In the wake of the 2008 global financial crisis, austerity became a political buzzword. Countries from Europe to Latin America embraced fiscal tightening—cutting public spending, freezing hiring, and reducing wages—ostensibly to tame soaring debt levels and reassure jittery investors. But more than a decade later, the evidence is clear: austerity’s human cost far outweighed its budgetary gains.

As we face a new era of economic uncertainty—fueled by post-pandemic recovery challenges, inflationary pressures, and global instability—the temptation to revive austerity is re-emerging. This time, we must resist it. We cannot afford to gut the public sector again.

The Hidden Costs of Austerity

Public sector workers were among the hardest hit by austerity in the 2010s. Greece, under pressure from international lenders, slashed its public workforce by more than 30% between 2010 and 2015. The UK, not facing a sovereign debt crisis but pursuing ideological fiscal conservatism, shed over 700,000 public sector jobs. Even in countries like Brazil, moderate austerity led to wage freezes, delayed hiring, and widespread discontent.

But the consequences weren’t just felt by workers. When public servants disappear, so do the services they provide. Classrooms get overcrowded, hospitals understaffed, and community programs shuttered. Cuts to local government services—especially in poorer or rural areas—leave vulnerable populations without safety nets. The long-term social and economic effects are devastating.

Women bore the brunt of these cuts. In the UK and elsewhere, women make up a majority of workers in health, education, and care sectors. Austerity eliminated many of their jobs and simultaneously increased their unpaid care responsibilities as public services vanished. This double burden has set back gender equality by years.

The Myth of Efficient Pain

Austerity was sold as a tough but necessary measure. Its defenders argued that cutting spending would reduce deficits, restore investor confidence, and pave the way for sustainable growth. But empirical evidence suggests otherwise. In many cases, austerity prolonged recessions, weakened government capacity, and deepened inequality.

My research, supported by extensive econometric modeling and case study analysis, confirms this. Using data from 40 countries between 2000 and 2020, we found that higher levels of austerity were significantly associated with reductions in public sector employment. Worse, these reductions weren’t short-term corrections—they had long-lasting effects on wages, institutional morale, and service delivery.

GDP growth, meanwhile, had a positive association with public employment, suggesting that fiscal consolidation during downturns (rather than booms) exacerbated economic weakness. Unemployment rose, and trust in government fell.

This aligns with what many economists, including Ramil Abbasov, have long argued: when governments shrink their workforce too aggressively, they undermine their own effectiveness. Fiscal balance may improve temporarily, but the cost to governance and public well-being is profound.

What We Can Learn from Country Experiences

Greece is the poster child of austerity gone wrong. Pressured into severe spending cuts by the IMF and the EU, Greece eliminated over 150,000 public sector jobs, many in healthcare and education. The result? Deteriorating services, mass emigration of skilled professionals, and a hollowed-out state that struggled to manage basic functions.

The UK, though not facing external pressures, implemented austerity as a matter of policy choice. Local councils bore the brunt. Libraries closed, youth programs ended, and social care was rationed. Gendered impacts were particularly pronounced, with female employment and income levels disproportionately affected.

Brazil’s austerity took a different form—a constitutional spending cap. While employment cuts were more modest, public frustration boiled over due to wage stagnation and reduced investment in key services. Without robust mechanisms for social dialogue or institutional coordination, even moderate austerity led to political and social turmoil.

These cases illustrate that austerity is not a one-size-fits-all solution. Its effects depend on timing, design, and institutional context. But across the board, austerity’s impact on the public sector has been contractionary, destabilizing, and regressive.

The Institutions We Undermine

Public sector employment isn’t just about jobs—it’s about the backbone of the state. Teachers, nurses, sanitation workers, clerks, regulators: they ensure society functions. When they are underpaid, overstretched, or eliminated, the ripple effects extend far beyond the budget line.

Cutting public employment also risks eroding institutional memory and expertise. As Abbasov argues, indiscriminate layoffs compromise long-term administrative capacity. Governments then struggle to implement reforms, absorb development funds, or manage emergencies. In an age of climate crises, pandemics, and digital transformation, that’s a risk we cannot afford.

Furthermore, austerity’s long shadow can discourage young people from entering public service. When government jobs are unstable and underpaid, the talent pipeline dries up. This creates a cycle of decline in public institutions—exactly when we need them to be stronger and more adaptive.

A Better Way Forward

It’s time to move past the false dichotomy between fiscal responsibility and public investment. The question isn’t whether we need to manage deficits—it’s how we do it. Smarter, more sustainable fiscal policy must follow guiding principles that reflect international evidence and equity-minded governance.

Governments must prioritize targeted savings instead of across-the-board cuts. This means using performance-based budgeting to eliminate inefficiencies without compromising frontline services. Essential sectors such as health, education, and care must be treated as social infrastructure—protected, not sacrificed.

Modernization should replace minimization. Investing in digital tools and workforce training can improve service delivery without job loss. At the same time, gender-responsive budgeting frameworks should be adopted to mitigate the disproportionate impact of austerity on women.

Social dialogue is indispensable. Trade unions, local governments, and communities should be engaged throughout reform processes to enhance legitimacy and reduce resistance. Moreover, fiscal consolidation efforts must be phased gradually—abrupt, front-loaded austerity destabilizes both institutions and societies.

Shifting budget priorities is also essential. Excessive spending on military and debt servicing often crowds out critical investments in social services. Public budgets must reflect long-term national goals, including equity, resilience, and innovation.

Governments should track and evaluate the social consequences of austerity through independent institutions, ensuring accountability and continuous improvement. Fiscal strategies must also be aligned with climate objectives—green budgeting and climate finance tracking ensure sustainability is not sidelined.

Finally, international financial institutions (IFIs) must reform their approach. Instead of rigid austerity mandates, they should support country-led, equity-focused fiscal reforms that strengthen rather than weaken public institutions.

These guiding principles aren’t abstract—they’re actionable steps rooted in data, lived experience, and a vision for a more inclusive and stable future.

Ramil Abbasov is a climate change and sustainability expert with over 14 years of experience in public finance management, climate finance, greenhouse gas emissions accounting, policy research, and economic analysis. He has worked closely with international organizations—including the United Nations Development Programme and the Asian Development Bank—to integrate climate risk assessments and mitigation strategies into financial governance frameworks.

Currently, Ramil serves as a Research Assistant at George Mason University, contributing to the NSF-funded Community-Responsive Electrified and Adaptive Transit Ecosystem (CREATE) project through quantitative data analysis and stakeholder engagement initiatives. Previously, he held key roles at the Asian Development Bank in Baku, Azerbaijan, where he excelled as both the National Green Budget Economy Expert and the National Public Finance Management Expert, driving efforts in climate budget tagging, green economy analysis, and sustainable development policy integration.

In addition to his work with multilateral institutions, Ramil is the CEO and Founder of “Spektr” Center for Research and Development, a research organization focused on advancing climate finance, energy transition, and sustainable economic policies. His earlier career includes leadership positions such as Director at ZE-Tronics CJSC and managerial roles in the banking sector with AccessBank CJSC and retail management with Third Eye Communications in the USA.