Less money = less jobs fo
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Defence:less money = less jobs for everyone?

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In 2011, Europe's defence and aerospace industries generated 734,000 direct jobs. In the US, it's estimated that the US aerospace and defence industry directly employed 1.05 million workers in 2010.

These are just direct jobs. It's estimated that each direct job generates 2.36 indirect and induced jobs. This means that in the US alone, direct, indirect and induced employment connected with the US aerospace and defence industry totals 3.53 million jobs.

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In 2011, Europe's defence and aerospace industries generated 734,000 direct jobs. In the US, it's estimated that the US aerospace and defence industry directly employed 1.05 million workers in 2010.

These are just direct jobs. It's estimated that each direct job generates 2.36 indirect and induced jobs. This means that in the US alone, direct, indirect and induced employment connected with the US aerospace and defence industry totals 3.53 million jobs.

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But the economic crisis has hit defence spending hard.
And this has affected jobs.
In the past three years, NATO countries have cut $120 billion from their combined defence budgets. Most NATO countries’ budgets are below the NATO targets of 2% of GDP and 20% spent on major equipment of the defence budget.

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There are only six countries that approach or exceed
NATO's 2% of GDP target for defence spending.
And only eight who approach or exceed NATO's 20% target of defence budget being dedicated to major equipment spending.

France
1.9%
Defence expenditures in % of GDP
28.2%
% of defence budget dedicated to major equipment
$53,444
Total defence expenditure in millions
Click on the NATO countries
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Defence expenditures of NATO countries, in million US dollars (current prices and exchange rates) and as a percentage of gross domestic product (current prices)

19775
1.9%
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In the US, the Budget Control Act will cut US government spending by
$1 trillion by 2021. The sequester will see much of this come from defence cuts. A survey of 23 economists by Bloomberg News found that predictions of the total job losses for all cuts (including defence) would range from 300,000 to
5.5 million, with a median of 1.5 million.

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Chuck Hagel
Chuck Hagel
US Secretary of Defence

US Defence Secretary, Chuck Hagel, said in 2013 that one of the least drastic way of reaching cuts needed by the sequester would see 40-70,000 less active personnel in the army and 25-65,000 less in army reserves. But he conceded that it may ultimately be more complicated.

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Chuck Hagel
Chuck Hagel
US Secretary of Defence

US Defence Secretary, Chuck Hagel, said in 2013 that one of the least drastic way of reaching cuts needed by the sequester would see 40-70,000 less active personnel in the army and 25-65,000 less in army reserves. But he conceded that it may ultimately be more complicated.

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But the sequester involves a 10 year plan and the US remains the world's richest nation. In Europe, the cuts are biting harder and quicker.
NATO European countries now account for around 26% of the
Alliance's defence expenditures, down from around 30% in 2007.
The reason is the need to service debts and cut spending. To return to their debt levels before the financial crisis, EU states would have to dedicate 1% of their GDP for the next 20 years . This means finding €120 billion a year every year – for the next 20 years.

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But the sequester involves a 10 year plan and the US remains the world's richest nation. In Europe, the cuts are biting harder and quicker. NATO European countries now account for around 26% of the Alliance's defence expenditures, down from around 30% in 2007. The reason is the need to service debts and cut spending. To return to their debt levels before the financial crisis, EU states would have to dedicate 1% of their GDP for the next 20 years . This means finding €120 billion a year every year – for the next 20 years.

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The governments of two of the biggest spenders – the UK and France – are having to look at how much they spend on both personnel and equipment. The UK is cutting its army personnel by 20 000 people. The UK government underspent its budget by £1.8 billion in 2012-2013.

In August 2013, the French government halved its order for the Rafale jet. NATO's European countries’ spend about the same now on major equipment as they did expenditures in 2003 (at just under $50 billion).

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The governments of two of the biggest spenders – the UK and France – are having to look at how much they spend on both personnel and equipment. The UK is cutting its army personnel by 20 000 people. The UK government underspent its budget by £1.8 billion in 2012-2013.

In August 2013, the French government halved its order for the Rafale jet. NATO's European countries’ spend about the same now on major equipment as they did expenditures in 2003 (at just under $50 billion).

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Less equipment to service, maintain and operate – coupled with budget austerity – has hit military numbers. But the lack of orders is hitting jobs from top to bottom in the private sector too.
In November 2013, BAE announced 1,775 job cuts. At the same time, EADS conceded it will need to make ‘hard cuts’ – which may be up to 6,000 jobs.

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Less equipment to service, maintain and operate – coupled with budget austerity – has hit military numbers. But the lack of orders is hitting jobs from top to bottom in the private sector too.
In November 2013, BAE announced 1,775 job cuts. At the same time, EADS conceded it will need to make ‘hard cuts’ – which may be up to 6,000 jobs.

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Job losses have already been seen in prime defence countries and include SMEs (small and medium sized enterprises) – who provide the backbone of the European economy. And the US is suffering too. Defence and aerospace firms there have shed at least 160,000 jobs over the past five years as Pentagon spending has waned.

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Press
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But one of the bargaining chips customers are increasingly using is that they want production of the defence products to increase their own local employment – so more orders for Western defence companies does not always translate into more Western jobs.
Local employment means technology transfer as well, and in time the “partners today” become the “competitors tomorrow” on defence as well.

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Apart from seeking new markets, defence companies are diversifying.
One area is increasingly offering services as well as products. One prime
defence company, BAE Systems, already has half of its sales come from
services. It has contracts such as maintaining the US Navy ships in the US.

Plane
BAE helped set up Air Astana as part of a radar deal with Kazakhstan in 2001.
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Another area is focusing increasingly on new threats such as cyber. Defence companies are increasingly buying up companies that have the skills needed: Jane's Defence calculated that about 14% of defence acquisitions targeted cyber companies in 2011.

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Another area is focusing increasingly on new threats such as cyber. Defence companies are increasingly buying up companies that have the skills needed: Jane's Defence calculated that about 14% of defence acquisitions targeted cyber companies in 2011.

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What's clear is that the defence industry – and the defence establishment in general – is going to have to adjust to the new reality of dealing with less money. And less jobs – or at least traditional ones.

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What's clear is that the defence industry – and the defence establishment in general – is going to have to adjust to the new reality of dealing with less money. And less jobs – or at least traditional ones.

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Photos: Reuters

 

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