New federal pay tables for the coming year and the annual COLA increase are always topic of interest for those impacted by these events.
For 2022, a current projection for the annual cost of living adjustment (COLA) for federal retirees and Social Security recipients is 6.2%. We will find out in mid-October the actual amount of the annual COLA that becomes effective in January.
Federal Pay and COLA for 2022
We also do not yet know the amount of the pay raise federal employees will receive in January. A projection of 2.7% is the current estimate based on current events, including the president’s budget and proposed raise as well as actions in Congress on the budget. The annual pay raise usually becomes finalized in late December. Last year, it was finalized on December 30, 2020.
We will know more about the pay raise if and when the president submits an “alternative pay raise” letter.
The average salary for employees is going up every year—despite occasional years of not having an annual pay increase. Some readers have already commented that the COLA increase coming in January is unfair to current employees because the increase is likely to be larger than the pay raise.
The reality is that the amounts differ from year to year. The chart below shows the average salary of federal employees in September of each year (except for the 2021 average based on March figures), the annual COLA increase, the annual average pay raise, and the average inflation figure for each year.
Those with an abiding interest in the topic of federal pay raises may also want to read 50 Years of Federal Pay: Democrats v. Republicans. While federal employee unions almost always support Democrats, actual pay raises have been higher under Republicans (but better benefits for federal employee unions are granted under Democrats).
Salary Differences For Average Federal Pay vs. Washington, DC
Here are the salary statistics compiled by the Office of Personnel Management. The latest salary figure is from March 2021 and not September 2021. We have also included the average salary in Washington, DC. That average salary figure drives up the overall average for federal employees as the salaries there are often much higher.
Some argue the higher average in Washington is justified because they have greater responsibility for decisions in the federal government. Others contend it is because there is a tendency to award higher grades to employees in Washington because they work in an agency headquarters even though many or most of the significant government decisions in the bureaucracy are made outside of DC.
Readers will reach their own conclusions based on their impressions or experience; the data do support the common belief that salaries in Washington are higher. These are the salary figures only and the totals do not include the average value of benefits provided to federal employees.
|Year||Average Salary||Pay Raise %||DC Average Salary||COLA %||Inflation|
Inflation rate from US Inflation Calculator
The data for 2021 is from March. Other salary data is from September of each year as that is the end of the federal government’s fiscal year.
Here are several other data tidbits.
- The actual percentage increase in the average salary for federal employees from 2013 to March of 2021: 18.1%.
- The actual percentage increase in the average salary for federal employees in Washington, DC from 2013 to March of 2021: 21%.
- 13.6% is the total percentage of annual federal pay raises from 2013-2021.
- Total COLA percentage increase from 2013-2021: 12.9%
Why The Difference in Total Average Increase and Annual Raise Increases?
How can the average salary go up so much more than the total of the average pay raise?
Contributing factors are probably what is sometimes called “grade creep”. This means a person’s duties may not actually change but the position description is rewritten so that an employee receives a promotion as a way of getting a pay raise. That is obviously not how the system is supposed to work. Nevertheless, it is done, particularly in years when the annual pay raise is low and a person is not going to get a within-grade increase or a promotion. It is an insider’s way of receiving a higher salary and very difficult to track or trace.
Locality pay also makes a difference. Over time, the Federal Salary Council and the President’s Pay Agent have increased the number of employees and increased the number and size of geographic areas receiving locality pay increases.
What does this data mean for federal employees?
Move to DC to Increase Future Retirement Income
One obvious conclusion for federal employees wanting to raise their average “high-three” salary is to move to the Washington locality pay area long enough to impact your future retiree income.
This is not an uncommon move for federal employees. A federal employee can work in the Washington area for the necessary period of time, rent an apartment and keep a house in an area where federal salaries are lower. When the employee retires, the retirement income will be higher and the costs will presumably be lower in a different geographic area.
The grade structure is higher in Washington and the average length of service for DC federal employees is longer. More experience in working in government can make it easier to obtain a higher-paying job for the last several years of federal service.
The average length of federal service for federal employees in Washington, DC is higher than in the rest of the federal government. At the end of March 2021, the average federal employee has 12.2 years of federal employment. In Washington, the average length of federal employment was 15 years.
Way back in 2013, the average length of federal service was 13.1 years. In Washington, at the end of September 2013, the average length of service was still 15 years. The difference in those eight years between employees in Washington and the average federal employee increased over this eight-year period but remained at 15 years of average federal service for those working in Washington.
The Federal Bureaucracy is Self-Sufficient
Another conclusion is that the federal government is a self-sufficient bureaucracy. Congress and the president may approve what is perceived by the federal workforce as unfair low annual raises. There are ways around that system of granting federal raises.
Grade creep and locality pay are ongoing within the bureaucracy. No Congressional or presidential approval is necessary for approving a larger locality pay area or adding to an existing pay area. Some locality pay areas now extend two hours or more each way in driving to or from the central location in the pay area. Employees in the same locality pay area are under the same pay structure.
Grade creep is done within an agency. It is a quiet, unassuming system controlled largely by the human resources system which in turn responds to meeting the needs or desires of employees. Who does not want a higher grade and more pay? This is one way to keep employees happy.
No doubt, some agencies are also hiring employees at higher grades, perhaps changing the mix of jobs in the agency. These types of changes also impact the average grade and salary in an agency if enough people are being hired at the higher grade level.
The reality is that the stated amount of a pay raise is not always an accurate indicator of how much the average pay is increasing in government.