Loss of income, even temporarily, can be nerve-wracking. But couple it with an economic downturn that has left wages stagnant for years, meaning less savings to fall back on, and suddenly such an event can become an all-out disaster.
In economics, the process of trying to balance one's level of spending and saving throughout periods of both feast and famine is known as consumption smoothing. A recent study from NBER takes a look at how federal employees managed and manipulated their finances during the 2013 government shutdown in an attempt to figure out how such "smoothing" works in reality.
The 2013 shutdown, which lasted from October 1 through October 16, left approximately 850,000 federal employees at home on unpaid leave as a result of lawmakers' inability to pass a new budget. The study used information collected by a mobile-banking app, Mint Bills, to parse financial data for federal employees whose income was subject to delay or decrease due to furlough. The research showed that, although workers were eventually paid for the days they missed, for one pay period many saw their paychecks drop by 40 percent.
But though the pain was temporary, and arguably small, it wasn't without consequence: Researchers found that affected government employees reined in their weekly spending by about 20 percent, or roughly half of their income loss. Spending returned to more normal levels during the next full pay period.