The Politics of Federal Pay Rates

By on November 1, 2012 in Human Resources, News, Pay & Benefits

There is little agreement on how much federal employees should be paid. If anything, the gap between those who think federal employees are overpaid and those who think the federal workforce is underpaid is growing wider.

A new document that will stoke the fires of discontent and heat up the political discourse is the latest volley in what is essentially a political dispute disguised as a battle between salary experts.

To add to the complexity of the debate, there is growing disparity in salary levels among the federal workforce. Federal employees who work in agencies where unions negotiate wages make more money than those in other agencies. Also, federal employees who work in agencies that are outside the restrictions or requirements of the general salary schedule also make more money. We don’t know if the higher salaries paid in these outlying agencies is more fair or just examples of taking advantage of a good deal that is largely invisible to the American public but, presumably, the federal  employees making more money are happier with their pay rates and those that are in the remaining agencies grow more unhappy as a result. (You can search for an individual federal employee’s salary at  FedsDataCenter.com)

The Federal Salary Council recently reported that federal employees are underpaid by about 35%. That conclusion appeals to many federal employees who, understandably, would like a higher salary. It also appeals to the unions that represent federal employees for a variety of reasons.

The recent report by the Salary Council will certainly serve to stoke the debate but will not resolve it, in part because the organization has little credibility. The Salary Council includes three experts in labor relations and pay policy and six representatives of  labor unions and other employee organizations.

The view of those outside of government is essentially that the conclusions are political decisions in a different wrapping. As noted in a recent article quoting salary expert Howard Risher, “ ‘It is impossible to conceive of a change in circumstances that will restore credibility to the Pay Agent recommendations.’ Moreover, the latest report to the president noted the pay agent has “serious concerns” about the process used to adjust salary ranges and the method used for estimating pay gaps.”

The U.S. Bureau of Economic Analysis data show that 2011, federal civilian workers had an average wage of $84,671. By comparison, the average salary of the nation’s 102 million private-sector workers was $53,463. And, when benefits such as health care and pensions are included, the federal compensation advantage over private sector workers gets bigger, according to the BEA data. In 2011, federal worker compensation averaged $128,226, or about double the private-sector average of $64,560. The CATO institute states  “It isn’t just rocket scientists that are earning high federal compensation, it is also workers in many run-of-the-mill bureaucratic jobs.”

The analysis by Cato does not, of course, resolve the dispute any more than the findings by the Federal Salary Council.

The Congressional Budget Office (CBO) stepped into the fray recently. Its study concluded:

  • The wages of federal workers are 2 percent higher than similar private-sector workers, on average.
  • The benefits of federal workers are 48 percent higher than similar private-sector workers, on average.
  • The total compensation (wages plus benefits) of federal workers is 16 percent higher than similar private-sector workers, on average.

In effect, the federal compensation advantage varies by education level according to the CBO. People with low and middle levels of education generally do better in the government, while people with doctorates generally do better in the private sector.

A new analysis of federal pay reaches a different conclusion and attacks the CBO study. The Federal-Postal Coalition is made up of many federal unions.

The coalition makes an argument that federal employees are different than those in the private sector in the following ways:

  • A higher percentage of federal employees (33 percent) work in professional occupations as compared to the private sector (18 percent). This translates to more formal training and experience, which partially accounts for the fact that the average age of federal employees is four years higher than the private sector (45 versus 41).
  • Federal employees have higher levels of education, with 51 percent earning at least a bachelor’s degree, compared to 31 percent of the private sector workforce.
  • The federal government has a higher proportion of “white-collar” jobs than the private sector with many lower skilled and lower paid federal jobs recently contracted out.
  • The primary reason federal benefits average higher than the private sector is because some private employers provide little or no employee benefits.
  • Comparing the federal “blue collar” workforce to private sector jobs has its own set of difficulties and there are significant differences. It is essential to understand that many jobs in the federal government are unique to the government. While federal “blue collar” jobs may be similar to the non-federal sector, they often have substantially greater skill requirements and levels of responsibility. For example, a federal employee working as an electrician in a military depot with electronic weaponry requires a much different skill set than a private sector electrician doing residential work.
  • Most federal employment positions require US citizenship and personnel security clearances resulting from September 11, which would naturally increase federal employee compensation in comparison to the private sector.

