscover the manufacturing process for this one particular component.
http://en.wikipedia.org/wiki/FOGBANK
Obviously FOGBANK is an extreme case, but it's a fair point worth considering. Drastic cuts to military contractors may leave large holes in military supply, especially of sensitive and classified materials.
NPR Planey Money episode: http://www.npr.org/blogs/money/2013/08/23/214928040/episode-...
The flipside is that it's impractical to pay companies to maintain the capacity to build everything they've ever built for all time. Imagine what it would cost IBM to keep people trained in building new versions of every product they've ever invented! If it costs billions to adequately document and mothball the construction process for every wheel you've ever made, but it only costs millions to reinvent the occasional wheel, what do you do?
The defense contractors handle that problem by putting those people on other projects. Sometimes it is productive work, sometimes it is just any project with a budget surplus. Their intent is to maintain institutional memory even if the project itself has been mothballed.
That's what I saw happen to people numerous times while working as a consultant to a couple of DoD contractors. I billed a crazy-high rate and they even shuffled me off onto a peripheral program in order to keep me around as a sort of security blanket for the original program that was (slowly) spinning down.
There's a reason the mainframe forward-compat date is 1964, it's so they don't have to!
Well, we didn't exactly "rediscover" the process for manufacturing FOGBANK. That's because we never actually knew the process -- we just thought we did.
The previous production process just happened to include a contaminant that turned out to be a critical ingredient. This is what we had to discover.
As for the money -- how much would it have cost to keep the existing facility running for the past few decades? If this is more than $80 million (including inflation), then it was better to stop manufacturing it.
The massive deficit spending, financed by the Fed, that keeps all of these jobs going, is mostly in fact funded out of the pocket of Americans without their knowledge. If we were forced to balance the budget tomorrow, a million people would lose their jobs. Given the guaranteed increase in the cost of debt over the next decade, that tells you exactly what is going to happen to all of these jobs given our national debt will climb past $20 trillion (just 5% on $15 trillion wipes out social security or the US military).
This shutdown will end very soon, despite the hoopla. Not one of the major financial problems that America has will be resolved however. An even bigger disaster will merely roll closer.
The most surprising thing about what's going on, is the fact that so many people dependent on government largesse have for so long been spared the consequences of the out of control financial problems in DC.
Basically the republicans are such a minority. They are fighting for something they claim to be their ideals, and are willing to drag the whole nation down with them (so far). The big problem is that the majority calls their BS, and not without any merit...
So this passes all the costs onto the states.
I am wondering why state governments aren't foaming at the mouth yet about this.
So this passes all the costs onto the states.
Unemployment insurance is primarily paid for by payroll taxes that go into a dedicated fund. That probably doesn't apply when the federal government decrees an extension to unemployment benefits, but the first 180 days or so come from that dedicated fund.
My understanding is that the payroll tax varies based on the historical rate of lay-offs. So a company that regularly lays people off (say a hollywood production company that lays people off at the end of every movie project) will have a higher payroll tax than a company with much better employment continuity. I could be wrong, that's just what I've been told and I have not dug into the details, although I did marry a woman who works in movie production.
Also keep in mind furloughs are not layoffs - just unpaid leave.
they pay back the salary for the furloughed days once shutdown ends - at least that happened to gov employees after previous shutdowns
And here I thought that the sliver lining of the shutdown was that the government would spend less taxpayer money this year!
So much for that hope.
I went through the shutdown back in the 90s as a contractor working at the Whitehouse and we all got sent home without pay. If you had saved up vacation you could use that, otherwise you didn't get paid and there was no back pay for the furlough period. We basically got laid off for that time period, whereas the government employees got a paid vacation.
Carry on then.
The software engineers rather directly.
The others are there to support the software and other engineers.