Pay decisions in the federal bureaucracy are complex, controversial, and fodder for dueling statisticians.
It’s not that pay disputes don’t occur in private industry. There are disputes and disagreements in companies as well. The difference is that in a company an employee who thinks he or she is worth more money can make a pitch for a raise, company management decides it is worth paying more to keep the employee or decides it cannot afford a higher salary (or just is not willing to pay more). The decision is often made on a case by case basis and takes into consideration the importance of the employee and the relative profitability of the company.
But, in the government, the overall structure is determined through the legislative and political process. Profit is not an issue as agencies usually spend money given to them by Congress but they don’t make money. The battle is political; how much can interest groups squeeze from the process to get as much as they can.
Many of us in the federal community have been hearing for years that the federal workforce is underpaid. My experience from working in human resources is that some employees were paid much more than they were worth for a variety of reasons and that those making more than they would ever make in private industry stayed on the job until they retired or died or could arrange to leave early and still collect a retirement check.
Other employees were underpaid compared to what they would make in private industry. Sometimes they stayed with the government because the work was unique and challenging and they liked the government culture and environment. In the case of NASA where I worked for a few years, some employees stayed because they liked the agency’s mission and were living their dream of working on space and scientific expoloration programs that probably were not available to them in private companies. And some who could make more money in private industry did leave for more money–especially the younger employees who were a long way from retirement and felt their performance and contribution to a company would result in more prestige, money, responsibility, etc whereas the federal system tended to reward longevity above all else.
In effect, whether a person is overpaid, underpaid or paid the right amount as a federal employee depends on a number of factors including the person’s job, the geographic location where he is working, and the value of a person’s skills to a private company that may need those skills.
But here is a statistic that will surprise many readers. According to data from the Bureau of Economic Analysis, the 1.8 million federal civilian workers earned an average $111,180 in total compensation (wages plus benefits). If the Bureau of Economic Analysis sounds like it belongs to a federal agency, it does. It is part of the Department of Commerce.
The $111,180 that the average federal employee received in pay and benefits last year is more than double the $55,470 average earned by U.S. workers in the private sector.
Chris Edwards, the Director of Tax Policy Studies at the Cato Institute, has looked closely at the new government data and notes that “Looking just at wages, federal workers earned an average $73,406, which is 60 percent greater than the $45,995 average earned by private sector workers.”
In recent years, federal pay has grown much faster than pay in the private sector. This growth of the federal compensation package slowed last year as federal employees got an average increase of 4 percent versus an average of 4.2 percent in the private sector.
To illustrate the growth rate, Edwards points out that in 1990 the compensation package for the average federal employee was $46,496. The average compensation for private sector employees in that year was $30,709. In 2006, the average compensation package for federal employees was $111,180. The average compensation package for private sector employees was $55,470.
In articles giving federal pay data, one comment that is frequently submitted by readers is that the figures cannot be valid because the reader does not know any federal employees that make that much money. And, while it may be true that the reader does not know any federal employee that makes that much money, keep in mind that these are average figures. A federal employee living in a rural area with a small population is probably going to make much less than federal employees in large metropolitan areas. For example, the average federal employee in Washington, DC now makes about $88,000 a year in salary alone. Obviously, some make much more than that and others make less. The averages cover the entire federal workforce.
Other readers take issue with the figures because they are publicized by the Cato Institute and contend they should not be considered valid because the organization has a political agenda and cannot be trusted to provide reliable data.
There is no doubt that Chris Edwards’ articles on federal pay will get wide distribution in news outlets around the country over the next few months. There is also no doubt that the organization has political views that are different than other organizations that advocate higher pay for federal employees. But, before attempting to shoot the messenger, keep in mind that the data is compiled by a federal agency. While readers will interpret the data in different ways, or they may not like the policy objectives of the Cato Institute, the data provided by federal agencies in this area is consistent in showing that federal employees make much more in pay and benefits than most private sector workers.
Other readers point out that the federal government is more than the private sector “average” worker and that the average wages should be higher as a result of this differential. That point has validity as the federal government has contracted out much of the lower paid work (as well as much of the higher paid work) and there are fewer lower graded employees in government than there used to be. In other words, this is one source of the differences between dueling interest groups in arguments on federal pay.
The overall compensation of federal employees includes the value of the benefit package offered to federal employees. Federal workers receive health benefits, retirement health benefits, a pension plan with inflation protection, and a retirement savings plan with a match from Uncle Sam. In addition, Federal workers have a holiday and vacation schedule package that is generous, often receive the option of flexible work hours, training options, incentive awards, disability benefits, flexible spending accounts, and a complex system of appeals with union representation before a series of federal agencies set up to handle the appeals.
One observation from the Cato Institute in a report issued last year that is sure to arouse the ire of some is the following observation made in support of paying federal employees less than private sector employees:
“Perhaps the most important benefit of federal work is the extreme job security. The rate of ‘involuntary separations’ (layoffs and firings) in the federal workforce is just one-quarter the rate in the private sector. Just 1 in 5,000 federal nondefense workers is fired for poor performance each year. All these federal advantages in benefits suggest that, in comparable jobs, federal wages should be lower than private-sector wages. A market indicator of the adequacy of federal pay is the quit rate. The rate of ‘voluntary separations’ (quits) in the federal government is just one-quarter the rate in the private sector. That suggests that pay in most federal jobs is more than adequate, and workers could be attracted with reduced compensation.”
No doubt, the political wrangling will continue and the debate will continue as to how much federal employees should be paid. But, if you are one of those federal employees who considers himself to be seriously underpaid, or one who is fairly happy with the overall compensation package, you may take some comfort in knowing that your career choice of working for the federal government may not be as bad as some would lead you to believe.
And the new figures detailing the extent of the average federal employee’s compensation will lead some to wonder what impact they will have on the 2008 federal pay raise. No one knows for sure. In all likelihood, the decision will be based on the lobbying efforts in Congress and the desire of our elected representatives to be sent back to Washington after the 2008 elections. In short, there probably isn’t much to worry about; federal pay will probably keep going up in the near future. (See “2008 Pay Raise on Track: What Will Sway Congress?“)