Federal Wages Rising Faster Than Private Sector Wages

It is fitting that Labor Day is a federal holiday, given that under a supposed wage freeze from 2010 to 2012 the average base salary for federal workers increased by 10% to $78,467. Over the same period, private sector workers’ wages rose by only 4.6% to $45,790. 

Most assume these differences are due to unionization rates, but only a little over one third of federal civilian workers are actually unionized. The reason government workers’ wages rise faster than those of private sector workers is that under current law, federal workers are guaranteed periodic step increases for seniority. So while there was not much for private sector workers to celebrate this Labor Day, it was party time for federal employees who make 71% more. 

Union membership rates for all wage and salary workers in 2012 were 11.3%, down from 11.8% in 2011. Only 35.9% of federal workers–a little over one third–are unionized, and according to the Bureau of Labor Statistics, there have been no major labor strikes in America as of 30 July 2013.

The real reason for the increasing pay advantages of federal workers is they are guaranteed under the General Schedule Law to receive “periodic step-increases” for seniority, on top of any performance promotions and inflation adjustments normally available to private sector workers. They receive automatic seniority pay raises in each of their first three years of service, a pay raise every two years for the next six years, and a pay raise every three years for the next six years. They are required to perform “acceptable” work, but just .06% of those eligible were denied increases in 2009. Despite pay freezes, about 20% of federal workers still received a raise each year.

Two years ago, Congressman Darrell Issa (R-CA) tried to do away with the periodic step-increases that have been used by federal agencies to set compensation rates for the last sixty years. The goal of the reform, according to his spokesman Kurt Bardella, was to create “a system that rewards good work, removes poor performers, and keeps pace with the private sector.” Office of Personnel Management Director John Berry called for “entirely eliminating classification for federal employees,” which would mean doing away with the General Schedule completely.

Colleen M. Kelley, President of the National Treasury Employees Union, said Issa’s amendment “unfairly singles out federal employees allegedly in the name of deficit reduction. In fact, it would have little to no impact on the deficit but would have a great impact of the ability of federal agencies to retain skilled employees, recruit promising new employees and meet their missions.”

Despite rapid escalation of federal wages and salaries over the last three years, the Federal Salary Council’s annual report claims that on a comparison basis from 2001 to 2009, job-to-job federal wages fell from a negative 21% to a negative 26% below private sector wages. However, the Bureau of Economic Analysis reported average federal salaries rose 47% from 2000 to 2009, while private sector wages rose only 29% in the same period.   

These comparisons of federal and private pay do not account for the vastly superior benefits received by government workers. Federal workers receive health insurance, retirement health benefits, a pension plan with inflation protection, a retirement savings plan with a government match, generous holiday and vacation days, flexible work hours, training options, incentive awards, and generous disability benefits protections. The Bureau of Economic Analysis calculated that in 2012, federal employee benefits were worth $33,271 a year, versus just $10,921 for the private sector.

The federal government does need competent workers for federal jobs and those workers should be reasonably paid, but is a $55,057 average premium for higher wages and benefits for federal workers over private sector workers really reasonable?

The United States of America will run about a $1 trillion dollar deficit this year, and the total debt of the federal government is at $17.2 trillion. An important piece of that deficit is the $248 billion in wages and benefits paid to federal executive branch civilians this year. 

As the Cato Institute stated, “The federal workforce has become an elite island of secure and high-paid workers separated from the ocean of average American workers competing in the global economy.” I did not notice many Labor Day parades this year, probably because federal employees had their own private parade on that elite island.