Cuts to USAID – the Fallout Continues (Part 2)

In Part 2 of a short series, this post looks at the loss of employment, domestically within the U.S. and USAID and internationally among implementing partners, NGOs and contractors. With the demise of the role of the US in global development leadership, part 3 will look at the wider disruption to global development assistance and the multilateral architecture that has historically underpinned it. (Read Part 1)

The Employment Implications of USAID Cuts: A Global Shock to Global Development Workforces

Donor Aid and Employment: A Fragile Ecosystem

Donor aid has long been recognised as a driver of employment, not only through the direct hiring of agency staff but also indirectly via implementing partners, managing contractors, NGOs, and local civil society organisations. USAID, with its extensive network of global programs, sustained thousands of jobs worldwide. Sidelining USAID staff and dismantling the organisation has further compounded the damage by eliminating career pathways for young development professionals.

The recent wave of cuts also underlines the disproportionate vulnerability of local staff in aid-receiving countries, particularly women and young professionals employed in sectors such as health, education, governance and gender-based programming.

Studies of aid volatility highlight the ripple effects of donor withdrawal, which can include sudden funding shortfalls, disrupt service delivery and result in layoffs, downsizing, and broken institutional memory (Bulir & Hamann, 2008; Celasun & Walliser, 2008). These impacts are most severe in humanitarian and post-conflict contexts, where donor funding can contribute a significant portion of national employment opportunities and economic recovery. In such contexts, development aid is not merely supplementary, but foundational to workforce stability.

Trump’s Rationale for USAID Cuts

The Trump administration’s rationale for cutting USAID funding was rooted in a combination of economic nationalism, fiscal conservatism and a transactional view of foreign relations. Today, many countries appear to adopt a transactional approach to donor assistance by offering funding in targeted sectors not purely out of altruism, but with the expectation of reciprocal support on a yet-to-be-determined issue in the future. However, under the banner of “America First,” Trump argued that U.S. taxpayers should not be financing development overseas while domestic issues like healthcare, jobs and infrastructure remained underfunded. Trump and his former head of Department of Government Efficiency (DOGE), Elon Musk, frequently questioned the effectiveness of aid. “USAID is a criminal organization,” Musk wrote on his social media platform, X, on February 2, 2025. “Time for it to die” which suggested that funds were misused and that U.S. assistance failed to produce measurable benefits for U.S. interests.

In his first term as President, Trump also adopted a transactional lens, asserting that aid should be tied to political loyalty or strategic cooperation. Countries that ‘voted against the U.S.’ in multilateral forums or acted contrary to American interests were singled out for cuts. In 2017, U.S. Ambassador to the United Nations, Nikki Haley, echoed this sentiment, warning that the U.S. would be ‘taking names’ of countries opposing its contentious stance to recognise Jerusalem as the capital of Israel.

Its behaviour and use of the forum of the United Nations comes at a time when it is in arrears of approximately US$1.5 billion to the United Nations regular budget, making it the largest debtor among member states, also with a significant portion of the unpaid amount for peacekeeping operations standing at US$2.7 billion.

Furthermore, efforts to downsize USAID were aligned with a broader ideological push to reduce the size of the federal government and reallocate spending away from global development priorities and payments to multilateral organisations. While popular among isolationist and populist constituencies, critics warned that such cuts undermined U.S. soft power, weakened global stability, and risked more costly crises in the future. 

However, the funding cuts also have broader economic implications for the US economy with one estimate of the dismantling of USAID costing the economy US$23 billion in exports, and putting over 200,000 American jobs at risk. This impacts particularly in sectors like agriculture and manufacturing that benefit from development aid programs. Precisely the opposite effect of Trump’s economic direction.

Global Employment Losses from USAID Cuts

The scale of the current USAID reductions is staggering. An estimated 60,000 development workers globally which include program officers, health professionals, teachers, and trainers are projected to lose their jobs due to the termination or suspension of USAID programs. Contractors delivering U.S. foreign aid have been hit particularly hard. 

For example, in March 2025, Johns Hopkins University (The Guardian) announced it was planning to cut more than 2,000 jobs after an US$800 million cut in USAID funding, affecting both domestic and international positions. 

Chemonics, the managing contractor for a large health supply chain program has laid off 750 U.S. based staff. DAI, another large managing contractor also operating in the health sector has had to lay off over 380 staff. 

FHI 360 announced the elimination of 483 US based roles, while also terminating contracts for more than 700 international staff in other countries globally. 

Nonprofit research institute RTI International laid off over 370 domestic employees and halted major programs such as Tusome in Kenya, and three programs in Nepal, the Early Grade Reading Program, Inclusive Education for Children with Disabilities and the Marginalised Youth Support in Karnali and Madresh have all been suspended. These programs have previously been lauded as success stories in education assistance and their discontinuation of early-grade reading and literacy programs affects not just learners, but the employment of local educators, translators, curriculum developers and administrators.

