The Truth about Federal Salary Numbers

November 26, 2012

The Federal Salary Council, an advisory body of academics and leaders of public employee unions, suggested last month that federal workers are underpaid by an average of 35 percent relative to nonfederal employees. Employee unions seized on this figure, using it to push back against salary freezes. But the pay agent's latest conclusions actually highlight the inadequacy of its methods, say Andrew G. Biggs, a resident scholar at the American Enterprise Institute, and Jason Richwine, a senior policy analyst at the Heritage Foundation.

  • If these figures are to be believed, federal employees are paid only 65 cents for every dollar received by nonfederal employees doing the same work.
  • Put another way, the average federal employee who shifts to a job outside government would increase his salary by 54 percent.

The figures are implausible on their face. Here is the truth behind these numbers.

  • The pay agent doesn't consider fringe benefits, even though benefits for federal workers are famously generous. Indeed, a Congressional Budget Office (CBO) study published in January found that the federal retirement package was 2.7 times more generous than what is paid by large private-sector firms.
  • Federal workers also receive more paid vacation and sick days.
  • Even if they made 35 percent less, their benefits would make up much of the difference.

But federal salaries are not 35 percent below private-sector levels. All five outside studies reviewed this year by the Government Accountability Office (GAO) found that federal pay is equal to or higher than those of comparable private-sector workers. This is consistent with three decades of academic research.

So where does the government calculation go wrong? To begin, it compares pay for federal jobs to nonfederal positions at a similar "grade," or level. Yet both the CBO and the GAO have documented "overgrading" in the federal workforce, meaning that federal jobs could be assigned higher grades on the General Salary Schedule than the pay agent assumes for their nonfederal equivalents.

The pay agent also doesn't consider the relative qualifications of federal employees. In a 2002 study, economist Melissa Famulari concluded: "Federal workers have significantly fewer years of education and experience than private sector workers in the same level of responsibility in an occupation."

Federal employees should be compensated at fair market levels, which would allow the government to hire and retain workers without overcharging taxpayers. An essential first step toward that goal is ensuring that the government's annual pay comparison is objective and comprehensive.

Source: Andrew G. Biggs and Jason Richwine, "The Truth about Federal Salary Numbers," Washington Post, November 19, 2012.

 

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