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Federal Workers Earning More Than Those Paying Their Salaries

By: Daniel Horowitz (Diary)  |  January 31st, 2012 at 06:47 AM  | 

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Remember Obama’s two-year salary freeze he imposed on federal workers?  Well, as part of his FY 2013 budget, Obama plans to end the pay freeze and offer salary increases to federal workers.  It is in this context that CBO published a report showing that federal workers still earn more than their counterparts in the private sector.

While it is clear that many federal workers (but not all) work hard for their money, it is also clear that they should not be earning more than those who pay their salaries.  It is simply unsustainable for government workers to be earning more than their counterparts in the private sector.

Yesterday, CBO published a report showing that on average, government workers are paid more than those in the private sector with similar jobs and qualifications.  Here are the pertinent findings of the report:

CBO, Jan. 2012

  • Overall, federal civilian employees receive total compensation 16% higher than their private-sector counterparts;
  • Federal civilian employees receive 2% more in cash wages than private-sector employees;
  • The most significant advantage comes in the form of benefits, where federal civilian employees enjoy a 48% advantage over their private-sector counterparts.  Also, workers with no more than a high school education enjoyed the largest advantage over their private-sector counterparts.  The only workers who fare better in the private sector are those with post-graduate degrees.  Obviously, even with the generous benefits package for government workers, there is a limit to how much one can make.  That inherent limit affects the most educated workers.

This is something lost on those who opposed Wisconsin Governor Scott Walker’s public sector compensation reforms.  Walker’s major reforms included requiring teachers to contribute 5.8% into their pensions (instead of 0%) and all public employees to pay 12.6% of their health-care premiums.  The average private-sector worker with similar education, qualifications, experience, and salary, would walk over glass for those benefits.  Yet, the union goons blew up Madison for a month because their benefit package wasn’t 100% free.

The same thing holds true on a federal level.  Average benefits were 72% higher for federal employees with no more than a high school education than for their private-sector counterparts.  We are slated to spend over $1 trillion just on civilian federal workers’ pensions over the next 10 years.  It is these unlimited benefits for federal workers that are more costly and unpredictable than higher wages.  CBO notes that they are hard to quantify and predict in the long run.

How in the world can the taxpayers, many of whom receive no pension, support such a scheme?  The federal workforce needs to transition from a defined-benefit retirement system to a defined-contribution system.  The private-sector might serve as a good example for such reforms.

Cross-posted from The Madison Project

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  • renl57

    …of federal workers–which I don’t think you mentioned–is job security.

    It’s almost impossible to fire a federal worker. Much harder than to fire or lay off a non-unionized worker in the private sector, where the worker is considered “an employee at will.”

    In an uncertain economy, that type of job security is worth a lot–thousands of dollars because that’s the wages he would lose in a layoff before finding new work.

    I still remember a classic episode of “I Love Lucy” from the 1950s, where Lucy and Ethel need to go to the Passport Office to get their passports for their trip to Europe. Lucy is late and Ethel gets angry at the clerk who refuses to wait. The clerk retorts,

    “Lady, I’m in the Civil Service. If you want to fire me, you’ll have to wait till I die.”

  • dumpbho2012

    It makes me sick to my stomach to know, while I ride this train this morning, commuting to my private sector middle management job, that the ticket collecting conductor of this train likely makes more money than me, has far better benefits, and a lifetime of job security…and all at my expense.

    • Repair_Man_Jack

      This is aggregated over several job categories. A Federal Manager who manages as many employees as you do probably makes $5 to $10K more a year than you do, and I personally think that is unfair. However, what skews these stats is that a lot of the Federal workforce consists of educated professionals, rather than blue collar employees.

      This means that the average Federal Job requires at least a Bachelors if not a Masters Degree for you to have a realistic shot at being hired. When you require that level of training, you then have to pay for it to successfully recruit.

      • skorrent1

        They compare based on education level. It is the mail-handlers, the motor pool, and the secretarial pool that have the most advantage over their private counterparts. Those with advanced degrees settle in for an easy professional lifetime with comparable or less earnings.

