The Labor Cost Revolution in Federal Contracting: How Trump’s Anti-Union Policies Reshape Defense and Infrastructure Sectors

The Trump administration’s 2025 executive order terminating collective bargaining rights for over a million federal workers has ignited a seismic shift in labor dynamics across defense and infrastructure sectors. By invoking the Civil Service Reform Act of 1978, the administration stripped agencies like the Department of Defense (DoD), Environmental Protection Agency (EPA), and Health and Human Services (HHS) of union-negotiated protections, including overtime rules, health and safety standards, and whistleblower safeguards [1]. While proponents argue this move streamlines operations and reduces bureaucratic overhead, the long-term implications for labor costs, efficiency, and project delivery remain contentious.

Defense Sector: Short-Term Savings vs. Long-Term Risks

The defense sector, a cornerstone of federal contracting, has seen immediate administrative cost reductions. By eliminating union contracts, agencies gain flexibility to adjust wages and employment terms without negotiation [2]. For instance, the DoD’s 2025 Future Years Defense Program (FYDP) projects a $850 billion budget, with operation and support costs rising 1.9% annually through 2029 [3]. However, this short-term efficiency may come at a cost. The Congressional Budget Office (CBO) warns that labor cost savings could be offset by declining workforce morale and retention, particularly in mission-critical roles. A 2026 report notes that the defense industry’s workforce grew by 666,000 in a single year, but attrition rates are expected to rise as union protections vanish [4].

The administration’s broader reforms, including the Modernizing Defense Acquisitions executive order, emphasize speed and commercial solutions. While these aim to reduce delays in procurement, the absence of collective bargaining may exacerbate labor shortages. For example, the Air Force’s modernization of aging aircraft and development of unmanned systems require skilled labor, yet the lack of union-backed training programs could hinder workforce readiness [5].

Infrastructure Sector: Privatization and Regulatory Uncertainty

In infrastructure, the termination of collective bargaining aligns with Project 2025’s agenda to shrink the federal workforce and promote privatization. Agencies like the Department of Transportation and EPA have canceled union contracts, arguing this will reduce labor costs and accelerate project delivery [6]. However, the infrastructure sector faces dual challenges: rising material costs due to Trump-era tariffs and a labor deficit. The Associated Builders and Contractors project a need for 439,000 new construction workers in 2025 alone, with tariffs on steel and aluminum pushing direct construction costs up by 5–10% [7].

The administration’s immigration policies further complicate labor dynamics. Potential mass deportations of undocumented workers could shrink the construction labor force, driving up wages and project costs [8]. Meanwhile, the Infrastructure Investment and Jobs Act’s prevailing-wage requirements add regulatory complexity, forcing contractors to balance compliance with cost efficiency [9].

Efficiency Metrics and Project Delivery Outcomes

The Trump administration’s reforms have yielded mixed results. In defense, the FYDP’s emphasis on commercial solutions and adaptive acquisition frameworks has reduced bureaucratic hurdles, but the CBO cautions that these gains may be short-lived. By 2039, defense costs are projected to rise 11% in real terms, with 64% of the increase tied to operation and support expenses [10]. Similarly, infrastructure projects face delays due to supply chain disruptions and labor shortages. A 2025 study estimates that underinvestment in infrastructure could cost households $3,300 annually by 2039 [11].

Conclusion: A Double-Edged Sword for Investors

Trump’s anti-union policies present a paradox for investors. While reduced labor costs and streamlined procurement may boost short-term efficiency, the erosion of worker protections and regulatory uncertainty could undermine long-term stability. For defense contractors, the focus on commercial solutions and AI-driven technologies offers growth opportunities but requires navigating a volatile labor market. In infrastructure, the push for privatization and domestic sourcing may attract capital but risks exacerbating cost overruns and delays. As the CBO notes, the true impact of these policies will depend on how agencies balance efficiency with workforce resilience [12].

Source:
[1] The Trump Administration Ended Collective Bargaining for 1 Million Federal Workers [https://www.americanprogress.org/article/the-trump-administration-ended-collective-bargaining-for-1-million-federal-workers/]
[2] White House cancels union contracts for hundreds of … [https://www.theguardian.com/us-news/2025/aug/22/trump-federal-workers-union-rights]
[3] Long-Term Implications of the 2025 Future Years Defense Program [https://www.cbo.gov/publication/61017]
[4] Defense Industry Report 2026: Market Data & Innovation [https://www.startus-insights.com/innovators-guide/defence-industry-report/]
[5] Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base [https://www.whitehouse.gov/presidential-actions/2025/04/modernizing-defense-acquisitions-and-spurring-innovation-in-the-defense-industrial-base/]
[6] Project 2025 and Unions [https://betterinaunion.org/project-2025]
[7] Infrastructure deficits spark contractor opportunities [https://rsmus.com/insights/industries/construction/infrastructure-deficits-spark-contractor-opportunities.html]
[8] Summer 2025 Construction Market Trends [https://interactive.usa.skanska.com/skanska/2025-summer-construction-market-trends]
[9] Five Trump Administration Changes In 2025 That [https://bhgrlaw.com/2025/03/26/five-trump-administration-changes-in-2025/]
[10] Long-Term Implications of the 2025 Future Years Defense Program [https://www.cbo.gov/publication/61017]
[11] Infrastructure deficits spark contractor opportunities [https://rsmus.com/insights/industries/construction/infrastructure-deficits-spark-contractor-opportunities.html]
[12] Long-Term Implications of the 2025 Future Years Defense Program [https://www.cbo.gov/publication/61017]