Are we allowed to talk about the “income inequality” gap between employees of the federal government and the private sector? Because it’s huge, it’s been huge for a long time, and it’s and getting worse.
According to a study of data from the Bureau of Economic Analysis, conducted by the Cato Institute, compensation for federal workers is 78% higher on average than compensation for private sector employees.
“Federal civilian workers had an average wage of $84,153 in 2014, compared to an average in the private sector of $56,350,” according to the Cato review. “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.”
To put this in perspective, the federal government has “the fourth highest paid workers in the United States, after utilities, mining, and the management of companies.” The government pays better than information services, the financial sector, the insurance industry, and scientific industries. Federal compensation is more than double what the education industry receives, and over three times what retail workers make.
This would seem problematic in light of left-wing class warfare rhetoric. Compensation for the education industry is supposed to be the veritable benchmark of fairness. We are constantly told it’s outrageous that various professions are paid more than teachers. How, then, can statists justify federal workers making over twice what the education industry pays?
In a similar vein, we’re always lectured about the profound unfairness of highly-compensated private-sector employees making many times what the entry level workers are paid. How does that square with the federal government’s employees making triple what retail workers earn?
How about the “self-interest” canard used to shut down so many valid arguments from people in the private sector? Liberals are always claiming the first dollar of private-sector financial interest taints every bit of testimony from their adversaries, a refrain that has been particularly loud in the “climate change” debate lately. What about the obvious self-interest of government employees in securing more money and influence for the titanic employer who rewards them so handsomely?
The income inequality between private-sector workers and government employees is getting worse, after merely “slowing” during the much-ballyhooed “federal pay freeze” from 2011 to 2013. The data shows that “wages rose 2.9 percent in the federal government in 2014, on average, compared to 1.7 percent in the private sector.” The disparity became 2.8 percent to 1.3 percent when total benefits such as pension and health care were included.
Cato’s deep dive into the numbers found rising federal compensation resulted from “legislated increases in general pay, increases in locality pay, expansions in benefits, and growth in the number of high-paid jobs as bureaucracies become more top-heavy,” as well as automatic compensation adjustments that tended to “move federal workers into higher salary brackets regardless of performance.”
Of course, the politics of unionized federal workers lobbying their own government machine for higher wages and benefits was an important factor as well. The government’s vast army of workers provide a great deal of muscle for the government’s efforts to grow richer and more powerful. The Cato Institute observes that “members of Congress who have large numbers of federal workers in their districts often lead the efforts to expand pay and benefits.”
Although the Cato study doesn’t delve into it, another interesting subject would be the immense value of the connections developed by top-level federal employees. There are some departments where the revolving door between government employee and lobbyist spins madly, day after day. The value of the connections enjoyed by elected representatives is legendary, but they’re not the only ones who depart Washington with Rolodexes worth big bucks to subsequent employers.
The study also anticipated the common objection that Uncle Sam must pay handsomely to attract the best and brightest by noting the federal budget is littered with “mundane bureaus where workers are paid highly for normal bureaucratic jobs.” No one can claim with a straight face that the U.S. taxpayer should be billed for six-figure salaries to keep a labyrinth of redundant departments staffed with paper-pushers… but of course, when talk of budget restraint begins, that’s never how the government workforce is presented to us. To hear Big Government acolytes talk, one would think federal bureaus are staffed with nothing but cops, soldiers, teachers, and firefighters.
Not only does government work have a level of job security almost unheard-of in the private sector, but the extremely low “quit rate” suggests federal employees are very well aware of how good they have it. According to data from the Bureau of Labor Statistics, “the quit rate in the federal government is just one-quarter the quit rate in the private sector.”
The Cato study raises an interesting point by asking if the notion of paying big federal salaries to attract the best and brightest would be a good idea, even if that did explain the stunning discrepancy between government and private compensation. Do we really want people passing up on productive private-sector careers to seek the high wages, amazing benefits, and incomparable job security of government employment?
Naturally, we do want good people working for the federal government. The gap between their compensation and the private sector has grown too large to politely ignore, especially in a time of private-sector wage stagnation, workforce collapse, and unsustainable public debt. Cato has a few suggestions for reversing the trend, including the end of defined-benefit pension plans, privatizing as many federal jobs as possible, and reforms to federal pay packages.
The end of public-employee unions would be another positive step; unfortunately, the most ambitious such plan presented in the current political season was offered by Wisconsin Governor Scott Walker, who dropped out of the presidential race. Perhaps other candidates will take up the flag of public union reform.
Conservatives should labor to teach the public that the government is a “special interest,” as surely as any corporation that lobbies it, and it is very much capable of “greed.” Government employees are not uniquely greedy, mind you – they’re mostly just people trying to do their jobs every day, and even with a 78% compensation advantage, they would naturally resist cutbacks as much as any private-sector employee. No one in Washington thought the feelings of private-sector employees about wage stagnation, job loss, and the conversion of full-time jobs into part-time work was relevant to the ambitious agenda of left-wing politicians. Let us be done with the mythology of “selfless public service,” and deal as squarely with the bureaucracy as we would with any of the corporations it regulates.