Are Federal Workers Overpaid?

Washington Matters

Are Federal Workers Overpaid?

Republicans are building the case for a government pay freeze -- and eventually a cut -- as a way to reduce the deficit.

Government workers have never been the most popular people -- even when they’re sending out Social Security checks or coming to the rescue in a national disaster. But the anger this year is reaching a peak, spurred in part by concerns over big government and whipped up by GOP leaders. On their Web site proposing solutions to the deficit and debt problem, House Republicans featured a freeze on civil service salaries as an option and millions enthusiastically jumped on it.

Then came a report from the Heritage Foundation that added fuel to the fire. It found that government salaries are, on average, 22% higher than in the private sector, and when benefits are added in, the difference rises to 30%. The disparity has gotten worse in recent years, as private sector pay has been frozen or cut while government workers continue to get pay raises -- 2% last year.

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Unions and government workers immediately cried foul over the Heritage study, saying lower-level jobs are contracted out, leaving a much higher concentration of white collar and highly educated government workers than in the private work force. That’s true -- 33% of federal workers have a college degree vs. 22% in the private world, and 7% have a PhD vs. 2.7% in the private sector. But the Heritage folks say they adjusted for that, and the 22% pay discrepancy they came up with is from comparing people with similar degrees, though not necessarily with similar experience (federal workers tend to be older and have more time on the job).

So is this an argument for cutting pay? Not across the board. At the top end, government workers make far less than their private-sector contemporaries. Federal civil service pay is capped at about $180,000, far less than a top money manager or CEO makes. So an across-the-board cut would be unfair and counterproductive. Organizations and people who specialize in studying the federal government, including the Partnership for Public Service and Paul C. Light of New York University, agree that a scalpel rather than a meat cleaver is needed in approaching the issue. It probably makes no sense, for example, to cut the pay of nursing aide at a VA hospital in Kansas. And they warn that pay cuts and freezes can and have been easily circumvented with promotions.


Though government workers often feel underappreciated and lack the autonomy and job satisfaction many in the private sector have, they do have a lot more job security and much better benefits, especially after they retire (with generous health care and pension plans). Enough are willing to make the trade-off, especially today when jobs are so scarce. But there is a brain drain under way -- many experienced workers in the 55- to 65-year-old range are retiring and being replaced by younger and less experienced workers.

Heritage argues the solution is a pay-for-performance system that would reward the best and take away from weaker performers or those who could be easily replaced. Heritage says that would save $47 billion a year. That’s probably an overstatement, but it would clearly be a significant amount at a time when the country needs to find as many ways as possible to cut spending.

So what should Congress do? For starters, the freeze seems to be a no-brainer. Congress should reject the 1.4% pay raise for next year that President Obama proposed in his budget. Unions and government workers will lobby hard against it, but it’s the right thing to do. Federal workers need to share some of the pain being felt by the private sector, and this is a start.

A whole new pay system requires a lot more study, but there’s a strong case for arguing that the retirement benefits of federal workers are too generous. Those costs add to the structural deficit in ways that are hard to justify and even harder to afford. Still, changes need to be imposed carefully. We want a government that is more competent, not less, and if you take away too many of the advantages of government work, there’s a real risk that the workforce will deteriorate.

Hopefully, some of these changes will be part of the president’s debt commission recommendations, and we’ll have an intelligent debate about them. That’s not possible during the campaign, although that won’t keep the grandstanders from using federal workers as a foil.