The federal employee salary is a source of concern and contention. Opinions about whether federal salaries are too high or too low or about right often depend on the economic interest of the person holding the opinion.
Federal employees often see information about the average annual pay raise that typically starts paying out in January. The federal pay system is very complex. Locality pay makes a big difference. Locality pay adds a considerable amount to a federal paycheck over time. Less is known about how this complex system increases federal employee salary levels without direct Congressional or presidential involvement.
Federal Salary Council and Locality Pay Areas
Federal employee unions comprise the most members of the Federal Salary Council (FSC). The FSC plays a major role in determining federal employee salaries as they make recommendations each year on locality pay.
There are a large number of locality pay areas now and more are being added. Since 2015, the number of locality pay areas has gone from 33 to 53, a 61% increase. The Federal Salary Council (FSC) recently recommended adding four more areas to be designated as locality pay areas. This will put the total number of locality pay areas at 57. The President’s Pay Agent approved the addition of these new areas recently and this will likely be implemented in 2024.
In 2023, the FSC recommended adding about 16,000 federal employees into existing locality pay areas. That did not occur for 2023 but will likely be implemented in 2024. The Federal Salary Council has also proposed adding about 190 new jurisdictions into the locality pay system.
FedSmith has asked the Office of Personnel Management (OPM) for the percentage of federal employees now covered by a locality pay area. We have never received a response.
In addition to the complexity, some federal employees are now working from home and collecting locality pay while living outside the local pay area. Locality pay areas are expanding all the time including from distances so far from the workstation that most employees would not want to spend that much time driving to and from work. Some employees can and do live even further away from their assigned duty station—presumably to enjoy a different lifestyle and lower cost of living.
The reality is that some employees are able to work in a less expensive area, collect the higher pay for a locality pay area, and still live a long distance away while collecting the higher locality pay.
Value of Federal Benefits Package
The Federal Salary Council routinely reports that federal employees are paid substantially less than private sector employees. While that may be true, the reality is often different than the underpayment of 23% or so that is portrayed. FedSmith reported in August 2022 that FSC calculated the underpayment of federal employee salaries at 22.47%. This figure does not include the employee benefits package, however.
Federal employees had an average benefit package of about $44,000 in 2021. This is not considered by the FSC when reporting federal employee salaries. Individual federal employee compensation averaged $143,643 in 2021. This compares to an average federal employee salary of $91,733 reported by OPM as of the end of September 2021.
Federal employee unions are organizations that exist to increase pay, benefits, and improve working conditions for at least some federal employees. This is their reason for existence. It is not a surprise that they are like politicians—they use data and arguments to advance their reason for existing. While the reports may and do get wide coverage, the reported data often leave out anything that does not serve the purposes of the organization creating the press release for public consumption.
Approved Federal Pay Raise vs. Actual Pay Raises: 2.12% vs. 5.08% From 2017-2022
Each year, usually in December, there is considerable publicity about the federal pay raise that will start in January. In January 2023, the average federal pay raise was 4.6%.
For this article, FedSmith has compiled a listing of average federal salary figures, the average salary for federal employees in Washington, DC, the amount of the approved raise by Congress and the president, and the actual pay increase each year based on average federal employee salaries.
The average yearly salary data are from the Office of Personnel Management. The data reported in the chart below are as of the end of September for each year. We have highlighted data from 2017-2022. September was picked as this is the end of the federal government’s fiscal year. We have not included 2023 data as they are not available.
Pay Charts 2017-2022: Approved Raise vs. Actual Raise
As outlined in this chart, the average pay raise approved for federal employees from 2017-2022 was 2.12%. The amount of the actual pay raise paid for this period was 5.08%.
The chart includes data for Washington, DC as well. This area often receives one of the highest federal pay raises each year and it has the largest concentration of federal employees.
While federal employees in Washington have a higher average salary than most other federal employees, their actual increase is less than the overall average for federal employees during this time period.
|Fiscal Year||Average Salary||Average Salary in Washington, DC||Approved Raise %||Actual $ Pay Increase for All Federal Employees||Actual % Increase for All Federal Employees||Actual $ Increase for DC||Actual DC % Increase|
Why does the actual pay raise amount exceed the approved pay raise amount?
There are probably several reasons for this. Locality pay is a reason, probably the primary reason, for the difference between the approved pay raise and the actual increase. Other reasons for the difference are within-grade increases, promotions, and “grade-creep” in the federal bureaucracy.
Since 2015, the number of locality pay areas has gone from 33 to 53, a 61% increase. The Federal Salary Council (FSC) recently recommended adding four more areas to be designated as locality pay areas. This puts the total number of locality pay areas at 57.
The number of locality pay areas and the number of federal employees being added into locality pay areas has been going up considerably in most years. In 2016 alone, the number of GS locality pay areas jumped from 33 to 46, an increase of more than 39%. Federal employees in a locality pay area make higher salaries than the “Rest of the U.S.”
As an example of the impact being added to a locality pay area can make, the Virginia Beach-Norfolk areas were included as a new locality pay area. The 2023 pay tables from OPM note that the 2023 pay rate for this one new area includes “the 4.1% general schedule increase and a locality payment of 17.94%.”
In addition to adding new locality pay areas, more employees are also being added into existing areas. Adding more employees to existing locality areas and adding more locality pay areas made a big difference. “Tens of thousands” more federal employees are to be added into the locality pay system when the rule-making process is concluded, probably in 2024.
The actual pay increase for employees in Washington was a lower percentage than it was for all federal employees. As most readers know, federal employees were already in a locality pay area. This means the increase in the number of locality pay areas did not impact employees in Washington even though the average federal employee salary in Washington is much higher than that of the average federal employees.