        One thing that might blow those “professional” graph numbers is the temporary nature of the “political appointees”. We know they often take a cut in salary for a few years before they move to K Street to make the big bucks. It’s not clear whether the data included them or just the GS career types.

  • http://jhowell.net jameshowell

    Disclaimer: I currently hold a federal civil service job.

    While I don’t totally disagree with some of the points, these studies are a little bit apples and oranges.

    First, the jobs should be compared to similar jobs, not similar education levels. The vast majority of government jobs are white collar jobs. There are no federal fast food joints, etc. So, comparing to the entire private sector job range puts the study out of context.

    Second, the salaries need to be normalized for geography. The vast majority of government jobs are located in high cost of living areas (with a huge number in the DC area). The majority of private sector jobs are not located in high cost areas, so some adjustment seems appropriate.

    That being said, in my experience, federal workers are overpaid at the lower end of the scale and underpaid at the higher end of the scale.

    And there is no comparison to state workers’ benefits. Federal workers pay 28% of their health care premiums and 8.45% of their salary toward their pensions.

    I do whole-heartedly agree with the job security statement.

    • virginiahiker

      Full disclosure, I also hold a federal civil service position.

      While pay is adjusted to reflect high cost of living areas, you do have to ask: “does the fact that DC is a high cost of living area justify paying feds more or serve as a reason to disperse federal jobs throughout the nation?” There is nothing I do which requires me to be in DC. My job could just as easily be moved somewhere else. And I would willingly follow at a lower salary if it provided even close to the same standard of living. (Eastern Tenn would be my preference).

      Also, many public employees stagnate in place at a certain point. They are not doing bad work, they simply are not making the effort to excell. So they sit in one job at one GS grade and ride the step latter from 1 to 10 before retirning. The military reduces this type of homesteading with an “up or out” policy. An officer gets three bites at the promotion apple (below zone, in zone, above zone) before they are referred to a retention board and likely separation. consequently military officers strive for excellence, or thay are not in the military. Applying a similar policy to career civilian feds could produce similar results.

      • http://jhowell.net jameshowell

        Good comments.

      • http://jhowell.net jameshowell

        If the jobs were moved to lower cost of living areas, the payscale could be reduced. Locality pay does not make up the difference in cost of living. A federal employee living in middle America has a much better standard of living than a similar graded federal employee in DC, NY, SF, etc. even with lower locality pay.

        • virginiahiker

          Many republicans, myself included, might have to eat a little crow over comments about former Senator Byrd’s efforts to relocate federal offices to West Virginia. Nevertheless, it would be worth while to do a cost comparison of personnel and facilities expenses at those agencies now that many of them have been operating in WV for 10 to 20 years. The crusty old codger just might have had the right idea.

        • Repair_Man_Jack

          We could save billions of dollars a year by taking Northern VA’s Federal Workforce, dividing by 50 and farming all of these positions out to lower cost installations. A civilian version of BRAC, if you will.

    • mystryda

      Disclaimer: I’m Active Duty military, so I guess you could argue that I’m part of the “machine.”

      Just as far as making a more accurate comparison, I think another thing to normalize for is whether (and which) security clearance is involved. The rule of thumb that I’ve heard used around DC is that any given job is worth about $20k more per year with a TS. Some of that premium is simply a result of the limited number of people with them (both need to know as well as the logistics and expense of getting one). Some of that premium is “earned,” I think, because of significant restrictions and burden that holding a clearance puts on an individual

  • jboran12

    I wonder how long the myth of the underpaid public servant will persist? I wonder what the chart looks like for hours worked between salaried federal workers and their counterparts in the private sector. My guess that when it comes to time on the job there is also a big discrepancy.

  • http://jhowell.net jameshowell

    The hours would be much less. Specifically because federal wokers are not truly salaried. Most positions are FLSA non-exempt, meaning overtime for excess hours. Salaries are converted to an hourly rate. Overtime is paid at time and a half but capped at time and a half for a grade 10 step 1 (meaning high paid federal employees get less than time and a half for overtime).

