26.71% Federal Employee Pay Disparity Says FSC

May 19, 2020 1:52 PM , Updated June 2, 2020 3:59 PM
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The Federal Salary Council (FSC) submits an annual report to the President’s Pay Agent on locality pay for federal employees in various locality pay areas. The annual report for 2021 locality pay areas has been released.

How the System Works

The President appoints the members of the FSC. It includes three experts in labor relations and pay policy and six representatives of Federal labor unions and other employee organizations.

The FSC submits recommendations on the locality pay program to the President’s Pay Agent. The FSC’s recommendations cover the establishment or modification of pay localities, the coverage of salary surveys (conducted by the Bureau of Labor Statistics) used to set locality pay, the process for making pay comparisons, and the level of comparability payments that should be made.

The FSC’s recommendations are advisory. The President’s Pay Agent makes the final determination on locality pay areas and also makes the final recommendation to the President regarding locality pay percentages that go into effect the following year.

Federal Pay Disparity

The Salary Council makes recommendations each year and also calculates what the organization concludes the “pay disparity” is between the federal workforce and the private sector. In reality, the FSC’s conclusions on pay disparity figures with the private sector are not held in high regard.

In the most recent report issued by the FSC, the organization wrote:

[T]he estimated overall disparity between (1) base GS average salaries and (2) non-Federal average salaries as estimated by BLS in locality pay areas was 55.81 percent. In theory, therefore, the amount needed to reduce the pay disparity to 5 percent (the target disparity established by FEPCA) averages 48.39 percent. Thus, when existing locality pay rates (averaging 22.97 percent of the average GS salary) are taken into account, the overall remaining pay disparity is estimated at 26.71 percent….Note that these locality pay rates would be in addition to the increase in GS base salary rates…. 

Hopefully, no reader is expecting a salary increase of 26.71 percent in 2021.

We do not know what the General Schedule (GS) average pay increase will be in 2021 (if there is a pay increase). We do know that it will not be about 27 percent or more than 29 percent as calculated by the FSC when a possible base GS salary increase is added to the total raise.

The reality of the system is that the unions on the FSC are advocates for higher pay for federal employees. Proposals that stand in the way of a recommendation for higher pay for more federal employees are usually not adopted. That is not surprising. Advocating for higher pay and more benefits for bargaining unit members is what unions do. The process does not lead to establishing credibility with Congress or the President’s Pay Agent.

Nevertheless, over time the FSC has been successful in creating many new locality pay areas and also adding more areas to existing locality pay areas. In effect, the system has resulted in higher pay for many federal employees.

More recently, the Salary Council has had less unanimity in its annual reports. Generally, the unions band together to argue for higher pay for more people. The members of the FSC who do not represent a union sometimes disagree and have their own recommendations.

The latest report of the FSC is for locality pay starting in 2021.

No New Locality Pay Areas

For 2021, the FSC is not recommending establishing any new locality pay areas. The Council is considering pay disparities in 38 research areas that have not been approved as separate locality pay areas.

Issues in Dispute at the FSC

Ron Sanders is the Chairman of the Federal Salary Council and also Director of the University of South Florida School of Public Affairs. Katja Bullock is Special Assistant to the President and Associate Director of Presidential Personnel and also serves on the FSC.

Sanders and Bullock are the outliers on the FSC and appear less inclined to automatically support proposals likely to lead to more salary increases in expanded locality pay areas or by adding new areas to existing locality pay areas.

For example, in the latest FSC report, there is disagreement among the members on expanding metropolitan statistical areas (MSAs) and combined statistical areas (CSAs) to use within the locality pay area program. Union representatives would prefer to use a new definition of these areas as long as it would increase pay rates for federal employees. They would prefer to exclude counties that would see a decrease and to indefinitely continue the higher locality pay for impacted employees even if the new definitions would normally lower their pay. Members Sanders and Bullock do not support a recommendation to follow the definitions only when they would expand a locality pay area.

On another topic, Sanders and Bullock support requiring applications for establishing new locality pay areas that do not meet existing criteria for a new area to submit detailed information in support of the request.

Union members generally do not want to require applications not meeting existing criteria to submit additional information and also want to eliminate the GS employment criteria for areas of application. In effect, their approach would likely expand the number of new locality pay areas even if they do not meet current criteria for new areas.

Wayne County, PA Added to NY Area

The FSC reached agreement that Wayne County, PA be added to the New York-Newark locality pay area.

Wayne County has about 51,000 people and is approximately 110 miles from New York City and about a three hour drive each way. The pay area covers some counties in New York, New Jersey, Pennsylvania and Connecticut.

The locality pay area has a locality pay of 33.98% in 2020 according to the Office of Personnel Management. Adding the county to the existing pay area would provide a pay increase for employees there if the Pay Agent adopts the recommendation.

No Action on Two MN Counties

Union representatives wanted to add Olmsted County, MN and Pine County, MN to the Minneapolis locality pay area. Members Sanders and Bullock disagreed and recommended additional information be studied before making a decision.

Summary

The President’s Pay Agent usually makes its recommendations for the next year late in the year. Impacted federal employees will probably not know what the locality pay rates will be for 2021 until sometime in December.

At the same time the Pay Agent’s report is issued, the report will most likely decide whether to adopt the recommendation to add Wayne County, PA to the New York-Newark locality pay area.

2020 has already been a tumultuous year. We do not know what the impact of the COVID-19 coronavirus or national elections will have on locality pay rates or any pay raise for 2021. The FSC recommendations are less sweeping this year so we can expect fewer changes going into next year.

Readers interested in seeing specific pay for each GS grade and step in each locality can check it out in the FedSmith GS Pay Calculator.

© 2020 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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