The analysis also concludes that there is little interest among college students in working for the federal government as a career. It states:

“Recently, the National Association of Colleges and Employers (NACE) conducted an online survey of 35,000 college students and found only 2.3 percent of them plan to pursue careers in federal government.”

We do not know if the lack of interest is due to salaries paid by federal agencies or a perception of the government as an undesirable place to work but, presumably, a higher salary would still entice more people to apply for government jobs. We do know that in 2011, federal employees younger than 30 quit their jobs at a rate that was five times higher than their counterparts over the age of 30. Although 13 percent of 20-somethings left the civil service in 2011, many more are at risk of leaving: 31 percent report that they will consider leaving their organizations in the next year, according to the Federal Employee Viewpoint Survey.

But, to put the quit rate in perspective, as noted by the Cato Institute in analyzing data provided by the federal government: “BLS data shows that a federal employee is more than 8 times less likely to quit than a private sector employee. We’ve argued that this indicates that federal employees recognize that the generous combination of wages, benefits and job security is hard to match in the private sector, so they stay put.”

We also know that, according to an OPM survey, 62.5% of federal employees were satisfied with their pay and that the percentage dips to about 64% for those federal employees who are in their twenties. The same survey showed that about 71% of federal employees in their twenties were satisfied with their jobs—a slightly higher percentage than older federal employees. In analyzing the survey and the satisfaction of younger federal employees, one expert concluded:

“Ultimately, what motivates millennial workers is not fundamentally different from what motivates those with more experience. Providing development opportunities and meaningful recognition have always been key tenets of management, and reinforcing both does not need to cost the agency much, if anything. Amid the commotion of constraining budgets, it is nice to know that the public-sector manager has a fair amount of control over the retention of their workers.”

The Federal Postal coalition concludes  that the argument about federal pay and benefits “will only serve to exacerbate the situation. ”

In the final analysis, the coalition analysis says that the Congressional Budget Office study  “may worsen public perception of this issue as some may inappropriately use the conclusions drawn to justify continuing federal pay freezes and further reduce compensation, which would seriously detract from the efficiency of the federal workforce.” Or, in other words, the CBO should butt out of the issue because the “CBO study to compare federal benefits to the private sector is flawed and should be re-evaluated.”

In short, arguments on the appropriate level of federal pay are likely to continue and that new studies with conclusions contrary to the underlying beliefs of other participants are going to be attacked. The pay and benefits of federal employees are likely to be under close scrutiny for some time, particularly with a lingering recession or economic slowdown and high unemployment. The “perfect storm” for the federal workforce has not yet abated. (See A Perfect Storm for Federal Employee Pay and Benefits)

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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  1. Andy2x says:

    But you see, those of us who think fed workers are underpaid have FACTS to back up our claims.  I know facts don’t mean much to a large part of the population today but they do to people who know what is going on.

  2. FEDUP says:

    Federal employees are required to “go to school” every two years! In addition to having earned advanced degrees. We have constant (some mandatory) courses that we have to complete every year.  If you are in a technical field, you have to keep up with the technology and changes in your area; and courses are made available for that through Defense Acquisition University and other colleges.  Federal employees have to be at the top of their game to monitor changes in contractor changes or deviations. We have to be ahead of curve and anticipate technical issues in management and contractor performance that require solutions or suggestions to the contrator to consider; somebody’s life may be at risk down the line.  Some federal employees have spent years learning different aspects of work — “the universal soldier” we have to be able to do other work besides our own.  People on the other side don’t understand this; we have to project risk, tie in changes that occur and determine the safety factors involved.  There are more federal employees who have been on the job longer then the newly elected blindsighted congressional caucus!  And federal employees don’t get the same level of retirement benefits like a congressman after one term; after he or she leaves office.  They get retirement funds for life!

