Federal workforce trauma is creating a stumbling block for AI adoption

The federal government and the U.S. economy is at a crossroad. There are two contrary but seemingly independent developments that have profound implications for the workforce. Both sides cannot be correct but to build support for what’s unfolding the differences need to be understood and resolved.

One is the rapid transformation of jobs and work systems driven by AI. The frequent headlines contend the drive to roll out AI is the future. It’s inevitable. The titles suggest a solidly optimistic view that AI will be:

• “a Net Economic Accelerator,”
• “a Force for Better Work, Not Job Loss,”
• “a Force for Better Work, Not Job Loss,”
• “a Driver of Safer, More Efficient Daily Life.”

The contrary argument has made the headlines of the country’s more prominent websites:

• CNN — “Tech industry experts warn AI will make us worse ...”
• Forbes — “The Real Threat of AI: WEF Global Risks Report 2025”
• BBC — “Artificial intelligence could lead to extinction, experts ...”
• The New York Times — “The A.I. Prompt That Could End the World”

There have also been reports and columns arguing AI has revealed problems in how government work is organized and managed, and from a GAO report, that the work models are not suited to AI integration.

DOGE made the problems worse

Elon Musk has been very vocal. On one side, he contends AI will create unprecedented abundance, producing goods and services “far in excess” of current levels. He has also argued AI will eliminate most or all human jobs. When that happens, he promoted a form of government-provide “universal high income.”

Musk is relevant of course because of what he and the Department of Government Efficiency (DOGE) did to the federal workforce. Through 2025 DOGE initiated (1) mandatory attrition targets, (2) reductions-in-force plans, (3) a hiring freeze and (4) contract cancellations that removed contractor employees. The actions triggered 348,219 individuals to quit, retire, were laid off or otherwise left federal employment. At the same time, 116,912 people started working for the federal government — a 55.6% decrease from the year before. The net reduction, according to the Pew Research Center, was nearly 238,000.

The impact on the workforce has been pronounced. There has been a loss of institutional knowledge, support functions disappeared, worker shortages have impeded agency performance, and reports contend agencies are struggling to maintain mission delivery. The Brookings Institute expert, Elaine Kamarck, reported the cuts made agencies “scramble to fill critical gaps in services” ... There are time bombs all over the place ... They’ve wreaked havoc across nearly every agency.”

Employees are not open to AI

When the Office of Personnel Management canceled the Federal Employee Viewpoint Survey for 2025, the Partnership for the Public Service created and conducted a similar survey late in the year. It had responses from 11,083 employees across executive branch agencies.

The survey “revealed significant challenges” — read significant declines — in federal employee engagement and morale in 2025. The Partnership’s CEO, Max Stier, made it clear what the decline means:

“We have every red light blinking across the federal government. Morale is as low as imaginable.”

“This workforce has been fundamentally traumatized ... That’s not good for anyone. It’s bad for the workforce, it’s fundamentally bad for the American people, and it will lead to use be less safe, healthy, and prosperous as a society.”

“This loss of expertise directly harms Americans’ access to critical services and will take decades to repair. [The losses leave] dangerous gaps in key federal services, like food safety inspection, Social Security processing, veterans’ health care and disaster response.”

Research in other sectors by Gallup and others shows clearly a demoralized workforce triggers a high cost. In Gallup’s terms, that is when employees are “actively disengaged” or “unhappy and unproductive at work.” There is no direct comparison but the Partnership’s survey shows the “chainsaw” workforce cuts left the workforce “traumatized.” Psychological safety “collapsed.” It could hardly be worse.

The Partnerships analyses show the “reforms to the federal government cost the U.S. economy more than $165.6 billion ...” Possibly more important going forward is the loss of the better performance when employees are fully engaged. Gallup has promoted the value of engaged employees for over three decades. Their research has linked engagement levels to a long list of employee performance metrics.

Gallup “research has repeatedly shown that engaged employees are the lifeblood of successful organizations. They are not just loyal and productive; they the driving force behind innovation and customer satisfaction.” Their research “... reveals a stark contrast between teams with highly engaged employees and those struggling with disengagement.” Companies with an engaged workforce are more productive, more profitable and have higher customer satisfaction.

OPM has reported its measure of employee engagement for years but for unclear reasons has never reported finding a connection between employee engagement and performance. However, it is very clear that is no longer a consideration.

Research also shows clearly disengaged workers are not open and supportive of implementing AI. That point was emphasized in a recent "Forbes" column, “Why You Can’t Lead an AI Revolution Without Engaged Managers.” A column summarizing Glassdoor reviews and social media posts related to AI concluded many “employees are pretending to use AI tools just to comply with internal protocols ... multiple people admitted to exaggerating or fabricating their usage.”

Projected national job losses

From a broader perspective, researchers at Tuft’s Fletcher School of Global Affairs recently released the American AI Jobs Risk Index. It summarized the projected job losses for 784 occupations in 20 industries.

“It is a first-of-its-kind data-driven framework that maps the potential of AI-driven job vulnerability across every major occupation, industry, metropolitan area and state in the United States. ... the Index goes beyond prior studies by measuring actual vulnerability to job loss — not merely exposure — and connecting that vulnerability directly to projected income loss and geography.”

“The Index projects approximately 9.3 million U.S. jobs are at risk of displacement in the next 2–5 years, with a plausible range of 2.7 to 19.5 million depending on alternative adoption scenarios. Associated household income at risk spans $200 billion to $1.5 trillion annually ... equivalent to the economies of Belgium and, under faster AI adoption, approaching that of South Korea.”

“Industry-wide vulnerability averages approximately 6%, but the steepest risks sit in Information (18%), Finance and Insurance (16%) and Professional, Scientific, and Technical Services (16%).”

Based on the Index estimates, the country will lose from the three groups a total of over 3 million jobs. The federal government has an AI estimated 128,500 Information specialists (in 14 job series) and would lose 23,000 specialists.

The biggest losses are projected to be in California, Texas, New York, Florida and Illinois. The losses are also high in the District of Columbia. “Wired Belts” like Ann Arbor and Boulder could become “Rust Belts.” That will have political consequences.

The economic concerns include:

• Job displacement and lost income
• Wage suppression prompted by reduced labor demand
• Increased economic inequality benefiting capital investors
• Erosion of human skills and loss of adaptability

Microsoft co-founder Bill Gates’ made a disturbing AI prophecy: “Humans won’t be needed ‘for most things' in 10 years.”

Public policy debate: Regulation needed?

As long ago as 2021, the European Commission, the executive arm of the European Union, proposed the first EU artificial intelligence law, establishing a risk-based AI classification system. It did not pass initially but in 2024 the EU Artificial Intelligence Act became the world’s first comprehensive AI law.

In contrast, President Trump released a promised “AI Action Plan” in July 2025 that outlined “over 90 federal actions focused on three areas of focus: increasing private-sector innovation, expanding AI-related infrastructure and exporting American AI.” He followed that with three Executive Orders promoting American AI products.

In December he signed an EO intended to override certain state laws on AI, with department heads to identify the laws deemed “burdensome.” All 50 states considered AI-related measures in 2025.

A number of prominent scholars and economists have argued legislation is needed. A core issue is — developments in AI are ongoing and it’s not possible to anticipate in advance what may be warranted. Tomorrow’s AI systems could be very different. It is clear that the legal process is slow, incentives are misaligned and the complexity of AI systems is growing faster than governance.

Questions for Elon Musk: When will the economy warrant creating the government-provided universal high income? Does it ride on high unemployment or low family income? How will it be funded?