The Cost of the 2013 Pay Raise

Starting after March 27, 2013, federal employees can expect a 0.5% pay raise after having no raises for the last two years. How much does this pay increase add to the federal budget?

An executive order issued last week made the end to the pay freeze official. Starting after March 27, 2013, federal employees can expect a 0.5% pay raise after no raises for the last two years.

Although a 0.5% pay raise for federal employees and members of Congress doesn’t sound like much, it is estimated that it will add $763,125,000 in total salary costs to the federal budget.

According to the CBO’s latest monthly budget review, the federal budget deficit was $292 billion for the first two months of FY 2013, a 24% increase over the same time period last year. The Government Accountability Office also recently said in a report that the federal government is on an unsustainable long term fiscal path.

So given the federal government’s rapidly growing deficits from excessive spending, giving pay raises to federal workers and Congress is likely to raise the ire of those who believe that spending is already out of control.

Indeed, the House voted Tuesday to block the pay raise for federal workers, and the “fiscal cliff” legislation that passed Congress late Tuesday night contained a clause to withhold the pay increase for members of Congress.

However, every debate always has two sides. Federal workers have pointed out that they have been not seen a pay raise in the last two years and a 0.5% raise doesn’t do much to break that trend, so consequently they say it’s well past time for the raise.

Earlier in the “fiscal cliff” negotiations, there was some talk of expanded cuts targeting federal workers as part of a compromise, such as Senator Bob Corker’s (R-TN) proposal.

Federal unions and federal employee advocates were quick to speak out on such proposals, saying that the federal workforce had already made enough sacrifices in contribution to deficit reduction. As part of their case, the groups said in letters to members of Congress that the federal workforce had collectively contributed roughly $103 billion to deficit reduction through various cuts. That staggering figure makes the $763,125,000 in added costs for the pay raise sound like pittance, however, it is based on a 10-year budget window as opposed to a two year time frame (the length of the pay freeze).

Regardless of which side one chooses in the federal pay debate, the reality is that federal payroll is a small part of the federal budget. Social Security, Medicare, and Medicaid are what really strain it, especially with an aging population with growing health care needs.

A recent GAO report addressing the future sustainability of promised government spending said, “In both GAO simulations spending for the major health and retirement programs will increase in coming decades, putting greater pressure on the rest of the federal budget.”

And the CBO said in its December 7 monthly budget report that expenditures for each of the three main entitlement programs were higher than the same period last year accounting for a significant increase in spending: Social Security benefits increased the most; expenditures for it are up $8 billion or 7%; Medicare rose $6 billion or 8%, and Medicaid rose $4 billion or 9%.

The CBO also estimated that the fiscal cliff agreement that just passed Congress will add $4 trillion to the federal deficit over a decade.

Lawmakers will eventually have to look hard at these three programs if they want to make serious headway on cutting the federal deficit.

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.