With the stage set for Trump’s second term and Department of Government Efficiency (DOGE) all but a done deal, mass layoffs of federal employers seem to be on the horizon. But that’s just the first act—the sequel is a talent war in the private sector.
It won’t be long before public sector talent starts finding opportunities in the private sector, bringing changes to hiring practices, wages and workforce dynamics in industries already feeling the strain. Here’s what federal downsizing could mean for industries and individuals alike—with insights from experts in the fields.
Opportunities in a leaner workforce
Everyone has a stake in the upcoming exodus—something to gain and something to reflect on.
First up: the government. With his co-chief Vivek Ramaswamy, Elon Musk, Trump’s hand-picked leader for DOGE, has promised sweeping reforms: axing federal jobs and slashing inefficient spending. Musk claimed he could reduce the federal budget by $2 trillion, around one-third of the federal government’s annual expenditure.
While that may sound drastic, the benefits of downsizing on organizational performance are well-documented.
The public sector reforms in New Zealand during the 1980s and 1990s—known as the New Public Management model—are a good example of how decentralizing authority and implementing performance-based budgeting can enhance accountability, promote cost-efficiency and deliver more concrete benefits for citizens.
Similarly, research by Karthik Muralidharan and Venkatesh Sundararaman, on-contract teachers in India, also suggests that diversifying staff use—such as using contract-based staff to fill gaps created by budgetary constraints or headcount limits—could cut significant costs while boosting student performance.
Now, assuming DOGE’s ambitious goals can push past the hurdles of congressional appropriations—challenges that stymied similar efforts during the Reagan administration—this could mark a significant step toward government efficiency.
However, a leaner government achieved through downsizing—unless justified by support strategies—might lead to unwanted consequences such as increased job insecurity. In view of this, it’s worth taking a closer look at the potential impact of displacement on government employees.
Not everyone displaced is doomed
The implications for displaced workers are multifaceted. For some, the shift may come naturally, but for others, the differing expectations and workplace cultures could create a few roadblocks.
For example, the private sector operates on a result-driven culture, which is the opposite of the public sector often strained by the red tape, says Clark Lowe, CEO of O’Connor Company. Therefore, the private sector’s competitive environment can feel tough to public sector workers accustomed to a more relaxed, steady rhythm.
Sherry Fitzpatrick, human resource director at Taunton Village Dental, shares a similar perspective. She notes that the challenges of transitioning to the private sector—such as losing the security of seniority and predictable pay raises—could leave displaced public servants worried about income instability. Adding to their concerns, Fitzpatrick says, is the prospect of starting over in mid-level or even entry-level roles despite their years of experience.
“It’s crucial to acknowledge the difficulty of this time for those impacted,” says Theresa Payton, the White House’s first female chief information officer and now CEO at Fortalice Solutions.
The loss of institutional knowledge and the morale hit for remaining employees are very real concerns, says Payton. Think about it—by the time a public servant leaves, they’ve likely picked up countless unwritten rules, mastered the shortcuts to get things done, and developed key relationships. It’s like losing a “mental map” built over time—one that would take years to build in a new environment.
Despite the immediate challenges, Payton notes the displacement could open the door to new career paths that promise growth in the long run.
Public sector skills, private sector thrills
While public sector roles are known for their stability and comprehensive benefits, private sector companies—offering merit-based bonuses and promotions—often attract those driven by financial incentives and career growth opportunities.
Here’s the encouraging part: current data shows that the tech, healthcare and education sectors are aggressively hiring right now, and the roles in demand are well-suited for former public sector workers’ core skills—such as compliance, cybersecurity and organizational expertise.
This growing need presents a unique opportunity for the corporate sector, which could benefit from a good command of agency mechanics—competencies that former federal workers possess in abundance.
According to Paul L Gunn Jr., founder of KUOG Corporation, the expertise federal employees bring to private companies working with government agencies is invaluable. For example, their understanding of complex regulations like the Federal Acquisition Regulation can help position an organization to secure bids and cater to the needs of government clients effectively.
Another promising sector is healthcare technology, especially as the industry undergoes significant digitization, says Tony Holmes, practice lead for public sector solutions architects at Pluralsight. This is a thriving market for former government IT employees with security and compliance expertise. “Right now, the tech industry faces a significant shortage of skilled workers, and this talent migration could help alleviate bottlenecks,” says Holmes.
