The U.S. Labor Force And The Defense Budget

Over the last twenty years there has been a significant expansion of jobs related to the defense budget. Not only are there many manufacturing and highly technical maintenance and repair jobs linked to the U.S. defense spending on large procurement programs but there are also many high-paying technical jobs supporting the Government offices involved in managing the Department of Defense. Many of these have been created since the Clinton Administration began winding down the civilian workforce in the Nineties. Since 9/11 as the defense budget has grown jobs related to this money have also grown.

Now the Obama Administration is planning on major changes to the defense budget as well as to the DoD workforce. The downturn in the national economy is also having an effect. In Florida many high-technology related jobs have been lost but the defense industry has kept even over the last year. There have been changes at the company level as contracts are won and lost but overall there has been little change. If there are significant cuts or restructuring of the budget then Florida will begin to lose those jobs as well negatively affecting their economy even more.

There is a lot of crowing about Oshkosh winning the MRAP-ATV contract and the effect on that company and the Wisconsin economy. There is hope that suppliers and sub-contractors will gain from the big contract in other parts of the state. Of course if Force Protection, Navistar or BAE Systems had won then South Carolina, Mississippi and Pennsylvania would have stood to gain. A contract in one area hurts another part of the country.

Any downturn in defense spending overall will drag on the economy. In 1996 the Bureau of Labor Statistics estimated that the decline in defense spending since 1987 led to a labor force that was smaller by one million government workers and one and a half million private workers compared to the 1977 post-World War II previous low. Many of the private workers were indirect losses due to the decline in spending by defense related workers. At that time they were predicting the decline would continue into the next century not obviously knowing about the future attacks on the U.S. and the operations in Iraq and Afghanistan.

If the current budget actions continue then the Obama Administration will have to cut defense spending heavily. Like the Clinton years there will be actual shrinkage of the active duty force and major cuts to modernization programs. This will lead to large job losses. Just the minor cuts to Lockheed’s workers in Owego, NY due to the ending of the VH-71 program will affect all aspects of the economy as these are high paying jobs hard to replace. If you multiply this by hundreds as programs are ended across the U.S. the effect will be great on specific areas of the country.

Right now the twenty percent cut to the Missile Defense Agencies budget has not had a big effect, but by the end of 2010 in places like Huntsville, AL or California it may. On top of all the other bad news for the economy and record unemployment major cuts to the defense budget will only exacerbate the problems. Of course there may not be big cuts or ending of major defense programs. The ones cut in 2010 could be restarted as different programs and the effect on the economy might be limited. The 2011 budget sent up to the Hill in seven months will tell the story.