Compensation for the federal government’s 1.9 million civilian workers in the executive branch costs almost $200 billion annually.
These wages and benefits have been rising quickly, and by 2004 the average compensation of federal workers was almost twice the average in the private sector,$100,178 in wages and benefits for the average federal worker, compared with $51,876 for the average private-sector worker, according to U.S. Bureau of Economic Analysis data.
Looking just at wages, federal workers earned an average $66,558, 56% more than the $42,635 earned by the average private worker.
Federal compensation has been growing more rapidly, too,up 115% since 1990, compared with 69% in the private sector.
While the current administration has supported greater pay flexibility and other management reforms, it has presided over large increases in federal pay.
Pay inflation has been fueled by routine adjustments that move workers into higher salary brackets regardless of performance, and by jobs that are redefined upward into higher pay ranges. The federal civilian work force has become an elite island of secure and high-paid workers, separated from the ocean of private-sector American workers who must compete in today’s dynamic economy.
Some government studies have found that federal workers suffer from a “pay gap” compared to private-sector workers. By contrast, some academic studies have found that federal workers are overpaid.
Studies that find a pay gap sometimes compare federal workers to those in large businesses. But many U.S. workers are employed by small businesses, which tend to have lower compensation levels. More important, comparison studies typically look just at wages and don’t consider the superior benefits paid by the government.
Perhaps the most important benefit of federal work is the extreme job security. The rate of layoffs and firings in the federal work force is just one-quarter the rate in the private sector.
Of course, certain federal jobs may be underpaid and others overpaid compared to private markets. For example, the average annual compensation of federal air traffic controllers seems rather high at $170,000.
To objectively find the proper pay level, one could privatize this activity and let the market decide. Indeed, air traffic control, postal services and other activities should be privatized to improve industry performance and to allow for more efficient and flexible compensation policies for workers.
It is often assumed that the government should have the highest-skilled workers and should pay high wages to get them. However, for the overall economy, federal hiring of top caliber workers is a problem because it draws talent away from high-valued activities in the private sector. With today’s large government, marginal resources are likely to be more efficiently used in the private economy.
In France, most of the best minds move from the elite schools into the national government, and the economy is weaker for it. In the U.S., most of the best minds are attracted to places such as Silicon Valley, and we prosper because of it.
In the near term, Congress should restrain federal compensation by freezing federal wages for a period of years and examining fringe benefit programs for possible savings.
In the longer term, the coming surge in federal worker retirement as baby boomers enter their 60s offers an opportunity to downsize federal agencies without problematic layoffs or buyouts. As government air traffic controllers, space scientists, and others retire in coming years, these activities should be handed over to the private sector so that they can be better managed and have more efficient compensation policies.
Edwards is director of tax policy studies at the Cato Institute in Washington, D.C.
