The Trump administration took its first major step toward reducing the number of federal workers. But how will it impact the wider job market if hundreds of thousands of employees accept a “deferred resignation” offer?
The Office of Personnel Management emailed most federal employees Tuesday, Jan. 28, titled “Fork in the Road.” Elon Musk used the same subject line in a similar downsizing move at Twitter.
In the email, government employees were offered the option to quit their jobs by responding to the email with the word “resign” by Feb. 6. OPM said in return, employees will receive pay and benefits through the end of September. There are around 3 million federal employees, although not all are eligible.
“It’s very badly explained in the email and beyond, but apparently, what happens is you resign, you are kept on staff, but put on administrative leave,” former acting Labor Secretary Seth Harris told Straight Arrow News. “You are paid during that administrative leave, but you can be pulled off of administrative leave to do work if you are needed, and that will last until September. So that’s not really a buyout.”
Is the email offer legal?
Unions representing federal employees are skeptical. The National Treasury Employees Union sent a message to members urging them not to resign. The union said the so-called “deferred resignation program” is trying to “pressure,” “entice or scare you into resigning from the federal government.”
“Purging the federal government of dedicated career civil servants will have vast, unintended consequences that will cause chaos for the Americans who depend on a functioning federal government. This offer should not be viewed as voluntary,” the American Federation of Government Employees, which represents 800,000 federal workers, said in a statement.
Harris said it doesn’t appear this is a traditional severance, where an employee and employer cut ties in exchange for a lump sum.
“It appears that you stay on administrative leave and you don’t work,” Harris, who is a senior fellow at the Burnes Center for Social Change, said. “Many federal employees have unions, and the unions are explaining to them, educating them, and also their non-union coworkers, many of whom work side by side, about what this deal really looks like. And they’re explaining that it is not legal to have federal employees on administrative leave for longer than I think it’s a 10-day period. You can’t be on administrative leave for eight months.”
Will hundreds of thousands flood the job market?
A fork in the road https://t.co/vzk1RYbM5u
— Elon Musk (@elonmusk) January 28, 2025
Elon Musk’s America PAC posted to X saying they anticipate 5% to 10% of the workforce will accept the offer, resulting in $100 billion in salary savings. If the estimate is accurate, that could mean up to 200,000 federal employees leaving their positions.
Harris says if Musk’s estimates are correct, it will have little impact on the labor market.
“I don’t think it will have a very dramatic effect,” he said. “You’re talking about 100,000 to 200,000 people. They’re not all going to leave at once. Apparently, this is going to get stretched out over an eight-month period.
“Just to put it into context, in December of 2024 alone, the economy produced [256,000] more jobs,” he added. “So it’s not like the kind of layoff event that we experienced during the pandemic recession, where millions and millions and millions of workers were losing their jobs in a week.”
Harris pointed out that because federal employees are spread out all over the country, the impact will not be isolated.
“If you had 200,000 people losing their jobs just in Washington, D.C., that would have a depressive effect on the local and regional economy,” he said. “But these folks are absolutely everywhere because they’re serving Americans everywhere.”
While Harris doesn’t necessarily believe it will have a major impact on the labor market, he does see it causing issues with the effectiveness of government services, especially amid tax season.
“If half of the IRS frontline staff who advised taxpayers with respect to filing their taxes, if half of that staff took this plan and they left the government, they stopped working for the government, what would that mean to efficiency and to customer service at the IRS?” Harris asked.
“When you offer a blanket exit strategy, you don’t really know who’s going to say yes,” Harris said.
