Back in August, President Donald Trump said he’d cancel the 2.1% raises that would’ve taken effect for federal employees in 2019, stating “we must maintain efforts to put our nation on a fiscally sustainable course, and federal agency budgets cannot sustain such increases.” This immediately led to a number of Congressional Democrats and pundits claiming the move was “cruel,” “anti-worker,” and of course, “racist” (why not?).
If the removal of a planned 2.1% raise is enough to trigger such hysterical reasons, certainly these people must believe that federal workers are underpaid. And if that’s the case, it’s hard to tell if that belief is borne out of insanity or naivety.
Public Sector vs. Private Sector Pay
There was a time in American history where workers taking a federal job knew they were accepting a tradeoff – poor pay relative to a private sector job, but rock-solid job security. The job security remains – but the tradeoff does not.
As reported by Just Facts, in 2017 the Congressional Budget Office released a study that compared the compensation of full-time year-round private sector workers to federal workers from 2011 to 2015 (excluding Post Office employees). It adjusted for education, occupation, work experience, geographic location, the size of their employer, and various demographic characteristics. With those factors accounted for, the study found that federal workers received an average of 17% more total compensation than comparable private sector workers.
Those with only a high school diploma or less fare best in federal work, earning 53% more than their private sector counterparts. Only those with professional degrees or doctorates earn less in the public sector, and there are relatively few public sector jobs that require such degrees.
That study was looking at full-time, year-round workers, but it’s likely the case that full-time private sector workers spend considerably more hours on the job each year than their public sector counterparts. A 2010 study from the Bureau of Labor Statistics found that full-time private sector employees work 12% more hours than full-time state and local government employees. Thus, while federal workers may earn 17% more than private sector employees, their hourly pay is significantly greater than 17% higher if the same trend holds true in federal work.
Other studies give even more liberal estimates of federal compensation relative to private employees. The conservative Heritage Foundation in 2010 found an advantage for federal workers of 22 percent, while data from the Bureau of Economic Analysis in 2014 showed that:
Federal civilian workers had an average wage of $84,153 in 2014, compared to an average in the private sector of $56,350. The federal advantage in overall compensation (wages plus benefits) is even greater. Federal compensation averaged $119,934 in 2014, which was 78 percent higher than the private-sector average of $67,246.
The only government studies that say otherwise come from the Federal Salary Council, which employs an extremely poor methodology. A 2015 study of theirs claimed that federal workers are underpaid by 35%, their 2016 study found them underpaid by 34%, and their most recent found them underpaid by 32%.
Those figures are shocking in light of every other study of the matter, but exactly what we’d expect from a Council that composes of six representatives from government employee labor unions, and three “outside experts” on labor relations that Barack Obama appointed. The most glaring error in their studies is that they only examine wages, not fringe benefits (such as health insurance and retirement benefits). That’s significant given that federal employees have benefits on average 47% higher than their private sector employees. In fact, the majority of the gap in private and public sector compensation is from benefits, not wages. The 17% difference in compensation found by the CBO was attributed to federal employees having benefits 47% higher, but wages only 3% higher than in the private sector. The study also had poor controls to account for different skill levels needed for comparable federal and private sector jobs.
A 2012 Government Accountability Office review of federal pay studies, including the Federal Salary Council’s, failed to find evidence to support a 35% pay penalty for federal employees. The only study that concurred was one by the President’s Pay Agent, which is the body in charge of approving pay increases recommended by the Federal Salary Council.
And that’s not all.
Hotel California Economics
As the Foundation for Economic Education puts it, in the public sector, “nobody quits, and you can’t get fired.” Indeed, if federal workers were underpaid, you’d expect them to have high turnover rates as they seek better employment elsewhere. The opposite is the case, with the rate of quitting in the public sector 70% lower than in the private sector.
And the discrepancy isn’t much different for firings. Federal workers are fired or laid off at rates 71% lower than in the private sector, with the only exception being when state budgets faced severe pressure in the summer of 2010.
And About That Federal Pay Freeze…..
In the end, the hysterics over the proposed pay freeze proved pointless, as Congressional Republicans caved and ended up agreeing to a 1.9% pay increase for federal workers earlier this month.
Aren’t they supposed to be the ones for cutting spending?