  3. Japygid says:

    The son of a friend of mine has his masters and has worked in the computer section of a school district for several years.  Recently I was shocked to find out his salary is $30k.  Immediately I looked up Federal salaries in the nearest large city, which is Chicago.  I was shocked again to find that GS-5 salaries start at 30k.

    What is going on here?  Is this typical, or what?  Can it be true that feds really are overpaid?

  4. nitemarejim says:

    As a fed now, after being in private industry, I find working very frustrating. Yes, it has it’s security, as many of my coworkers keep reminding me.

    But, the stereotype of the lazy fed is true, partly, because in my agency, at least, once you are assigned to a position in a given division and branch, it’s impossible to work anywhere temporarily without some major paperwork shuffle. In some areas, it’s feast or famine with respect to work. And if  you work too well, you are told to slow down. Things are so compartmentalized, that it’s very hard to get information on your own, you are made to hurry up and wait for someone to get back to you.

  5. FrenchRun51 says:

    As a 60+ year-old male with four college degrees serving in a professional series, I make only very slightly more than the average salary of the 102 million private sector workers in the article above. I question the $84k average federal employee salary when the bulk of federal employees work at grade below my own.

  6. notts62 says:

    I’ll say that I am well compensated for my government engineering job, but it’s only because I stuck it out for 30 years.  The new people are very undercompensated, and I wouldn’t recommend anyone come into the government at an entry level.  I’ll also add that there is plenty of favoritism used to advance people to positions of higher responsibility and higher pay, so the people making the most are taking care of their own, hence the widening gap.

    • Pacof says:

      You hit the nail right on the head with favortism, cronism and next in line to get the job and it doesn’t matter whether your are qualified. You can write a job annoucment and the matrix to fit whoever you want.

  7. Arnold says:

    $84,671 mean or median?  I know a federal employees that are way below that.  It may be the median salary but I question if it is the mean salary.

    • RETVET03 says:

      Average would be the Mean….which is also my complaint, since the averages are skewed by salaries in D.C. Median would be a much more appropriate measure.

  8. Garykoca says:

    In truth, based on my experience, most Federal employees are paid about right. Some in really technical occupations like accountants and engineers, are probably underpaid. Some in very high cost of living areas like New York, LA, and San Fran and Boston are also underpaid. But those in remote areas or in military bases out in the middle of nowhere are way, way overpaid. And don’t forget, if you are talking total compensation, Federal employees have much better benefits in general than the private sector. So most Feds are NOT undercompensated.

  9. LikeBuffaloWingsALittleTooMuch says:

    A good measure of whether or not current employees are paid “enough” is retention rate.  As far as I can tell, the mid-career employees with whom I work are very unlikely to quit, suggesting that their pay is at least good enough to keep them around.

    However, job satisfaction appears to be in the tank, and I suspect that has a big impact on productivity and on recruiting.  Half of Congress and one major Presidential candidate hate us.  Technical staff are being required to take on more and more administrative work, apparently as part of a shell game to make it look like our administrative overhead costs are lower than they really are.  Legitimate travel is restricted apparently so that OMB can feel good about itself, without consideration for how that affects mission-effectiveness. 

    Long-story-short, the current workers are staying due to mortgages, etc.  But we’re probably killing the average quality of future hires, and a non-trivial fraction of current workers is looking to get out when the private sector recovers.

    • Guest says:

      I don’t know what location your organization is in, but mine is in a high-cost area that, due to the vagaries of the locality pay system, is paid at the “Rest of the US” rate. 40% of our employees quit last year, so apparently the pay wasn’t/isn’t sufficient to retain them. The remaining employees are “on call” 24/7, 365 days a year. We can’t have a rotating “on call” schedule because in most cases we only have one employee left who knows how to service a particular system. We publish vacancy announcements multiple times without getting any qualified applicants. I don’t see how our organization could survive a pay cut.

