Federal Pay Lagging Behind Private Sector

By on December 22, 2015 in Pay & Benefits with 82 Comments

Image showing chart of US employment trends from 2005 to 2015

As the national economy continues to improve, both wages and employment in the federal government are falling behind their private sector counterparts.

This is not new information for most people who are concerned about the role of the federal government in the lives of its citizens, but recently released data from the U.S. Bureau of Labor Statistics gives further indication of how the feds continue to fall further behind even as the federal government is called upon for more duties, from responding to natural disasters to dealing with immigration issues and threats of terrorism.

The new data show that federal government employment inched up 0.9% over the 12 months ending in June, compared to a 2.3% rise in private sector employment. By the numbers, while the private sector added nearly 2.7 million new workers, federal employment increased nationwide by a net of 25,398.

For the federal government, the 12-month increase is actually an improvement after suffering from net decreases in employment since 2010. Since mid-2005, the federal government has added only a net of 13,404 new jobs, while the private sector increased by 7.5 million.

The combination of few new positions plus low turnover means that few younger people are having the opportunity to enter into federal service, even if they are interested in working in government. Increasingly, those wishing to work outside of the for-profit sector must find their opportunities in nonprofit organizations or local governments.

For older federal workers, it means an aging workforce that results in fewer younger workers contributing to health insurance premiums, fewer younger workers contributing to FERS, and decreasing clout for federal unions who can look forward to fewer potential members.

Wage increases also continue to be a concern. Even with the increases effective in January 2016, the federal sector will still be falling behind the wage growth in private industry.

For the 12 months ending in June, the average weekly wage of federal employees increased 0.1%. That number includes all pay, such as step increases, overtime, and bonuses, as well as base and locality pay. In comparison, average pay in the private sector rose 3.1% for the same time period. With private sector wages moving up now, the January 1% pay rise (with an additional 0.3% increase for locality pay) will be insufficient to match the private sector.

Even though average weekly wages declined during the 2007-2009 recession, and with all the talk of stagnating wages, the private sector has outpaced the federal sector since 2005. As a result, while the average weekly wage for a federal employee has risen by 21.5% over the past 10 years, average weekly wages in private industry rose faster at 29.6%.

In 2005, the average employee in the federal government received $1,140 per week compared to $740 in private industry. This gap has narrowed, so in 2015, the average wage in the federal government was $1,385 per week compared to $959 in private industry. While differences in the educational levels and the mix of occupations in the federal government compared to the private sector explains the wage gap between federal and private industry employment, it does not explain why the gap is narrowing.

Combined with the less generous FERS pension and rising healthcare premiums, and employment in the federal government, when available, looks less desirable as a career although many might still use a federal job to gain training and experience before jumping to the private or nonprofit sectors.

The Pew Research Center found that “currently, just 19% [of Americans] say they can trust the government always or most of the time, among the lowest levels in the past half-century. Only 20% would describe government programs as being well-run. And elected officials are held in such low regard that 55% of the public says ‘ordinary Americans’ would do a better job of solving national problems.”

Few employment opportunities, uncompetitive wage growth, and distrust in government becomes a self-fulfilling prophecy that the federal bureaucracy will need to continue to battle if it wants to maintain an important role in the lives of citizens.

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


About the Author

Michael Wald is an independent economics analyst and writer based in the Atlanta area. He specializes in topics related to business, labor, and human resources. Prior to his retirement from the U.S. Department of Labor, he served as the agency’s Southeast Regional Director of Public Affairs and Southeast Regional Economist.