For those tired of bouncing from one boss to the next, entrepreneurship is worth exploring.
“When I left the White House, I faced a crossroads that required deep reflection,” Payton says. “The options included joining the private sector, entering academia or building my own company.” Payton opted for the latter. “I saw a gap in the market for human-centered design around technology innovation and cybersecurity solutions. Ultimately, I chose to start Fortalice Solutions, driven by a passion to combine my cybersecurity expertise with a mission to protect people and organizations.”
Beyond a change of scenery, switching sectors is a chance to inject specialized expertise into industries hungry for innovation. But for this talent migration to succeed, businesses must be able to adapt to the new dynamics of a larger, more varied workforce, which could spark changes in compensation and even corporate culture.
Shifting dynamics following the transition
Talent earns its worth, which is why compensation could be a key source of tension during transitions between sectors, says Lowe.
The same can be said for retirement programs, which also differ significantly: private sector employees typically rely on 401(k) plans, while federal employees receive pensions. These systems are structured differently and have profoundly different long-term impacts on workers’ financial security.
Union affiliation might also be an issue, says Lowe. Many federal employees are unionized, and their transition to the private sector can potentially drive up costs and create disruptions for companies.
While competitive compensation is crucial, attracting and retaining talent from the public sector requires more. For instance, clear job descriptions are crucial, says Fitzpatrick, particularly since federal employees are used to a structured environment with well-defined roles. They need to be assured their expertise will be valued for its specific contributions.
Equally significant are the frustrations federal employees often face with bureaucracy and micromanagement, says Holmes. Offering latitude, trust and autonomy is key. It demonstrates that employees’ expertise and judgment are valued, while also easing the transition for displaced workers into corporate roles.
What private sector veterans can expect
For private sector veterans, the influx of government talent could be a double-edged sword.
On one hand, the introduction of skilled workers may enhance the overall talent pool and drive innovation within firms. On the other hand, there may be concerns about job competition, particularly if displaced workers are willing to accept lower salaries.
However, according to Chris Coligado, executive vice president and federal business lead at Fedstack, the influx of former public sector workers into the private sector won’t necessarily create competition for existing private sector veterans.
If anything, their arrival will help complement existing teams. Former federal employees provide special insights into mission-driven operations, but they might need training or upskilling in areas specific to the private sector—like sales or marketing—to do well in their new roles.
On the other hand, employees in the private sector gain from the collaboration as well since it exposes them to upskilling possibilities in public sector-dominant areas, like cybersecurity and compliance.
Holmes suggests that a fusion could create a win-win dynamic.
“Cross-pollination of skills can strengthen teams, with private-sector employees benefiting from the deep regulatory and process-driven knowledge of their new colleagues,” says Holmes. Federal employees, meanwhile, can tap into the private sector’s fast-paced, innovation-first mindset—a dynamic that sharpens skills without necessarily involving cutthroat competition.
Public careers, redefined
While a leaner structure might seem like a win for all, the public sector could find itself stuck in a classic tug-of-war between productivity and its once-vaunted stability—where leaner and more efficient might just come at the cost of what made government jobs attractive in the first place.
Traditionally seen as stable, government jobs offer long-term career prospects that compensate for lower salaries, says Coligado. However, recent developments are reshaping that perception—such as Schedule F, which would reclassify civil service jobs to allow hiring and firing based on political needs. This could potentially weaken the job protections public sector workers have traditionally enjoyed.
With the federal workplace increasingly being viewed as transactional, employees are waking up to the reality that their roles could be swayed by political and departmental shifts. And, in this changing landscape, unions—long a symbol of security—may find themselves less able to provide the support they once did.
If benefits and security continue to shrink, Coligado says, the federal government will need a new approach to stay competitive. Federal salaries must rise to meet private sector standards, as the traditional tradeoff of stability for lower pay no longer appeals.
Affirming this outlook, Holmes warns that in the long run, the perception of instability could “widen the talent gap” in public service, as the uncertainty may push younger workers to view it as a less stable career choice and look elsewhere.
Photo courtesy of Gorgev/Shutterstock
