Analysis: Pay reform’s time has come

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Government employees’ compensation is too generous, too stingy or just about right, depending on who’s talking. If there’s one thing everyone agrees on, though, it’s that the time for federal pay reform has come.

A panel of economists and public policy observers revisited the federal pay debate in Washington on Wednesday, spouting reams of information on methodologies, data sets and regression analysis, but offering little insight into what shape government compensation reform should take.

The short answer to whether public employees earn more than their private sector counterparts? “Unfortunately, there is no short answer,” said Joseph Kile, assistant director for microeconomic studies at the nonpartisan Congressional Budget Office. CBO has conducted numerous studies on federal and private sector pay. Its latest report, released in January, concluded government workers on average earn more in total compensation than their private sector counterparts. It also found, however, that less educated government workers were better compensated than their private sector peers while more educated feds did not fare as well in a pay and benefits matchup.

And so goes the debate.

Comparing wages and benefits of government employees and private sector workers is an imperfect science, involving many variables including age, education, different pay scales and bonus opportunities. It’s also a comparison that ventures into controversial political territory, particularly at a time when budgets are tight and both parties are looking to score points with various constituencies. “The public debate over the adequacy of [federal] pay has been long and contentious, and this time is no different,” said John Palguta, vice president for policy at the nonprofit Partnership for Public Service, who moderated the discussion sponsored by the Coalition for Effective Change, a group of current and retired federal managers and executives seeking to make government more effective.

The government’s compensation system ultimately needs to be more flexible, said Andrew Biggs, resident scholar at the American Enterprise Institute who also has compared federal and private sector compensation. Hiring managers in agencies should be able to offer competitive salaries based on market demands for certain types of skills such as information technology expertise, for example, Biggs said. Rewarding top performers -- pay for performance in government parlance -- also is an important component to overall compensation, the panelists said, though that may be easier said than done. “Oftentimes, we don’t allocate enough money for pay for performance,” said Rex Facer, a member of the President’s Federal Salary Council and associate professor of public finance and management at Brigham Young University. Along those lines, Facer also questioned the utility of annual across-the-board pay raises. Of course, that’s a moot point at the moment, considering the current pay freeze.

Biggs, whose 2011 analysis concluded that federal workers receive more generous compensation overall than their private sector peers, also argued the government could be “overgrading” federal workers, or hiring people with less education and experience for government jobs, which results in compensation that is out of synch with their qualifications.

The government spends about $200 billion annually on federal civilian salaries -- a lot of money in the current political and fiscal environments. The Obama administration has said it wants to take a hard look at civil service reform, including changes to federal compensation. Obama and many lawmakers support an increase in the amount federal workers contribute to their pensions, and several efforts are pending in Congress to alter federal pay and benefits. The public debate over whether federal pay is too generous or not generous enough is in full throttle, but a discussion of exactly how to reform the government’s compensation system is just beginning.

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