Administration to Review Government ‘Competitiveness’ on Compensation

The White House declined to release details on how officials will formulate its comparison between federal and private sector jobs.

The offices of Personnel Management and Management and Budget will spend the next year studying the “competitiveness” of federal compensation with that of agencies' private sector counterparts, according to a quarterly update to President Trump’s management agenda.

The report on progress on the Workforce for the 21st Century cross-agency priority goals included a new milestone, tasking OPM and OMB with obtaining “market information” and studying “the federal government’s competitive posture in total compensation for civilian federal employees, to include base pay, benefits, and other relevant total reward elements.”

Officials at OPM had been working to provide details about the agency’s plans to Government Executive, but declined comment after intervention from OMB. The effort is expected to be completed by September 2019, and any resulting report would join a crowded field of controversial attempts to compare federal employees’ compensation with their counterparts in the private sector.

The Congressional Budget Office most recently found in 2017 that federal workers make on average 17 percent more than employees in the private sector, but critics, including Democrats and federal employee unions, argue its methodology does not adequately account for differences in educational attainment, among other issues.

And in April, the Federal Salary Council used data from the Bureau of Labor to conclude that feds make nearly 32 percent less than private sector workers, but that analysis omits some non-salary elements of compensation.

Howard Risher, a consultant on pay and compensation issues who in 1990 managed the project that led to the passage of the 1990 Federal Employees Pay Comparability Act, said a key problem with both metrics for comparison is they are too broad.

The dueling reports attempt to capture compensation data on all private sector companies, big and small, rather than only comparable large businesses of at least 500 or 1,000 employees. And neither report adequately focuses on the compensation of workers who have the skills desired by federal agencies. Instead, OPM and OMB should compile a series of local surveys of a subset of the workforce, Risher said.

“What they should be doing is figuring out who they’re competing with for talent,” he said. “[Most] industries have an industry survey that’s done privately . . . What I would do is I would go out to the [Federal Executive Boards] in each of the major cities and regions, and talk about what data would be useful in this area. You have to get people to agree about how to ‘price’ jobs in these cities, and then if there are local surveys that would be useful.”

Even using that methodology, trying to design a comparison of “total compensation,” including health care, retirement programs and bonuses, is fraught with difficulty. Each company, when devising a benefits package, comes up with their own array of assumptions, typically done by actuaries, regarding how much a new hire is likely to make over the course of their careers, how long they expect them to live after they retire, and a host of other variables.

And it is difficult to account for some other non-salary benefits offered in the private sector, like stock options and year-end bonuses.

“The other big thing that’s important here is that if you go to corporations, it would be fairly common for senior management and even middle management and supervisors to provide some sort of stock ownership opportunity, and ignoring that is a big mistake,” Risher said. “And BLS specifically does not look at year-end incentive payments or any payout that is dependent on performance. So a manager making $100,000 almost across the board will have an incentive of at least 10 to 15 percent of their salary. So you’re missing a big chunk of what they can earn.”

While there are many granular details to be ironed out before a study of federal compensation can be successful, it is just as important that OPM and OMB gain a consensus and the trust of various stakeholders, including lawmakers of both parties and employee groups. With federal employee unions in a pitched legal battle with the Trump administration over the constitutionality of three controversial executive orders aimed at reducing their influence in the federal workforce, such agreement would be difficult in the current climate.

“You have to reach an agreement about what’s valid for this purpose, and a part of that is [getting buy-in] from unions,” Risher said. “Unions, first of all, are democracies, and when people get elected to those offices, they have to prove that they’re doing good work for the members of that union. And there’s an innate distrust that changes to the General Schedule are going to lead to people getting screwed . . . [OPM and OMB] need what they produce to be credible, because there will just be people throwing rocks at it otherwise.”