    • http://jhowell.net jameshowell

      This comment was supposed to be a reply to jboran12′s “Depressing” thread.

  • burke

    The government is acting in the capacity of an employer here. This is a transaction between a employer and its employee.

    Of course, employees get paid with government money. That’s an argument for reducing the number of employees doing jobs that are not useful by decreasing the size of government. Scope of government is a public matter, terms of employment is a private matter. Who are we to judge how much an employee in each position is to get paid? I had thought that was the role of the market, not public opinion.

    This is the same type of class warfare argument that liberals make when they rail against executive pay. Salaries and benefits are the business of the parties who contract into them, no one else’s. Every limit on the employer-employee contracting relationship has come from the left, so I am confused as to why demonizing civil servant salaries has suddenly gained so much traction on the right.

    If you think that the government offers better benefits than the private sector, then you should compete to get a government job. Everyone can choose where to work in a free market economy.

    I am not a civil servant, and I don’t anticipate ever being one. I’m for smaller government and am highly skeptical of union overreach. But I know a class warfare argument when I see one, even when it is leveled against a group many conservatives don’t like.

    • http://slcliberty.blogivists.com randy streu

      Employees of a private company are private. Employees of the State work for US. Funds that go to pay them are paid out of OUR pockets.

      So, the size of those employment contracts are absolutely our business. The State doesn’t have the money to piss away giving high-dollar contracts to people. When a private company doesn’t have the money, they offer smaller contracts.

      Since the State is failing to do its job on that score, we, the People need to be aware, so we can try and correct that.

      • burke

        Randy, I think we agree on a lot. Let me explain my position a little more. In my view, if the government is spending too much on employees, it should have fewer of them, not depress the wages of all employees. To follow up on your analogy to a business that is low on funds, the business should make its contracts smaller by having fewer employees, not by paying the same number of employees lower wages. Or, maybe the business should not have quite so many contracts in the first place. In many areas of business, it wouldn’t make sense to simply lower wages because you wouldn’t attract the workers you need to do the job. For example, a top law firm couldn’t just slash all salaries by half, because it couldn’t get the talent it needs to keep up the quality of work its clients are useful, and thus maintain its current business model.

        I think many of us are operating from the premise that government employees are overpaid. I understand where that intuition comes from. However, I just don’t think the general public has a better way of knowing what the best wage to pay employees to maximize a business’s utility is than people in that industry who watch the market and know its trends. Civil servants are professionals like any other, and like any other employer, the government needs to calibrate its wages to be competitive with other employers in the market, all things considered.

        By contrast, the people are best-positioned to set the scope of government and by telling our representatives to make it smaller. That’s how I think the government should cut back.

        Randy, I agree with you that employee salaries are our business, in the sense that we pay for them. I also think that it’s within the right of the people to set limits on the benefits and wages of government workers. However, I don’t agree that setting government employee wages based on public opinion is good policy for the reasons I’ve outlined. It is inefficient interference in the labor market. I trust the market more than I trust legislators to determine what a good wage for a job is. The way to get smaller, cheaper government is to limit what the government does. Focusing on the wages of civil servants is a red herring, and smacks of class warfare.

        • satchman3

          I think that is exactly correct.

          In a market-determined wage, the government would go out and try to hire good workers at a low cost (salary). That’s what private sector companies do – as a job-seeker you try to negotiate your salary up, maybe by finding someone else to bid for your services.

          Charts like the one in the diary (which I’m not convinced is a fair comparison since it doesn’t look at comparable job descriptions) suggest that the government is paying higher than market rates which suggests cronyism..

          Since it’s taxpayer money taxpayers should have a say. If a company you own stock in is overpaying you would also have a say at the shareholder meeting. You probably won’t get anywhere but you have some recourse.

          The benefits and job security advantages grate on me a lot more than the salary does. 72% more benefits is absurd. The salary numbers don’t look too bad.

