NCPA - National Center for Policy Analysis

Switching to Federal Employment Pays Off

June 28, 2011

Federal pay was a hot-button issue during the 2010 campaign season, leading to some overheated rhetoric.  Politicians and journalists exaggerated the federal-private pay disparity by comparing raw salary figures without accounting for the above-average skills of federal workers.  On the other side, defenders of federal pay, particularly public-sector unions, unreasonably claimed that federal workers are underpaid and described evidence to the contrary as "lies" and "scapegoating," says Jason Richwine, a senior policy analyst with the Heritage Foundation.

Congress has become increasingly concerned that federal workers earn wages and benefits that are above market levels, creating a need for rigorous public-private pay comparisons.  The most common analysis compares the wages of federal and private workers with the same observable characteristics at one point in time, typically finding a federal wage premium of 10 percent to 20 percent.  Although well regarded and widely used, the cross-sectional method cannot account for unobserved abilities that may affect the premium estimate.

  • Controlling for unobserved abilities by following the same workers over time as they switch between the federal and private sectors, Richwine finds private-sector workers who switch to federal jobs receive an average real wage increase of 9 percent.
  • By contrast, private workers who find another private job earn just an additional 1 percent.
  • This implies an 8 percent federal premium.

Source: Jason Richwine, "Same Worker, Higher Wage: A Study of Workers Who Switch from Private to Federal," The Heritage Foundation, June 15, 2011.

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