Feeling the Squeeze: Public Employees’ Experiences of Cutback- and Innovation-Related Organizational Changes Following a National Announcement of Budget Reductions

Fiscal austerity is having major impacts on public service organizations, but little is known about the effects of these changes on employees’ well-being, attitudes and behaviors. Following a major UK national government announcement of budget reductions, we conducted a longitudinal field study of employees in diverse public sector organizations across the UK to address how the communication and the implementation of this external policy event affected employees. We ask two questions: First, how does a national policy announcement about substantial budget reductions affect employees’ well-being and attitudes at work? Second, how do cutback- and innovation-related changes that followed the budget announcement affect employees’ well-being, attitudes and behavior? Results suggest that the budget announcement itself – before any changes had been implemented – negatively affected individual well-being and attitudes at work. Further, we found differential effects on employees, depending on whether the budget reductions were followed by cutback-related or innovation-related changes. Increases in cutback-related changes had negative effects on employees, yet an increase in innovation-related changes did not just have less negative, but positive effects on employees’ positive well-being, job satisfaction and engagement over time. However, contrary to previous research, some employee outcomes were not affected by either of the changes in this longitudinal study. We discuss implications of our findings for public management and for the psychological processes underlying the experience of organizational change across all sectors in times of budget reductions.