The Clinton Administration is rethinking the formula it uses to calculate federal employees' annual pay increases. But changes to the highly criticized system are at least two years off, the administration has announced.
In an Aug. 6 letter to the Federal Salary Council, which recommends annual raises for federal employees, the three administration officials charged with setting federal pay policy said the formula for federal raises needs to be fixed.
"The administration, under the leadership of the Office of Personnel Management, is committed to developing a credible alternative to the current annual pay adjustment process," OPM Director Janice Lachance, Office of Management and Budget Acting Director Jacob Lew, and Labor Secretary Alexis Herman wrote. "It has become increasingly difficult to operate a pay adjustment system that is based on comparisons of pay for the same 'levels of work.'"
Under the current formula for setting annual raises, which was created by the 1990 Federal Employees Pay Comparability Act (FEPCA), the Bureau of Labor Statistics measured salaries for various private sector occupations in metropolitan areas throughout the country under the Occupational Compensation Survey Program. Then those salaries were compared to federal employees' pay in comparable occupations in the same geographic regions. So-called "locality pay" increases were then supposed to kick in each year to help close the gap.
The bureau's surveys put the average pay gap between private sector and federal workers at 30 percent in March 1997, according to the Federal Salary Council. Under FEPCA, which took effect in 1994, Uncle Sam was supposed to give federal workers sizable raises until the pay gaps were eliminated.
But the Clinton Administration has never trusted the FEPCA pay formula. Each year since the law went into effect, the council has recommended large locality pay increases to close the gap. For example, the council recommended an average 13 percent pay raise in 1999 to help close the gap. But each year, President Clinton has cited a loophole in FEPCA that permits him to set lower pay raises than the Federal Salary Council recommends. Clinton plans to give federal employees a 3.1 percent raise in 1999.
The administration contends that federal employees are not as underpaid as the FEPCA pay formulas suggest.
On top of the administration's concerns with the formula, the Bureau of Labor Statistics has discontinued the Occupational Compensation Survey Program. The bureau, which has seen significant budget cuts over the past few years, has combined the program with two other surveys into a new National Compensation Survey. The new survey also reflects changes in the workplace that the old program did not account for, the bureau says.
Problems with the National Compensation Survey, say the American Federation of Government Employees and other federal employee unions, include inconsistencies among the pay gaps it calculates for metropolitan areas and a tendency to suggest generous raises for employees in the upper grades of the General Schedule, but smaller increases for employees in the lower levels of the General Schedule.
"Any new type of survey would have to have AFGE's stamp of approval before it could be used" for calculating federal pay raises, an AFGE spokeswoman said.
So, the Clinton administration doesn't like the old surveys, which the Bureau of Labor Statistics has stopped conducting, while federal employee unions don't like the new surveys, which the bureau has committed to using.
To avoid a statistical stand-off with the unions, the administration has agreed not to use the new National Compensation Survey to calculate federal pay raises in 2000 (as mentioned above, Clinton plans on giving federal employees a 3.1 percent raise in 1999). The two sides plan to work out an acceptable interim formula for calculating raises in 2000, with the hope that a permanent system will be developed in the next two years.
In the meantime, federal employees can hope that Congress will grant them larger raises than President Clinton will. Several committees on the Hill are leaning toward a 3.6 percent pay raise in 1999.
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