Artificial Limits Hindering Pay Under the Federal Wage System

By on April 19, 2015 in Current Events, Pay & Benefits with 5 Comments

Recently I wrote an article about when the 2015 FWS wage adjustments would be effective. I concluded the article by blithely saying, “Should the Federal Government’s fiscal situation return to a place that allows the wage survey data to again guide the annual FWS adjustments, the various wage fixing authorities will have the data available and ready to implement.”

A Federal employee who read this article gently chided me in an e-mail that this statement was very optimistic sounding given the history of wage adjustments under the Federal Wage System (FWS).

In this article I plan to do two things. The first is to look briefly at the history of the FWS and the purpose for which it was created. The second is to examine how the principles established in statute to guide FWS wage adjustments have been applied.

A Little Bit of History

Federal trade, craft, and laboring employees have been paid according to local prevailing private sector rates since the Civil War. Until 1965, each Federal agency had authority to determine local prevailing rates and establish wage area boundaries for its employees. As a consequence, Federal trade, craft and laboring employees at the same grade level in the same city working for different agencies often received different rates of pay.

In 1965, this inequity was addressed by Presidential memo ordering Federal agencies to coordinate their wage setting activities. This wage structure was known as the Coordinated Federal Wage System (CFWS). It was replaced in 1972 by Public Law 92-392 that established the current Federal Wage System (FWS).

The goal of both the CFWS and its successor, the FWS, is to assure that covered Federal employees within a local wage area who are assigned to the same grade level receive the same rate of pay.  This goal of providing the same rate of pay for those at the same grade level within a local wage area is to be accomplished by annual surveys of local non-Federal organizations with similar kinds of jobs to determine the prevailing rate in the local area for the surveyed jobs.[1]

Adjusting FWS Pay Structures

So with this brief look at the history of the FWS and the goal it was established to attain, let’s look at how the FWS has been applied since 1972. After doing a little research I found that FWS wage adjustments have been limited to the same increase as granted to GS employees at least since 1989.[2]

While the impact of these limitations probably vary from one local wage area to another[3], let’s look at how it’s affected one local wage area.

A recent survey for the Boston area showed the prevailing rate for the WG-10 (journeyman) was $28.57 per hour, while the 1% increase for FY 2014 limited the WG-10 rate to $24.16 per hour or $4.41 below the prevailing rate identified during the survey of like jobs in the Boston wage area.[4]

And it does not appear that the future holds much hope for allowing the FWS to operate as it was designed, i.e., providing the same rate of pay for those working at the same grade level within a local wage area through annual surveys of local non-Federal organizations with similar kinds of jobs.

Recently, two U.S. Representatives (Cartwright, D-PA, and Cole, R-OK) introduced H.R. 485, which would limit wage adjustments for prevailing rate employees in a local area to the amount of increase granted to other Federal employees, e.g., those covered by the General Schedule. While some may hail this proposal because it would ensure FWS and GS employees will receive like wage adjustments, it also ensures that FWS employees may receive less than the wage adjustments they should receive under P.L. 92-392, thus defeating the FWS pay system’s goals.

Impact of Limiting FWS Wage Adjustments

The reader who chided me for having a Pollyanna view of the likelihood of the return of FWS wage adjustments that reflect the local area survey findings outlined five reasons he believes these limited wage adjustments create problems for Federal agencies and for taxpayers.

  1. Agencies find it difficult to attract new trade, craft and laboring employees because wages are not competitive with non-Federal employers in a locality. New employees often are limited to those who can afford to take such non-competitive jobs, such as Military retirees already receiving a pension.
  2. Current FWS employees feel trapped in their Federal employment because of their noncompetitive wages.
  3. The few younger employees hired often use these FWS jobs as a way to “get in the door,” and move to non-Federal jobs once they have acquired the necessary skills and experience while working for Uncle Sam.
  4. Many FWS employees have had to reduce their spending as costs have risen, e.g., health insurance, taxes, etc., but wages have not kept pace.
  5. And finally, non-competitive Federal wages may impact non-Federal employers in the local wage area; an issue that the FWS wage structure was designed to reduce or eliminate.

In summary, we find that the FWS was established to provide the same rate of pay for those working at the same grade level within a local wage area. This goal is to be accomplished by surveying local non-Federal organizations with similar kinds of jobs on an annual basis to determine the prevailing rates in the local area for such trade, craft and laboring jobs.

We also find that since about 1979 the FWS wage adjustment procedure established by P.L. 92-392 has not operated as designed, but has been limited to the same level of increase as granted to non-FWS employees.

It is probable that the impact that such limits have had on FWS wage levels across the country varies from one pay locality to another. But in at least one case, the Boston wage area, the limits have kept the journeyman level of pay for a WG-10 to an amount below the prevailing wage, thereby creating recruitment problems for local Federal managers.

Thus, I end this article less optimistically than the earlier one. It seems likely that these artificial limits that have been implemented for about 36 years hurt at least three groups: Federal managers who face recruitment problems; Federal trade, craft and laboring employees who may be kept below the local prevailing wage; and private sector employees with similar jobs who may face lower wages due to the presence of underpaid FWS employees in their local wage area.

The obvious solution, especially in this time when many critics believe the Federal government should operate more like the private sector, is to allow the FWS wage adjustment process to operate as designed so that FWS employees are paid at the prevailing rate for their local wage area.

Footnotes

[1] See the brief summaries regarding the FWS at: http://www.cpms.osd.mil/Subpage/Wage/HistoryOfWage/, and http://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/federal-wage-system/ from which this information is drawn.

[2] Will Shallit, President of Local 0219, American Federation of Government Employees, in an e-mail dated 5 January 2015 told me that the history of limited FWS adjustments actually goes back another ten years to 1979.

[3] There currently are 132 local wage areas for FWS employees paid from appropriated funds, and 118 local wage areas for Federal trade, craft and laboring employees paid from nonappropriated funds.

[4] Information provided by Will Shallit, AFGE Local 0219 President, in an e-mail dated 5 January 2015.

Wayne Coleman is a federal pay expert available to help your agency avoid premium pay claims through on-site training. Contact him for more information.

© 2016 Wayne Coleman. All rights reserved. This article may not be reproduced without express written consent from Wayne Coleman.

Tags:

About the Author

Wayne Coleman’s career at various Federal agencies spanned about 32 years.  Since his retirement he has consulted on, written about, and provided training on overtime and premium pay, on the principles of FLSA coverage and exemption, and on related federal compensation issues.  He can be reached at wayneslyhouse@comcast.net.

Top