Your 2007 Pay Increase: Plenty to Make Some Happy and Some Angry

Active federal employees are on track for an average 2.7% pay increase in 2007. Many federal retirees will probably do better than that again in 2007.

The 2007 pay raise for federal employees is rolling along the same path it has followed in recent years.

Pay parity has become a successful rallying cry for politicians in Congress who support higher pay raises for large numbers of federal employees in their districts. It has enabled federal civilian employees to ride on the coattails of support for higher pay for military personnel. The same tactic is working again this year. (See Dancing and Playing to the Crowd: Predictions for Your 2007 Pay Raise)

The House Appropriations Committee voted this week to give federal civilians the same 2.7 percent average pay increase the House has already approved for military personnel in the 2007 National Defense Authorization Act. (See 2.7% Increase for 2007 Gets Congressional Boost)

In short, the likelihood is increasing that the average pay increase for federal civilian employees in 2007 will also be 2.7 percent.

Another possibility that is looking more likely this year: Federal retirees may get a higher “pay raise” than those that are still working. Last year, federal employees got an average pay increase of 3.1%. But many former feds who are now on the retirement rolls did even better: They received an increase of 4.1%! (See Fed Retirees Can Look Forward to Bigger Than Expected Increase!)

A similar situation is likely to play out again this year. Here’s why.

Federal employees get a pay raise. Federal retirees get a cost of living allowance (COLA) increase.

From looking at comments on various articles, a casual reader would think that both groups are getting a bump in their COLA. It may be a technical difference but it is different. There is no preset formula for giving federal employees a pay raise each year. The process for approving the pay raise for federal employees has played out the about the same in recent years. The reality is that how much of an increase you will get next year as an active duty federal civilian employee is a political decision and will be determined by Congress and the President.

But, for the COLA increase, a formula is in place. The amount that many federal retirees will get next year depends on the rate of inflation. Currently, according to our friends at the National Active and Retired Federal Employees Association (NARFE), the cost of living allowance index would give retirees an increase of 2.3%.

But the 2.3% will not be the final figure. It changes each month and the 2007 pay raise will not be determined until the end of third quarter.

A likely scenario is that federal employees will get an average increase of 2.7%. Federal retirees may get–in fact are likely to get–3% or more. How much more depends on the rate of inflation between now and the end of September.

No doubt, this turn of events will elicit an angry outcry from some readers who will contend they are overworked and underpaid and retirees are getting a better deal than active federal employees. They may be right; no doubt it depends on your geographic location and the specific occupation.

But, if it makes these readers feel any better, from reading editorials in newspapers around the country, some Americans think they are getting a raw deal compared to federal employees. As a recent report noted: “Since 1990, average compensation has increased 115 percent in the government and 69 percent in the private sector, while average wages have increased 104 percent the government and 65 percent in the private sector.”

So, regardless of your point of view, there is plenty for people who are so inclined to look at the pay scenario and conclude they should be happy because they are getting a good deal; there is also plenty for those so inclined to conclude they should be mad because they are getting cheated out of what they believe is their entitlement to a bigger piece of the economic pie.

But, for now, it looks like many federal employees will wind up with an average of 2.7% in 2007. Except, of course, those large numbers of people who will get more or less depending on their geographic location.

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. Follow Ralph on Twitter: @RalphSmith47