A Straightforward Assessment of Federal Pay and Benefits is Badly Needed

The last market analysis comparing GS salaries with private sector rates based on benchmark jobs was completed over 20 years ago.

The Congressional Budget Office once again has presented a contentious assessment of federal pay and benefits. In the years when federal pay was “frozen,” CBO data confirms salaries continued to increase, thanks to step increases and promotions. What’s more, federal benefits are more generous than those typical in other sectors.

But it’s not clear what value the analysis has other than feeding the debate over whether federal employees are overpaid or underpaid (the answer is both—it all depends on what specific jobs you’re talking about). The CBO analysis cannot be used for planning either cash compensation or benefits.  

Payroll costs are important for all employers but competing for needed talent is the overriding reason employers offer benefits and align salaries with prevailing market rates. Companies routinely monitor compensation trends and with few exceptions adjust their salary programs annually to stay competitive.  As a matter of policy, some companies offer above-average compensation assuming it will help them attract above-average talent. It’s a reasoned policy decision.

A key point is that over the past two decades there has been a sea change in the management philosophy governing employee compensation in the country’s leading companies. One element is the shift from managing talent as an asset rather than a cost. When employees are managed as assets, it makes business sense to invest in workforce capabilities—and comparative payroll costs become less important.

Recently the business media has highlighted emerging skill shortages. The demographics indicate that will be a problem for years to come, especially for public employers with aging workforces. A new Harvard Youth Poll reported only 25 percent of millennials are interested in public service careers. That’s a problem. For agencies that want to hire critical skills, this is not a time to make changes that make federal careers less attractive.

For employers competing for talent, the first step would be to define their workforce priorities—that is, the essential skills—along with the known talent competitors. That effectively defines the relevant labor markets and needed survey data. There are regular surveys in virtually every industry tracking compensation trends. Hundreds are conducted annually. The general goal is always the same—to plan salaries that make it possible to attract adequately qualified talent.

Realistically, government agencies compete with a different group of employers in each local area where federal facilities are located. That is the rationale for the Federal Wage System. FWS wages are based on local surveys of the pay for matched jobs in selected industries. The Veterans Affairs Department relies on a similar policy, using surveys of local area hospitals to adjust the salary schedules of its specialists.

The rationale of the FWS system contradicts the CBO conclusion that federal workers “with no more than a high school education earned 34 percent more.” Although less is known about VA’s use of survey data, presumably their salaries are aligned with market averages as well.

Lessons from the Private Sector

Unfortunately, the CBO analysis is far more complicated than anything used for this purpose in business.  Moreover, CBO relied on data and methods that cannot be readily validated or confirmed with independent analyses. That’s also a problem with the annual Bureau of Labor Statistics surveys used to assess the claimed gap with General Schedule salaries. Both are classic black-box analyses.

That’s not true with a corporate market analysis. Those are based somewhat simplistically on job matching and widely understood descriptive statistics. That’s textbook and has been for decades.

The last market analysis comparing GS salaries with private sector rates based on benchmark jobs was completed over 20 years ago. Since the only compensation information normally made public are the reports summarizing the latest gap estimate (34 percent) and the President’s decision to adjust the GS ranges, it’s been years since job-to-job pay comparisons were publicly available.  

CBO’s analysis of federal benefits is not surprising, nor is it news. Federal benefits are more generous than those in the average company. That’s true for paid time off as well. Realistically the cost of benefits is inflated because the workforce is aging but at a time when millions of private employers provide little beyond legally required benefits, it is difficult to justify. It’s not that government is wrong; with companies shutting down employer-provided benefits many older citizens are experiencing financial problems.

A point from the CBO study that stands out is their conclusion that for employees with a doctorate or professional degree, “benefits were about the same in the two sectors.”  The fact is, highly educated employees are likely to work in the better private sector organizations. (They rarely work in the ‘mom-and-pop’ businesses in government surveys.) That is relevant because it confirms there are employers that continue to provide attractive benefits.

Federal salaries for those highly educated professionals as well as other high demand specialists are generally not competitive. The GS system lacks the flexibility to be responsive to market trends. Reducing the value of federal benefits will erode government’s ability to compete for and retain critical talent.

CBO’s analysis is not definitive, although within limitations it appears to be solid. The problem is the Current Population Survey was not planned for this purpose. Respondents to the CPS questionnaire, to illustrate the point, are asked about degrees awarded but not college majors. The analysis then assumes, simplistically, that all undergraduate degrees are paid the same.

The core problem, however, is that macro statistical analyses cannot produce evidence appropriate for addressing specific pay problems. But the BLS/OPM gap analysis has never been accepted because of similar problems. Neither will ever provide a broadly accepted answer.

The alternative that is solidly accepted in every other sector (as well as a long list of state and local public employers) is the use of benchmark job surveys to understand market pay levels. It’s a project that could be completed for a fraction of the cost of the BLS surveys. It’s consistent with the FWS and VA’s use of survey data as well as the occasional studies undertaken by off-budget agencies.

Government needs to go back to the basics, complete agency workforce analyses to understand future workforce needs, and then develop an understanding of the supply of needed skills and the pay those specialists command. Market analyses are routine in every other sector. Leaders need to know payroll dollars are well spent.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.