When workforce issues impede an agency’s service to the public, it’s more than a line in the budget.
Pay is not an abstract issue. Employee compensation affects an organization’s performance in two ways: First, it’s a core consideration for job seekers and influences the number and qualifications of applicants; second, it can be instrumental in motivating employees. It’s also a polarizing budget item, but when workforce issues impede an agency’s service to the public, employee compensation is more than a line in the budget.
The practical impact of compensation on staffing and agency performance becomes clear in reading the minutes of the Federal Salary Council. To state the obvious, agencies cannot achieve their mission without the requisite staff with requisite knowledge and skills. That consideration is never addressed in the gap analysis or in the Pay Agent reports to the President. Council Chair Ron Sanders summed up the problem in the minutes from the November Council meeting: “Having a compensation system that works would be worth the investment.”
The minutes tell the story. First on the meeting’s agenda was a report from a Bureau of Labor Statistics representative and a far-too-brief discussion of the pay gap methodology. Then council members heard from officials from six cities and counties who argued that their regions should be established as new locality pay areas or combined with others. At the meeting in July 2018, eight groups made similar presentations.
At the November meeting, two officials from Charleston, South Carolina, made the case for locality pay—an executive from the local Chamber of Commerce and the head of the local Veterans Affairs medical center. They pointed out two things: First, the area’s business base is growing and diversifying rapidly and that’s driving up pay levels. Second, even the Title 38 special pay authority “has limits” that make it difficult to attract talent. They also argued that housing costs have risen rapidly, adding to the recruiting problems.
Those presentations highlight a key but ignored point in BLS surveys: Labor markets are dynamic, driven by the shifting balance of supply and demand for each job family, and each city or town has a unique mix of employers and occupations. The local “gap” varies with each job family.
Markets Are Dynamic
All surveys are snapshots in time, and are therefore silent on how markets are changing. With BLS surveys, each locality area has a different mix of employers. Naturally, the sample of jobs is different in each. The BLS collects information relevant to occupational trends but it’s not a consideration in the gap analysis.
In Federal Salary Council discussions, the BLS gap methodology is far less important than the common thread in the arguments to name new locality areas. That thread is the linkage between staffing problems and employee compensation. Staffing problems dominate the meetings.
The comments by the head of the medical center are important because the issues are relevant to all federal medical centers. In November, his facility had 477 vacancies. Chairman Sanders asked whether staffing issues are associated with all positions at the VA medical center. The answer was that the staffing issues are mainly with STEMM (science, technology, engineering, math and medicine) positions, but that “a number of non-STEMM positions essential to the operation of the medical center are also affected by the pay disparity.
Nashville, Tennessee, was up next. The two speakers represented Army and Navy engineering centers. They made the point that government “does not hire guitar players and tour guides” and those jobs in the BLS survey mask the gap relevant to engineers. They were followed by representatives from a Minnesota county with a federal prison. That brought to mind earlier reports that the Bureau of Prisons routinely taps its nurses, secretaries, cooks and other non-security staff to pitch in as guards to address acute staff shortages. Finally, a geographically isolated Marine training center in California reported losing employees because of long commuting distances.
Significantly, the local gap calculation is only indirectly the issue at Council meetings. No one at the November meeting claimed all local area General Schedule employees are underpaid or deserve increases. The central issue is the contention that the administration of the GS system is contributing to staffing problems.
There are more than 50,000 vacancies at VA now, with more than 25,000 of those in a medical job series. I managed the pay program in a large hospital system and I know that has to adversely affect the care needed by the country’s veterans.
Vacancies naturally exist in all 46 locality areas as well as the huge area known as “rest of U.S.” or RUS, in federal pay parlance. The notoriously complex and slow federal hiring process is certainly an impediment, but federal pay is also a problem.
It is striking that government knows virtually nothing about how General Schedule salaries compare with the market pay for specific jobs. BLS surveys were not planned to provide that obviously important data. In the RUS regions, BLS data has no value for determining if low pay is causing problems.
This should be a concern for all agencies. The problem is complicated by people leaving the middle of the country for the urban areas on the coasts. That reduces the talent pool in states like Kentucky with its 25,500 federal employees, or Indiana where 23,500 employees are based. Thousands are paid RUS salaries and BLS survey data are useless in determining if their pay is competitive.
The National Association of State Chief Administrators recently released an important report on the battle for talent at the state level. The report’s conclusion is damning: “Government is falling too far behind in preparing for the workforce of the future. To close the gap—and attract the best talent—states must start making bold moves today.” The study found the inability to offer competitive salaries is by a large margin the biggest barrier to attracting qualified talent.
To begin understanding how pay impacts staffing, the Council proposes additional analyses, using “HCIs”—Human Capital Indicators or metrics—“to qualitatively assess the effects of the statistically modeled salary estimates.” The idea is to look for evidence that pay levels are linked to staffing, more specifically that low pay contributes to problems attracting and retaining qualified employees.
Council Chair Ron Sanders commented at the hearing “that he would work with OPM staff to develop a checklist of HCIs.” He could have added that government should require the use of HCIs to confirm pay is causing staffing problems. That’s the difference between descriptive and predictive use of HCIs.
It’s far less common in government, however. As a metrics guru told me, “Government collects lots of data, but a good percentage is collected without a purpose for its use in mind.” That’s been confirmed by the Government Accountability Office.
The use of HCIs surfaced in the discussion of the gap methodology but it could open the door to using HCI metrics for additional workforce management analyses. Management sage Peter Drucker is credited with the widely cited comment, “If you can’t measure it, you can’t improve it.”
That’s why agencies should be required, not encouraged, to maintain a dashboard of key human capital indicators to highlight trends. They should be required at each federal facility. It’s at the hospital or prison level, for example, where vacancies or skill shortages have an immediate impact on performance and where new hires often start. The staffing concern suggests the following would be relevant:
- Number of applications per vacancy
- Manager satisfaction with hiring process
- Cost of hire, including the time of everyone involved
- Cost of turnover in the first year or two
If, for example, a facility sees the number of applications or the qualifications of applicants declining, they need to learn why. The new understanding will contribute to better pay decisions.
The HCI metrics and dashboards will enable government to monitor emerging staffing problems. An educated guess is that the federal government’s reality is similar to what triggered the NASCA study. Developing the dashboard capability is a small investment to stay abreast of what is expected to become an increasingly serious problem. The Office of Personnel Management should take the lead.