NCPA - National Center for Policy Analysis

Do Federal Employees Deserve a Raise?

January 27, 2011

Federal employees are still smarting over President Obama's two-year pay freeze, but for some Republicans a mere freeze is not enough.  House Speaker John Boehner, R-Ohio, promises to eliminate tens of billions of dollars from the budget, and federal workers will not be immune, say Andrew G. Biggs, a resident scholar at the American Enterprise Institute, and Jason Richwine, a senior policy analyst at the Heritage Foundation.

  • Meanwhile, the Office of Personnel Management (OPM) argues that feds actually deserve a raise, not a pay reduction.
  • OPM's 2010 annual report says federal employees earn less than their private sector counterparts, noting the pay gap grew from 22 percent in 2009 to 24 percent in 2010.

Why is this research so inconsistent with claims that federal workers are underpaid?  Because economists compare similar workers, while OPM looks at similar jobs.  Economists use statistical techniques that account for differences in workers' age, education, experience, gender, race, marital status and other characteristics.  Those studies generally have found a federal pay premium in the range of 10 percent to 20 percent, according to the 1999 Handbook of Labor Economics.

  • A private sector worker earning $50,000 per year, for example, might receive $55,000 to $60,000 per year as a federal employee.
  • The largest premiums are for lower-skilled employees, with smaller benefits as education increases.
  • Using the Census Bureau's 2009 Current Population Survey, the authors calculated an average federal pay premium of 12 percent over comparable private workers.

Source: Andrew G. Biggs and Jason Richwine, "The Real Gap," American Enterprise Institute, January 20, 2011.

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