80% Disparity for Fed Benefits Says Report

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By on November 15, 2019 in Pay & Benefits with 0 Comments
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The Federal Salary Council (FSC) routinely concludes that federal employees are, in general, significantly underpaid by an amount of 25% or higher.

The FSC is unique in its conclusions, and their exact methodology for reaching a conclusion on the pay disparity is not transparent or easily understood. What we do know is that the FSC does not include benefits in its calculations and that the union members of the Council do not want to change this. As noted in a recent report from the FSC:

The members of the workgroup and Federal Salary Council from employee organizations (the American Federation of Government Employees, AFL-CIO, the National Treasury Employees Union, the National Federation of Federal Employees, AFL-CIO, and the Fraternal Order of Police, AFL-CIO) did not support the Chairman’s effort to use the Council to promote the Administration’s policy agenda of redefining “pay disparities” to include non-pay benefits or replacing the locality pay system with one that varies pay adjustments by occupation and manager discretion.

Salary Council Recommends New Locality Pay Areas

The unions that occupy the majority of positions on the Federal Salary Council obviously have a vested interest, as do unions in the private sector, in having their members obtain higher pay and benefits. The FSC helps them accomplish this goal. Adding in federal employee benefits would likely lead to a different conclusion.

Comparing Federal to Private Sector Benefits

Here is a quote from a recent report regarding federal employee benefits compared to the private sector. The data for these findings are from the US Bureau of Economic Analysis—a federal organization within the Department of Commerce.

In 2018 federal workers enjoyed average annual benefits of $41,508, which compared to average benefits in the private sector of just $12,075. That large difference stems from more federal workers receiving certain types of benefits than private workers, and from particular federal benefits being more generous than those provided in the private sector.

Another group has weighed in with its assessment of federal employee pay. It uses criteria from the Bureau of Economic Analysis (BEA) to measure overall federal employee pay and benefits compared to the BEA data from the private sector.

For federal employee groups and, of course, many federal employees, the analysis and findings by the Cato group are unwelcome as the organization routinely concludes that federal employees are significantly overpaid when compared to the private sector. Obviously, the analysis is substantially different from that of the Federal Salary Council, but at least the underlying data used (and compiled by the federal government) are readily available for those who wish to look seriously look at the subject.

Growing Disparity Between Federal and Private Sector

The latest Cato report was issued in August. The bottom line of the report can be summarized in this quote:

When benefits such as health care and pensions are included, the federal compensation advantage over private workers is even larger, according to the BEA data. In 2018 total federal compensation averaged $135,971 or 80 percent more than the private-sector average of $75,381….

While there have been pay freezes and annual pay raises have been relatively small, the disparity between federal and private sector pay has continued to grow. There are various reasons for this and these reasons impact federal employees more or less depending on their geographic location, agency and the pay systems used throughout government.

Reasons for Growth of Federal Compensation

In addition to annual general pay increases, there have been increases in locality pay, expansion of some benefits, and a growing number of high-paid jobs as agencies have more executives in higher paid jobs. Growing pay and benefits are also fueled by adjustments in the classification of federal jobs that moves federal workers into higher salary brackets.

“We Are Not Hamburger Flippers”

A frequent comment from readers on this or similar reports that find federal employees have a better compensation package than workers in the private sector is along the line of “We are not hamburger flippers”. In other words, most federal employees have great education, more advanced skills and have higher pay because of their advanced skills.

Growing Differential In Compensation

There appears to be some justification for this argument. Cato author Chris Edwards addresses this by noting the pay disparity continues to grow (despite a pay freeze in government for several years) and there has always been a high number of highly skilled workers in government. But, he notes this “does not seem to explain why federal compensation has grown faster than private-sector compensation in recent decades. In 1990 average federal compensation was 39 percent higher than average private compensation. By 2000 the federal pay advantage had jumped to 50 percent, and by 2018 it was 80 percent.”

Conclusion

So, are federal employees underpaid by 30.91 percent (when existing locality pay rates, averaging 22.35 percent of the average GS salary, are taken into account) according to the last published report of the Federal Salary Council?

Or, are federal employees receiving a compensation package that, in 2018, “averaged $135,971 or 80 percent more than the private-sector average of $75,381….” which many or most Americans would most likely conclude is out of line and too high for our federal civil service?

The reality is federal employees, and certainly federal employee unions, are more likely to agree with the FSC conclusions. Many outside of government would be shocked and upset at reading there is an 80% disparity between the private and federal sectors in total compensation packages.

There is unlikely to be any agreement between these two extremes. Political philosophy and economic interest play the major role in accepting one view or the other.

© 2019 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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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

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