These cuts reduce employment and erode institutional knowledge and disrupt development trajectories in recipient countries. The cuts have reverberated across sectors central to both development and employment not only education noted above but also health and food security.

Health:

In South Africa, the withdrawal of over US$430 million in U.S. health aid has destabilised the country’s extensive HIV/AIDS treatment programs. Clinics have closed, some 8,000 health workers have been laid off and medication access has become uncertain. 

In Uganda, reductions in USAID support for HIV and malaria vaccination programs, and maternal and child health, led to the closure of community clinics and job losses among midwives, nurses and program coordinators. 

In Ethiopia, approximately 5,000 workers, focused on HIV and malaria prevention, vaccination programs and support for vulnerable women, have lost their jobs due to the termination of USAID contracts.

Food Security:

The McGovern-Dole Food for Education Program, managed by the U.S. Department of Agriculture with USAID collaboration, cancelled 17 projects in 2025, affecting Honduras, Kyrgyzstan, Sierra Leone, and Nepal. The cuts triggered layoffs of school staff and left tens of thousands of children without daily meals. The program was administered by Catholic Relief Services and served 780,000 children across more than 11 countries.

In Somalia, the withdrawal of U.S. aid has forced organisations such as Save the Children to close nutrition centres putting tens of thousands of children's lives at risk. 

Livelihood Initiatives:

Finally, the termination of USAID funded programs has disrupted various livelihood initiatives providing literacy and vocational skills. In Mali, the abrupt cut in foreign aid led to the shutdown of the ‘Shifin ni Tagne’ a US$25 million literacy program that taught approximately 20,000 Malians to read and write in local languages and equipped them with vocational skills.

Local Employment and Donor Strategies

The Lowy Institute's Pacific Aid Map (2024) indicates a global donor trend to support locally led development, which naturally boosts local employment. In the North Pacific, a substantial amount of US development funds had previously been implemented via public institutions, with an emphasis on government-to-government assistance through the Compact of Free Association. This directly created jobs and stimulated local economies. 

Other donors, including Australia, have reinforced this model through direct budget support and infrastructure investments, especially in Papua New Guinea and Solomon Islands, where local contractors, community organisations, and public servants benefit from increased employment opportunities.

In contrast to the emerging model of community-driven, contextually grounded aid delivery, the USAID rollback has resulted in widespread layoffs that have disproportionately affected local personnel, most of whom operate without formal labour protections or adequate social protection systems. Without them, health systems, education reforms, and climate resilience programs cannot function effectively.

Strategic Consequences: Eroding Trust and Capacity

These cuts to USAID and its globally implemented programs, and impacts on downsizing diplomatic representation are more than bureaucratic reshuffles. It represents a tectonic shift in the international development architecture. Not only are development outcomes threatened, but the trust between donors and communities is being frayed. Layoffs signal unpredictability and weaken the social contract that underpins cooperation in fragile and developing regions.

Crucially, the emphasis on locally led development must be accompanied by predictable, sustained funding. Programs that engage local professionals, embed power-sharing, and build institutional capacity are more resilient to shocks (World Bank 2025; World Bank 2023).

Conclusion: An Avoidable Employment Crisis

The employment impacts of the USAID cuts are immediate, widespread, and disproportionately felt in the Global South. They undermine years of progress in building local expertise and institutional capacity, and threaten to derail hard-won development gains in health, education, food security and governance. Moving forward, donors must prioritise stable, locally led aid systems that create employment, foster trust, and deliver development outcomes. The USAID budget cuts are leading to significant disruptions in global health and humanitarian efforts. With the long-term consequences of these actions still unfolding, debates will be ongoing about the role of US foreign aid in promoting global stability and health.

Simon Fraser assists teaching International Development Studies at the University of Adelaide and is completing a doctoral thesis on donor funding of education programs in the Pacific. He has over 30 years’ experience in the development sector, having lived and worked in long term positions in India, Malaysia, Laos, Vietnam, Kiribati, Vanuatu, Mongolia and The Philippines. He has held Team Leader and economist/education specialist consulting positions on programs funded by the World Bank (Guyana), United Nations Office on Drugs and Crime (Laos PDR) Asian Development Bank (Nepal, Mongolia, Tajikistan, Sri Lanka, The Philippines, Kiribati and Indonesia) and Australia’s Department of Foreign Affairs and Trade (Kiribati, Vanuatu, Mongolia).  

The author acknowledges and thanks Emeritus Professor Brian Stoddart and Amber Hall for comments on earlier drafts. Any errors are the sole responsibility of the author and do not reflect the views of the University of Adelaide.