Feds Are Overpaid… Or Not

By on October 13, 2015 in Pay & Benefits with 79 Comments

Image of employee touching screen with salary lightbulb icon

The Cato Institute, formerly known as the Charles Koch Foundation, has issued yet another report claiming federal employees are grossly overpaid. Their numbers claim Feds make 78% more than private sector workers and 43% more than state and local workers. If true, those numbers would be alarming and cause for immediate steps to rein in federal pay and benefits.

Relax. The numbers are generally accurate, but they are not true.

How can that be? How can real numbers, based in part on the government’s own data (from the Bureau of Economic Analysis) be accurate but not true?

Easy. Anyone who starts out with a predetermined conclusion can select parts of the data that tell the story they want to tell. And they can ignore the data that conflicts with their narrative.

In this case, they are comparing numbers for the workforce as a whole with the federal workforce. The fact that there are millions of low wage jobs in the private sector that do not exist in the federal government is left out of the conclusions. The fact that federal jobs are concentrated in occupations that pay more is mentioned, but explained away by saying the higher-skill jobs have always been there. The fact that the lower-skill jobs used to be in government, but have been automated out of existence or outsourced to the private sector, resulting in a much higher concentration of higher-skill jobs in government, is left out. The fact that striving for a workforce that works for the lowest possible pay is not a good idea is left out.  So what we have is a report that tells the story the authors want to tell.

The sad fact is that we do not know how accurate federal pay really is. The most recent annual report by the Federal Salary Council reports that federal workers are underpaid by an average of 35%. Although it would be great for federal employees to think they should get a 35% pay raise, the fact is those numbers are also questionable.

When we look at narrowly focused studies of individual occupations we generally find that federal pay and benefits, taken as a package, are not seriously out of line with the private sector.

Some federal benefits, such of the Federal Employees Retirement System and the old Civil Service Retirement System, are far more generous than what we see in the private sector, but Feds do not get stock, big bonuses, or the signing bonuses some in the private sector receive.

Feds have more job security and that has value, but it is difficult, if not impossible, to place a realistic dollar value on it. In fact, some people would argue that staying in government too long actually causes people to make less than they would have made if they changed jobs more often and moved between government and the private sector.

We also know that job classifications in government are increasingly based on the grade levels managers want them to be rather than the actual job duties and classification standards. That means comparing the salary of a GS-13 to the salary of someone in the private sector whose job matches their job description doesn’t necessarily tell us anything useful. If the job description is bogus (and many are), so is the comparison.

So – the truth is that we do not have any idea how federal pay really compares to the private sector. We can’t even get a credible fake number.

It is almost certain that the Cato Institute numbers are useless. It is also almost certain that the Federal Salary Council numbers are also useless. Neither is based on the kind of in-the-weeds research that is actually necessary to come up with realistic numbers. Given the politics on both sides, I am not optimistic that anyone wants to take on the issue and produce credible numbers.

Much like Goldilocks and her break-in at the home of the three bears, it is safe to say there are a lot of federal workers who are overpaid, there are a lot who are underpaid, and some are just right. Given that this subject is almost always addressed using fairy tale numbers, maybe the Goldilocks analogy is appropriate.

This column was originally published on Jeff Neal's blog, ChiefHRO.com, and has been reposted here with permission from the author. Visit ChiefHRO.com to read more of Jeff's articles regarding federal human resources and other current events along with his insights on reforming the HR system.

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

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About the Author

Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. He formerly served in the Obama Administration as Chief Human Capital Officer for the Department of Homeland Security and Chief Human Resources Officer for the Defense Logistics Agency. Jeff is also a Fellow at the National Academy of Public Administration and a Partnership for Public Service SAGE.

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