  10. Management Attorney says:

    To those who want to shrink government, what better way than to starve the workforce and retain and recruit less qualified staff?  This discussion is much more political than we acknowledge.

    • guestwo says:

      Recruit and retain less qualified?  I must have missed the memo that OPM lowered the quals for job series?  I guess the probationary period is now down to two weeks?  Management attorney is not making sense!

  11. RRicigliano047 says:

    Average Pay for federal employees is meaningless – our agency outsources the lower level positions and pays them as a vendor – so they never appear in the payroll.  Therefore and higher overall average

  12. Diane says:

    One thing never mentioned whenFederal pay is compared to private sector pay is the fact that years ago many the lower paying government jobs were privatized, i.e., janitors, clerks, laborers etc.  Also a lot of computer tech grunts are private sector but they work for a section head who is a government employee boss would be expected to be paid more.  When you remove the lower half of an average, the average has to rise.  Of course Government sector pay is going to be higher.

  13. fedbens says:

    Put the salary issue aside for a moment – it is impossible to settle, anyway.
     
    My view is that the overall value of pay & benefits is about to undergo a sharp reduction, with new employees paying so much more for their not-especially-generous annuities.  To me, this is a good deal more important than the salaries.
     
    Starting January 1, 2013, we will go from a two-tier system to a three-tier system.  It will be CSRS vs. FERS vs. the new FERS.  What a mess! 

  14. Tired in a Swing State says:

    thanks Ralph – let’s keep stoking those fires so people hate the feds – especially this time of year.  I guess it’s freedom of speech at its finest.

  15. D Byte says:

    The GAO had reviewed the issue of 6 reports on pay and that review was Jun 22, 2012.  The crux of the difference in outcomes of these 6 reports the GAO states is the manner in which they are conducted. Three approaches were used to compare pay:

    human capital approach (3 studies)—compares pay for individuals with various personal attributes (e.g., education, experience) and other attributes (e.g., occupation, firm size);

    job-to-job approach (2 studies)—compares pay for similar jobs of various types based on job-related attributes such as occupation, does not take into account the personal attributes of the workers currently filling them; and

    trend analysis approach (1 study)—illustrates broad trends in pay over time without controlling for attributes of the workers or jobs.

    Academically, the first and third methods are fraught with erroneous procedural and methodology errors (not reliable).  The remaining job-to-job approaches were conducted on varying size populations.  The study with the greatest population was the PAY AGENT study by a wide margin, and therefore, the most reliable.  The result- six studies with only one reliable.  But no one reading these incendiary studies is knowledgeable about such matters and takes the study as bonafide. 
    GAO-12-564

    • Manage This! says:

      D-Byte – finally – someone with a brain – blogs.  With more than 30 years as an HR Analyst – I find your statements are spot on and am surprised to discover someone outside of my field capable of recognizing the issues accurately.
      I have made points similar to yours in the past articles – too many naysayers and trolls just making it all seem so insiginificant.  Our issues are truely based on the whims of politicians – they are so out of touch with reality.  The one thing I did find in my analysis in 2010 was that DC is so over graded in positions that it is causing radical shifts in the wage/salary comparisons.  We have way too many GS12+ staffers working for the Dept of Administration supporting the needs of the politicians.  The SES positions are also making the entire wage system evaluation nearly impossible to review with any accuracy.  None of these positions exists without at least two – sometimes more than five additional GS staffers with high salaries.  I have yet to see a justification that merits the gross over spending associated with the supposed need for assistants but DC Politicians have managed to increase their support staff more than double in the last decade.  So, over inflated valuation on the Fed Earners shows up more because of DC than because of the rest of the nations CS work force. 

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