      • skorrent1

        You might say the money for private wages comes from customers. In a sense, taxpayers are the “customers” of government. However, governments operate from a monopoly position. Dissatisfied “customers” have nowhere to go, hence governments have no incentive to be efficient. (The opposite, in fact.) Therefore, the constraints that competition places on “consent-based private contracts” has no effect to cap government wages. If government wages get out of line, then the only recourse the taxpayer-customer has is through the political process.

    • jdbird

      we are their employers, so it is our business what they are being paid.

  • spinoneone

    are the red herring in the argument. Non-high school graduates and those with only a high school education in the private sector usually have “blue” collar jobs, most with little job security and a benefits “package” based on Social Security. Small companies tend not to have benefits packages other than that required by the Government.

    A GS-8 USG employee will be either in an entry level position leading to management or in the middle of a blue collar or clerical job that may lead, after 20 or so years, to GS-10. The occupant of this job will pay for: health care – 22 to 29% of the cost; Social Security; Medicare 7% of salary; and have an opportunity to contribute between 5% and 15% of his/her salary to a civil service retirement program with the Government matching the first 5%. If you leave Federal employment prior to retirement, the retirement program can be transferred to a standard 401(k)..

    The low level Federal employee puts up about 1/4th of his/her salary to pay for these benefits.

    Note also that the Civil Service program doesn’t come close to covering all Federal employees. Those in public safety, the military, CIA, intelligence community, the Foreign Service, etc., have their own pay and benefits schedules.

    • ajsdaddie

      You forget the 13 days of vacation that jumps to 20 days after 3 years. Or the fact that a GS-8 in Chicago STARTS at $46K. You say this is an entry-level position, and I know people who would be thrilled with $46K a year with four weeks vacation for a clerical job.

      As to 25% of their pay, in Illinois, the Humana CDHP policy is as low as $55 a paycheck, or $125 for a family. That’s 6% of their salary for the family insurance (3% for single folks!), and that doesn’t even count overtime!

      And we haven’t even scratched the surface of lifetime health benefits and pension. So, please, find another shoulder to cry on. Federal employees have it made.

      • ajsdaddie

        Ooops… almost forgot the 13 days of sick leave (which you can accumulate) and the 10 paid holidays. So, let’s see here… of the 52 weeks in a year, a federal employee gets – to start – 7 of them off, paid, which leaps up to nearly 9 after 3 years.

        Yeah, we should feel sorry for the poor mistreated civil servant.

  • Death_of_the_Donkey

    Having got that out of the way, we also have to acknowledge a BLS study that showed the opposite (that federal employees got 26% less compensation). The problem with any of these studies is how one a) calculates benefits and b) what are compared (ie secretary to secretary or high school ed to high school ed). I am not sure I care that much since when averaging the two studies and actually compares secretary to secretary the pay/benefits are close, what I care more about are the raw numbers of government employees. I actually want to pay them very well to get better qualified and more dedicated people, but I want less of them (ie more efficiency). We would save far more money by paring down the government workforce and increasing efficiency than we will by sticking it to those employees on the salary front.

  • johnt

    matching dollars to employees on thrift plans,etc. These follow fed employee where ever they work, and in some cases there are pay raise differentials for urban areas.
    Work hard, puke? Productivity comparisons, work quality and out put, deadlines, layoffs, firings, deferred or postponed raises for poor performance, reductions in force connected to increased work demands on remaining employees ??
    They are part of the new elite, related to the total contempt held by media and politicians for whom government is sacred, todays god.
    Just put your shoulder to the wheel folks, it’s going to get worse.
    BTW, what’s the resignation rate over at the guvmint, historically that is, hmmm?

  • melbedewy

    between the 10% who have well compensated government jobs and the 90% of us who pay for them.

  • johnt

    where with no shame they inform the suckers that the money has to go to civil servants, It seems every last one is a first responder. Reid flat out says civil servants need it more then workers ion the private sector.