Pay Parity and Your 2010 Pay Raise

Congress says it approves the idea of pay parity between federal employees and military personnel but doesn’t indicate how much should be approved for a possible pay raise in 2010. Will federal employees be asked to take a lower raise in the midst of rising unemployment and low inflation? Also, federal retirees are on track to go without a COLA increase.

The annual federal pay raise drama usually plays out about the same but the political issues and pressures are different each year.

The pay raise for 2010 is no different.

President Obama has called on federal employees to sacrifice next year by taking a pay raise of 2%. He also proposed a raise of 2.9% for military personnel.

In what may be good news for federal employees, the House and Senate has just passed a final version of the 2010 budget resolution supporting pay parity for military and civilian personnel. The first reaction of many readers will be that this means everyone will get an average raise of 2.9%.

That may turn out the case–or not. As with many large government projects, the federal budget process is not straightforward. The fact that Congress has passed a budget resolution is important in the final decision-making process but it is not the final decision.

The final amount of the federal pay raise will be decided during the budget appropriations process. There is a good chance the final average pay raise for federal civilian employees will be 2.9% but there are no guarantees. It is also possible that, with the huge sums being spent by government, the pay raise could actually be higher than the 2.9%.

Average vs. Actual Pay Raise

Each year, there is confusion about the average federal pay raise and the actual amount that an individual will receive. Each year, we receive email from readers noting that a mistake must have been made because the email sender did not get the “required federal pay raise.”

The difference is locality pay raise. If the average pay raise is 2.9%, employees in higher cost areas such as Washington, DC, Houston, San Francisco and New York are going to get more than the average. That means that employees in many areas of the country will get less than the average raise. For an example of how this works in practice, see Understanding the 2008 Federal Pay Raise (Maybe) that contains a chart showing how the average pay raise would play out in different cities around the country depending on the average approved by Congress and the President.

Federal Retirees May Get No Increase

Federal retirees under CSRS and Social Security recipients got a 5.8% increase this year as a result of inflation. That, no doubt, irritated may federal employees currently working got less than that–perhaps much less depending on geographic location.

What about the retire COLA increase in 2010? As of today, the amount of an increase that federal retirees will receive is: 0%. Inflation is much less this year and the consumer price index used to calculate the retiree COLA shows a decline in the inflation rate so far in 2009. That could change but as of today the COLA figure stands at -3.2%.

Federal Pay vs. Private Sector

Another factor that is likely to have an impact on the 2010 federal pay raise is political. The Gross Domestic Product (GDP) of the United States decreased by 6.1% in the first quarter of this year according to the Bureau of Economic Analysis. According to the transcript from this agency: “The federal pay raise for civilian and military personnel added 0.3 percentage point to the change in the first quarter gross domestic purchases price index.”

Moreover, the jobless rate is now projected to get to as high as 10%.

USA Today recently issued figures showing that the average government employee (including state and local government) makes $39.25, including benefits. The average private sector employee is $27.35, also including benefits. This 44% differential catches the attention of the public and, as a result, the attention of the politicians voting on your next pay raise. Articles such as Feeding the Monster, in conjunction with the rising unemployment figures, may also have an impact on the final 2010 pay decision.

With the procedural changes in Congress and the large Democratic majority now in Congress, federal employees are probably going to know the amount of next year’s raise before the end of the year. That will be a change as the actual amount of any raise normally is approved in December or into the year the pay raise is to become effective. We will let readers know how it progresses as this year’s pay raise moves along.

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