I mostly agree with your position. However there are a couple of issues that make federal government work distinct from ordinary business.
1. Fired federal workers typically do not get a severance. Those impacted by the recent reductions in force are not receiving severance packages.
2. Government salaries are usually uncompetitive compared to the private sector; the major difference is the value of the pension. Leaving government service early results in a low pension; the pension is usually only worth it after 20 years of service and if one leaves federal service close to retirement age, to max out the "high-3" pension basis.
3. Because federal jobs are partially a stimulus effort to state economies, workers will have relocated to a region where there is no other employer in their field. Relocation will be necessary to find another job. This is less of a factor for the private sector, where workers typically move to locations where multiple employers offer jobs for their field.
A necessary set of reforms will be to simultaneously a.) raise federal salaries to market rate, b.) replace pension contributions with 401k matching, c.) reduce roadblocks for performance firings for tenured employees, and d.) consolidate contractors into federal employment.
Part of the reason federal employment is inflexible is due to the comparatively low income for many fields; mid-career employees have a low incentive for joining. Likewise, the barrier to leaving early is high due to the sunk cost of the pension. A tenured employee with reduced productivity is difficult to remove. Due to the pension obligations, the government is forced to use contractors to fill out the workforce. Contracting companies often take 50% overhead just to have someone doing the same job as a federal employee.
Such a policy change would take substantial bipartisan cooperation, so it's unlikely to be done in the current political environment.