Burning Question: Are Feds Overpaid?

By Alex M. Parker

April 1, 2010

Numbers tell conflicting stories about government salary gap.

For decades, federal employees have argued they are shortchanged by a growing pay gap between government and the private sector, wielding voluminous U.S. workforce data to make their case. The debate prompted reforms such as the 1992 Federal Employees Pay Comparability Act and locality pay, which is designed to bring General Schedule salaries in line with nonfederal salaries in various regions.

But today many citizens seem to be asking: Do federal employees actually make too much?

When he took office in January, Sen. Scott Brown, R-Mass., called for a freeze in federal hiring and wages, saying government workers earn double the salaries of their private sector counterparts. "We need to be a little bit bolder [in cutting the deficit]," Brown told Barbara Walters during an interview on This Week.

To make his case, Brown points to an analysis from the Cato Institute, a Washington think tank, which cites salary figures from the Commerce Department's Bureau of Economic Analysis. According to the study, when benefits are included, feds earn an average of $119,982 per year compared with an average annual salary of $59,909 for private sector workers.

It's not the first time Cato has examined salary data and drawn similar conclusions. The organization published a comparable report in 2008.

But this year the findings are getting more notice-and not only from Brown. Fellow GOP lawmakers such as Reps. Jason Chaffetz of Utah and Joe Barton of Texas also have been pressing federal agencies for salary information. Figures similar to the 2-1 ratio Brown cited have been touted in USA Today, on CNN, and by Boston Globe columnist Jeff Jacoby.

Fueled by a perfect storm of outside forces-a stagnant economy, unemployment stubbornly hover- ing at around 10 percent, a skyrocketing deficit and mounting dissatisfaction with government-federal salaries are attracting unusual scrutiny.

For civil servants, pay is a contentious and emotional issue-one that reaches beyond their wallets. When anti-government sentiment is high, federal employees often feel they are unfair targets for populist anger.

Reliable data on public and private sector salaries are hard to come by.

Critics argue the Cato analysis and similar studies are misleading and fail to provide a true comparison of public and private sector salaries. They say the data such studies are based on don't take into account variables such as occupation, years of service, education, experience and geography, among other factors. For example, since the General Schedule pay system was founded in 1949, career paths have transitioned from predominately clerical to largely professional. And some say using the federal civilian workforce for comparison-which excludes military service members-is not only comparing apples to oranges, it's more like comparing apples to vegetables.

"The only appropriate way to make a fair pay comparison is to compare similar jobs with one another. The federal workforce is a white-collar, highly educated workforce, consisting of such professionals as doctors, attorneys and scientists in virtually every discipline," NTEU President Colleen Kelley said in a statement responding to the Cato analysis.

Chris Edwards, director of tax policy studies at Cato, acknowledges that a better apples-to-apples comparison of job descriptions is needed. But he says Cato's statistics show that during the past decade, federal salaries have grown at a pace that exceeds that of the private sector.

"Has the composition of the federal workforce really changed that much in just eight years to justify such a big relative gain?" Edwards said in a statement on Cato's Web site. "I doubt it."

Government labor groups often point to annual reports from the Federal Salary Council-composed of union officials and workforce specialists-and the President's Pay Agent, which includes the Office of Personnel Management director, Labor secretary, and Office of Management and Budget director. Input from both panels is a critical ingredient in the formula to determine federal pay. Their reports show that in 2008, the pay gap between federal employees and their counterparts in similar private sector occupations and geographic areas was 26 percent, with private sector employees coming out on top. But those numbers also have been met with skepticism, and not only from critics with an ideological ax to grind.

The government began preparing those reports after the 1992 passage of the Federal Employees Pay Comparability Act, which sought to bring government salaries in line with the private sector's. The Federal Salary Council uses data from the Labor Department's Bureau of Labor Statistics to compare federal and private sector salaries, breaking them into locality pay areas.

Legally, the statistics are supposed to be used to calculate locality pay, which is added to federal employees' base salaries to bring them in line with prevailing wages in specified areas. In practice, the president and Congress have avoided using the formula since it's unlikely the president or Congress would raise federal salaries enough to close the gap. While the calculation has become mostly a formality, it still serves as a powerful weapon in the perennial battle over federal pay.

As envisioned, the Bureau of Labor Statistics would create a list of occupations for feds and nonfeds, and then compare averages down the line. But in 1996, BLS switched to the National Compensation Survey, which analyzes a random sample of occupations.

"While BLS surveys all white-collar jobs under the NCS program, it does not find all jobs at all work levels in each survey area," the 2009 President's Pay Agent report stated. "This is a serious problem with the NCS program because survey results and pay disparity measures can vary considerably, based on which jobs are included."

BLS uses economic modeling to predict salaries for professions it is unable to quantify-but that also raises questions.

Howard Risher, a consultant on pay issues who had a hand in designing the Federal Employees Pay Comparability Act, says he became suspicious of the BLS pay gap figure after seeing how much money agencies were budgeting for salary increases, compared with companies in the private sector.

He notes the BLS survey cycles through many different employers each year, possibly skewing the results, and says estimates used to model occupations that don't show up in the survey can be speculative. "It is far too complex to really pinpoint the problems," Risher says. "The only valid way that you could verify or dispute those numbers would be to take other data from other surveys."

One way to compare the data would be to look at similar jobs, while taking into account geographic areas and years of service. But even then, the numbers can tell conflicting stories.

In the Washington area, where roughly 10 percent of federal employees work, a private accountant earns an average annual salary of $49,800, compared with $43,432 for a GS-7 accountant, according to data from the Human Resource Association of the National Capital Area. But an editor in the GS-9 to GS-12 range earns an average of $75,269 annually, versus $63,300 for a private sector editor.

In reality, the question of whether or not federal employees are overpaid doesn't have a simple answer, according to Charles Fay, a professor at Rutgers University and former Federal Salary Council member. Those in entry-level jobs in the government might earn more than entry-level jobs private practice, he notes, while the opposite is true for those in management and specialized fields requiring years of experience.

"The higher you go, the more they're underpaid," Fay says. "The lower they go, the more they're overpaid."


By Alex M. Parker

April 1, 2010

http://www.govexec.com/magazine/magazine-trends/2010/04/burning-question-are-feds-overpaid/31188/