GovernmentExecutive.com

When President Bush called for a 2.2 percent raise for both the military and civilian federal employees in his 2007 budget, influential House Government Reform Committee Chairman Tom Davis, R-Va. praised his proposal.

"This will be the first time in many years that Davis and the Washington-area delegation will not have to wage a battle in Congress to protect pay parity, the belief that our federal workers should be treated equally in the annual cost-of-living pay raises," the congressman's office said in a press release.

Well, not exactly.

Federal employees don't receive cost-of-living increases; they receive annual increases that are tied to the cost of labor. The Federal Salary Council, which determines locality pay in each city, has made that point abundantly clear. As long as the labor is cheap, it makes no difference if inflation is eating away your wages.

That doesn't stop lawmakers with large federal constituencies and federal employee groups from opining on the gap between annual raises and cost-of-living increases.

The 2.2 percent raise is "grossly insufficient to cover health insurance premiums, the additional cost of gas and heating oil -- in other words, energy costs -- and the cost of living in this area," Rep. James Moran, D-Va., told Government Executive.

So how does the yearly federal pay raise stack up against the cost-of-living? Fairly well over the past five years, it turns out.

For example, look at federal retirees, who do receive yearly cost-of-living increases based on the Consumer Price Index for urban wage earners. The index, a common measure of inflation, is compiled by the Labor Department.

For 2006, retirees are receiving more than employees: 4.1 percent compared to 3.1 percent. But for the previous four years, it tips the other way.

Inflation was 2.7 percent in 2005, while employees garnered a 3.5 percent raise. In 2004, inflation ran at 2.1 percent and employees received a 4.1 percent hike. In 2003, inflation dropped to 1.4 percent, but employees got a 4.1 percent raise. In 2002, inflation was calculated at 2.6 percent and employees received a 4.6 percent raise.

Will 2007 bring a higher rate of inflation than the president's proposed 2.2 percent raise? The most recent data from the Labor Department show that from December 2004 to December 2005, inflation rose 3.4 percent. If the 2.2 percent figure sticks, then employees could be feeling cost-of-labor pains for the second year in a row.

How does the federal pay raise stack up against the private sector? Again, employees fared well over the last five years, according to a survey of 1,056 companies performed by Hewitt Associates, a human resources consulting firm.

In 2006, nonexecutive, salaried, professional employees are receiving an average 3.6 percent salary increase. In 2005, it was also 3.6 percent. The increase averaged 3.4 percent in 2004, while the 2003 and 2002 figures were 3.4 percent and 3.6 percent, respectively.

That means in 2005 and 2006, federal employees received slightly less than their industry counterparts, and in the three previous years, they received slightly more.

Cost of living versus cost of labor is an important distinction to understand. Increases in compensation or benefits based on one of the indexes are not necessarily a better deal than those based on the other -- for the government or for employees.

COMMENTS

• What is not taken into account is bonuses given out by private industry to employees. In some instances, this amount can be substantial, and is usually based on a percentage of the employee's base salary. The performance award system is an underfunded joke in the federal sector. Only the SES and top management receive decent performance awards. John R. Franco Posted March 16, 2006 1:01 PM
• Please permit me as one federal employee who has lived in RUS, the Rest of the United States, locality for the past eight years to say just how grossly misleading this article was. If the cost of living in 2005 was 2.7 percent, those of us living in the RUS received an increase of 2.83 percent (0.13 actual increase) http://www.opm.gov/oca/06tables/html/RUS.asp Further, federal employees have never received the full increase from the first Bush administration's attempt to bring federal employees in line with the private sector. Every year since the legislation was enacted we have received far less than what was recommended. This legislation was enacted as an effort to attract highly qualified persons to the federal workforce. Perhaps Ms. Rutzick should look at comparable salaries for IT workers and compared to federal staff. Or Perhaps Ms. Rutzick should take a look at what the cost of living vs. the cost of labor in a Midwestern college town in a state that has the third highest tax base in America and compare that to what those of us living in the RUS have experienced over the past several years. Hell, my water bill increased 3 percent alone last year, high speed cable up 17 percent (charter cable) and do I even need to mention heating and automobile fuel? The picture painted by Ms. Rutzick would seem as though all feds are living large. Perhaps I'll take a vacation to Hawaii, not on my salary! Sincerely, Alan Locke GovExec.com reader Posted March 2, 2006 10:54 AM
• If you are going to discuss proposed government pay increases there are a host of items that the article does not address. 1. Cost of labor: This is what the change in locality pay is based on and represents the competitive nature of the local in determination of wages and salaries. If there are too many people in an area available for work, they will hold the labor costs low so the government does not have to pay to get people. 2. Cost of Living: Cost of living is based on what it takes to buy goods and services in an area. Retirees get cost of living increases but government workers do not. There is nothing in the locality pay for cost of living. There is no reason that the government should maintain the purchasing power of government salaries and wages. Inflation indicates the cost of living but inflation is a government tax caused by excessive government spending relative to taxes. When the government over-spends it gives income to areas it spends on and drives up the bidding for goods and services that increases prices. The government should not give cost-of-living pay increases without congressional debate and action. The President never should consider suggesting a cost-of-living increase because such would increase government employees relative to the rest of the market. 3. Parity considerations and this are not military versus civilian. It is government versus private industry. For years Congress has said that the pay differences should disappear but has never made it happen. Pay increases above the cost of labor and the cost of living will make it happen but that is highly unlikely. Taxpayer Posted February 17, 2006 7:44 AM