The federal pay gap spiked again in 2023

New data from the Bureau of Labor Statistics indicates that the gap in wages between federal employees and their private sector counterparts is on the rise again.

In 2023, federal workers made 27.54% less on average than their peers outside of government, marking the second straight year that the federal pay gap widened. Last year, the pay gap was 24.09%, itself an increase from the 22.47% disparity between federal employees and private sector workers in similar jobs in 2021. The new data was publicized Tuesday at a meeting of the Federal Salary Council, an advisory body that issues annual recommendations to the White House on locality pay and other compensation issues.

In a statement following the meeting, National Treasury Employees Union National President Doreen Greenwald cited the new data as evidence that lawmakers should support an effort to provide feds an 8.7% average pay increase—4.7% in the form of an across-the-board increase in basic pay and 4% average boost to locality pay—rather than President Biden’s proposed 5.2% average pay raise for 2024, which includes only a 0.5% average increase in locality pay. Neither the Democratically controlled Senate nor the GOP-led House have sought to override the president’s pay proposal in appropriations legislation, however.

“The alarming new pay gap proves what federal employees have been feeling all year: their paychecks are not keeping up with inflation and monthly bills are increasingly harder to cover,” Greenwald said. “It is outrageous that our nation’s civil servants have lost ground in the fight for fair pay, and it makes our push for an adequate raise in 2024 all the more urgent.”

The salary council proposed the establishment of no new locality pay areas for 2025, though they did recommend that the president’s pay agent, which consists of Office of Personnel Management Director Kiran Ahuja, Office of Management and Budget Director Shalanda Young and Acting Labor Secretary Julie Su, add Wyandot County, Ohio to the Columbus locality pay area and Yuma County, Ariz., to the Phoenix locality pay area.

With upcoming adjustments to locality pay areas so that they better conform to OMB’s latest map of metropolitan and combined statistical areas, the two counties would be completely surrounded by locations already included in locality pay areas, thereby making them eligible to join those locality pay areas as well.

With the pay disparity widening for the second straight year, the council also unanimously voted to increase its advocacy for policies to reverse the trend. The council lauded Biden for tying his 2024 pay raise plan to the annual percentage increase in the Employment Cost Index but expressed a willingness to explore larger and more targeted increases in locality pay.

“Consistently providing meaningful locality pay increases each year—at least 0.5% of the [General Schedule] payroll but preferably 1.0% or more—would also be helpful,” the council’s working group wrote in a recent report. “The goal of locality pay is to reduce significant pay disparities. The greater an overall amount is for locality pay increases, the more locality pay increases can be adjusted based on current pay disparities. The smaller an overall amount is for locality pay increases, however, the less implemented locality pay percentages will reduce pay disparities and reflect changes in local labor markets as shown by BLS salary data.”

And the council agreed to “go on record” about the impact of pay compression, wherein federal workers at the upper echelons of the General Schedule pay system receive smaller than anticipated increases to locality pay each year because they are at or near the federal pay cap, on the federal-private sector pay disparity.

“Since the number of such employees is relatively small, increasing the cap would be unlikely to impact the measured pay disparity significantly,” the council’s working group wrote. “However, the pay compression resulting from application of the [Executive Schedule level IV] cap is a growing problem. In addition, pay equity is a consideration too; while the EX-IV rate does not vary by area, the degree to which the EX-IV limit reduces the benefit of an annual pay adjustment for affected employees varies with the applicable locality pay percentage and the number of employees at capped pay rates.”