Six Ways the Government Shutdown Is Still Impacting the Self-Employed
January 30, 2019
Congress and the President officially re-opened the government on Friday, but effects from the longest shutdown in U.S. history remain, particularly for self-employed workers.
Like federal employees, self-employed workers are still facing serious financial pressure as a result of the shutdown. Both groups are struggling to replace the income they’ve lost over the past few weeks and make adjustments to stay solvent in the near-term.
Here’s a look at six direct and indirect ways that the government shutdown is harming the country’s independent workers.
1. They’re out a months’ pay
From janitors to translators, thousands of self-employed Americans count the government as their biggest client. Like most large American employers, the U.S. Government has increased the number of contractors it uses in recent years, as the gig economy has grown.
Many government contractors returned to work on Monday, just like their federal employee counterparts. While the latter group is still waiting on details of when they’ll get a check that includes back pay for the weeks missed, the former group simply won’t get paid for the forced time off.
Those contractors who performed work prior to the shutdown have been waiting weeks to receive payment on invoices for that work. The government is just now beginning to process those invoices, so the wait will likely continue for longer. “There’s an entire class of professional service providers who are consultants, adding special expertise and advisory services to agencies that now have payment delays,” says Rutgers University Business School Professor Lyneir Richardson.
2. Business remains slow for many
Even self-employed workers who don’t count the federal government as a client saw a fall-off of business during the shutdown. Hairdressers, house cleaners, caretakers and others who happen to have a clientele comprised of government workers saw a deceleration in business as those clients started tightening their belts.
In areas with a sizeable government workforce, workers are having trouble making rent or mortgage payments or other types of payments,” says Danielle Hale, chief economist with Realtor.com.
Government workers and contractors over the past month also put on hold plans for big purchases such as a buying a new home or remodeling an existing one, impacting builders and Realtors, who are generally independent contractors. One in four Realtors surveyed earlier this month said that the shutdown was impacting contract signings and closings.
In areas with a sizeable government workforce, workers are having trouble making rent or mortgage payments or other types of payments,” says Danielle Hale, chief economist with Realtor.com. “They’re certainly not out looking for a house, given that they don’t have income coming in right now.
When federal employees do receive their paychecks, they’ll be focused first on paying overdue bills before they can consider additional discretionary expenses or large purchases.
3. Businesses relying on federal agencies remain in limbo
Many self-employed workers rely on government agencies for licenses, inspections, and loans required to keep their businesses moving remain in limbo as those agencies begin to return to normal operations. Experts expect that it could take months for business to return to usual as those agencies start wading through the backlog of work they’ve missed during the shutdown.
4. They need to focus on debt repayment
As income for many dried up over the past month, many self-employed workers ran into cash flow issues. Since the Small Business Administration was among the agencies shuttered, there were few sources of cash for those workers when they most needed it. That may have meant turning to credit cards, 401(k) loans, or other high-interest sources of cash or putting off payments on existing loans.
“It is still imperative to be proactive and communicate with creditors,” Richardson says. “I advise entrepreneurs to call their credit provider companies today and say simply ‘I have been impacted by the government shutdown. I do not want my credit rating to decline because I may miss a payment or I’m late. Is there any way you can help me?’ Let the creditor know when you can make your next payment. Some creditors may extend the payment due date, waive late fees, and—most important—continue to report the individual as being ‘current’ to credit bureaus.”
5. Competition for gig work has gone up.
Until they receive their paychecks, government workers may still be in the market for gig work as a means of making ends. The availability of on-demand jobs like Lyft drivers or DoorDash deliveries is a great option for furloughed workers who need the cash, but it also represents more competition for that work just as demand may be going down. That could potentially lead to lower rates for both long-term giggers and those forced into the market due to the shutdown.
6. An uncertain outlook
While the nature of freelance work means that the self-employed understand that they have less job security than full-time peers, this this shutdown has upped the anxiety level for anyone who relies on the Federal government (or its workers) as a source of income. After all, while this one’s officially over, there’s a chance of another in just three weeks. “We’re in a situation where we’re normalizing this insecurity around the shutdown,” says Paul Light, a professor of public service at New York University Wagner. “We have another budget that’s going to come up that has to be enacted. There are going to be continuing resolutions again. It’s almost February, what’s Congress doing about next year’s budget? That’s really a problem.”
“They must not let the shutdown corrode their pride,” Light says. “The nation needs them. They are public servants, too.”
As difficult as the last few weeks have been for federal workers and contractors, there are some resources that can help. Soup kitchens and diapers banks that sprouted up during the shutdown to provide essentials to those impacted by the shutdown continue to operate, and some lenders and other financial institutions have said that they’ll work with borrowers impacted by the shutdown.
While it’s easy to feel frustrated, federal contractors should remind themselves of the valuable role they play in public life. “They must not let the shutdown corrode their pride,” Light says. “The nation needs them. They are public servants, too.”