Federal employees work in an environment that is controlled by politics. Anyone working for the federal government knows that after a few months on the job but sometime the message is clearer than ever.
Federal employee salaries are making headlines in the national media (again).
Last week, it was the recent news about the average federal employee making $79,000+ a year with total a total salary and compensation package of about $119,000. (See Federal Pay Gap With Private Sector Growing and Federal Employees and Their Pay: How They Stack Up)
This week, the news is that President Obama has decided to reduce the size of the pay increase in 2010 for the federal workforce. Perhaps last week’s headlines about the average federal salary had an impact on White House staffers or, perhaps, the timing of the President’s decision to reduce the size of a federal pay raise was a political coincidence that will help smooth the way for his decision in Congress.
In any event, President Obama’s letter to the House and the Senate leaders sent out without any fanfare on August 31st noted that a 2.4 percent increase would cost $19.9 billion more than the 2 percent increase he proposed in his 2010 budget. Therefore, he concluded, an average federal pay raise of 2% would be appropriate. (See President Asks Federal Employees to Sacrifice in 2010: Proposes 2% Pay Raise) If the text of this letter sounds familiar, it has much of the same language contained in President Bush’s letter to the House and the Senate. Both letters note the very low federal employee "quit rate" compared to private sector employment.
The President’s letter states that "an across-the board increase of 2.0 percent shall go into effect on the first day of the first applicable pay period beginning on or after January 1, 2010."
A pay raise of 2% would leave federal workers with their lowest raise in two decades. Presidents Bill Clinton and George W. Bush proposed lesser increases three times. Congress has to approve the President’s plan and it has not been willing to go along with less than 2% since 1988. Whether the current Democratic Congress will want to override the President’s decision is doubtful but could still happen.
The 2010 budget passed by Congress follows the President’s proposal to increase military pay by 2.9 percent and federal civilian pay by 2 percent.
Actually, the 2.4 percent is just one of the figures that has been bandied about in Congress. The 2010 authorization bill for the Department of Defense contained the authorization for a 3.4 percent pay raise for military personnel next year. Federal employee advocates jumped on that and asked for "pay parity" meaning that federal civilians would also get an average pay raise of 3.4% in 2010. Assistant Senate Majority Leader Richard Durbin, (D-IL) earlier this year announced legislation that would give federal civilian employees a 2.9% cost of living raise if it were to pass.
Needless to say, an average federal pay raise of 3.4% or 2.9% (instead of the 2.4% cited in Obama’s letter) would have enlarged the federal payroll by a few billion more dollars than the $19.9 differential cited in his letter.
Congress could override the President’s pay decision.
No doubt, the nation’s unemployment rate that is hovering about 10% played a role in the decision to limit the federal pay raise to 2%. There is also little doubt that since Social Security recipients (and federal retirees) are very unlikely to get any COLA increase this year, a raise of 2% probably seemed politically astute.
Federal employee unions are likely to be unhappy with the decision but don’t look for them to stage a rally on the National Mall or in front of the White House to protest the decision. Chances are, their protestations will be relatively mute as there are other favors more important to these organizations that the President can give them down the road. (See Draft Obama Labor Relations Order: What Might It Change If It’s Issued?)
In short, the decision to limit the pay raise is not a politically risky decision. In fact, with articles appearing around the country citing the average pay of federal employees being much higher than the average pay of private sector workers, limiting the raise is probably a political winner.
For those readers who will want to comment that the average pay of federal employees is still 20% or so below what it should be, feel free to send in your comments but remember that you are working in a political environment. The President’s decision has more to do with politics than economics and the political reality is that advocating a lower pay raise for a segment of society with secure jobs, good benefits, and a high average salary is good politics. Any arguments to the contrary will not be very strong under the current economic situation for many voters.