Paychecks on Pause: Lessons Everyone Can Learn From the Shutdown

Many of us live paycheck to paycheck, as a wide range of surveys confirm.

So when those paychecks suddenly stop coming, because of a layoff or other unforeseen event, the effect can be profound and immediate. How do you pay for the basics — food, shelter, child care and more — with no money coming in, especially if you haven’t been able to build an adequate emergency fund?

Virtually all of the nation’s nearly 3 million federal workers are facing life without pay for the foreseeable future as the federal government shutdown (which began Oct. 1) slogs through its third week.

And it’s not just federal employees living with disruption and uncertainty: The livelihoods of an estimated 3 million contractors also depend on federal dollars. Although work continues, for now, on many contracts that had already been funded before Oct. 1, effects of the shutdown are beginning to ripple through the contract sector, with hours trimmed and other measures reported.

As the shutdown drags on, and millions of financially strapped families cut back on spending, effects are bound to spread into an already uncertain economy and an anemic labor market.

For those of us outside the federal workforce, effects of the shutdown may be mostly indirect for now — an understaffed national park, slow government processes. But the experience of federal workers can serve as a reminder to review our own readiness for future financial disruption.

For federal workers and their families, the reality is here and now. If you’re a federal employee affected by the shutdown, we’ve listed some resources below.

Who works for the federal government?

It can be easy to imagine that most federal employees work behind a desk somewhere in the Washington D.C. area. The reality is far different.

“There are a lot of times you see in the media this nasty word, ‘bureaucrat,’ and a kind of a notion that people are very highly paid, and that's just not true for the majority of our membership,” says Jacqueline Simon, policy director for the American Federation of Government Employees (AFGE), which represents more than 800,000 federal and D.C. workers across the U.S. and beyond.

“Our members are working in VA hospitals. They're working in federal prisons,” Simon says. “There are people in the Department of Labor who are doing site visits to workplaces to make sure OSHA standards are being met.”

Robyn Kehoe, executive director of the Federal Employee Education and Assistance Fund, offers a similar perspective. “I do think that there's sometimes a perception that ‘federal employees’ means people at a higher income level making policy decisions, rather than people who are sort of in the trenches doing the work that needs to be done to keep the government going,” Kehoe says. The FEEA is a national nonprofit that, among other things, works to support federal and postal employees in need.

“It's a wide variety of people, and they're all across the country,” says Kehoe, who adds that 85% of them live outside the D.C. area.

What happens to federal employees during a shutdown?

Some of these workers are deemed “essential” and are still working every day. Others are “furloughed” — waiting at home for the end of a political stalemate that shows no signs of ending soon.

Virtually all of them are now living without pay. Federal pay cycles vary, but most federal employees received a partial check in the last week, one that pays for work only through Sept. 30. It may be the last check they get for a while.

It gets worse. In past shutdowns, furloughed workers have received backpay, and the practice became law in 2019. That pay can land weeks after a shutdown ends, but it does eventually come. This time, a White House memo argues that there is a legal basis for withholding backpay from furloughed workers. It’s hard to know if it’s a negotiating tactic or something more concrete, and any such move would be challenged in court, but for federal workers it’s one more uncertainty on a growing pile of uncertainties.

(Note: Typically in a shutdown, military personnel also go without pay, but this time around the White House has found a way to pay active-duty members of the armed forces and some federal law enforcement agents. Postal employees are not affected by the shutdown.)

“The fact of the matter is people are just not getting their paycheck on payday, and it doesn't take a tremendous amount of imagination to figure out what that means to working class people and middle class people who basically live paycheck to paycheck,” Simon says.

“We estimate, based on income and [job] grade, that about 65% of our membership in fact does live paycheck to paycheck and does not have any kind of nest egg that would be adequate to pay rent or mortgage or daycare or car payments or anything like that in the absence of a paycheck,” she adds.

(Overall, nearly half of Americans — 48% — say they're currently living paycheck to paycheck, according to a September NerdWallet survey.)

Shutdowns are not rare — but most end within a few hours or, rarely, days. The longest on record lasted 35 days in 2018-2019, during President Donald Trump’s first administration. The current shutdown is already the third longest in history.

'A shutdown fund'

Amanda Barroso, a NerdWallet writer who lives outside Atlanta, is married to an employee of the Department of Veterans Affairs. He is considered an essential employee and reports to work every day, but is not currently receiving pay.

When he took the job, it was not long after the 35-day shutdown that ended in 2019. They built their budget around the possibility of a repeat and built up a healthy emergency fund.

“Our emergency fund has always, to him, been a shutdown fund,” Barroso says. “So, we wanted it to be robust. It's still not as much as I would want it to be. It's really hard to build up an emergency fund.” As an additional hedge, he moved his personal banking accounts in January from Bank of America to a credit union that offers emergency assistance loans.

So while they are better off than some, Barroso and her family are still actively cutting back on spending because of uncertainty over how long the shutdown will last.

“We're rethinking the purchases that we're making every day,” Barroso says. For an upcoming birthday, for example, “My husband had bought me this Skylight Calendar thing that I've been talking about, but it was, like, $250, and I told him to return it yesterday. He was grumpy about it, but I was like, ‘Look, we could use that. That could be groceries for a couple weeks.” They also cancelled a planned anniversary dinner.

She and her husband have also been talking about what regular payments they could cut if the shutdown drags on — items like Amazon Prime, streaming services and satellite radio. “The challenge with a shutdown, maybe versus a job loss or something, is that we could get a notification in 15 minutes that this is over,” Barroso says.

“There's an element of this that really makes you think, like, what do we actually need? So it's clarifying, in a way.”

What can federal workers do to cope financially?

Many of the tactics that shutdown-affected workers can adopt mirror those for workers experiencing a layoff or other job loss:

• Cut back all but essential expenses.

• Look to community resources, like food banks.

• Check to see if mortgage, phone and utility providers offer hardship programs. 

• Take on part time or gig work. 

Under certain circumstances, and depending on the state of residence, federal workers may be eligible for unemployment benefits. Kehoe’s group, FEEA, offers a resource page that includes state-by-state links for unemployment offices as well as other resources.

FEEA has also activated a program that offers shutdown microgrants to federal employees who make less than $60,000 per year. There were almost 1,300 applicants within days of opening the program.

“So these are very small grants. This time around, $150 is the maximum amount,” Kehoe says. “But it helps somebody who's furloughed or who's working in excepted status but not getting a paycheck right now, to buy gas to get to work, or buy some food for their family, or maybe pay a utility bill, or something like that, just to help folks as they're trying to get by.”