NCPA - National Center for Policy Analysis

Federal Employees Earn More than Private-Sector Workers

February 25, 2011

The average federal employee earns 57 percent greater cash pay and 85 percent greater total compensation (which includes benefits) than the average private-sector worker, says James Sherk, a senior policy analyst in labor economics at the Heritage Foundation.

  • This is an apples-to-oranges comparison because federal employees generally have more education and experience than private sector workers do.
  • Controlling for observable skills and characteristics allows economists to make an apples-to-apples comparison between private sector and federal employees.
  • Doing so shows that the federal pay system still gives the average federal employee hourly cash earnings 22 percent above the average private worker's.
  • Including benefits raises the average compensation disparity to between 30 percent and 40 percent.

Federal workers receive automatic seniority-based raises irrespective of performance.  President Obama's suspension of the annual cost-of-living adjustment does not affect these raises.  Despite these average pay differences, many of the hardest-working and most highly skilled federal employees receive at or below market compensation.  There are however certain policy objections, says Sherk.

  • Taxpayers should not sacrifice so that federal employees can enjoy better pay and benefits than they could hope to receive in the private sector.
  • Many federal employees retire in their late 50s, collect their pension and retiree health benefits, then take a second job in the private sector.
  • Taxpayers should not have to subsidize this double-dipping.

Source: James Sherk, "Federal Compensation: Why Government Pay Is Inflated," Heritage Foundation, February 22, 2011.

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