Wednesday, September 04, 2013

Federal Wages Raising Fast. Very Fast

By Chriss Street

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.  

Lowly private sector workers wages rose over the same by only 4.6% to$45,790.  Most people 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 private sectors workers is that federal workers are guaranteed “periodic step-increases” for seniority under law.  There was not much for private sector workers to celebrate about this Labor Day, , but it should have been party time for federal employees who make 71% more.

Most Americans believe that the difference in compensation between the private sector and the public sector workers is due to unions’ power to push up government wages.  Union membership rates as a percentage for all wage and salary workers in 2012, were 11.3%, down from 11.8% in 2011.  According to the Bureau of Labor Statistics, there were also no labor strikes in America as of July 30th.  Unionization rates for federal government workers are five times higher than private sector workers, but only 35.9% of federal workers are unionized and only 6.6% of private sector workers are unionized.

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 promotion and inflation adjustment normally available to private sector workers.  According to the Office of Personnel Management, federal workers 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.  Federal employees are required to perform “acceptable” work, but just .06% of 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 tried to get rid of the periodic step-increases that have been a factor used by federal agencies to set compensation for the last sixty years.  The goal of the reform according to his spokesman Kurt Bardella: “A system that rewards good work, removes poor performers and keeps pace with the private sector is long overdue.“  Office of Personnel Management Director John Berry called for “entirely eliminating classification for federal employees.”

But 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 year, the government’s 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.  This report appears absurd, given that the Bureau of Economic Analysisreported average federal salaries rose 47% 2000 to 2009, while private sector wages only 29% in the same period.   

These comparisons of federal and private pay do not consider 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 schedules, flexible work hours, training options, incentive awards and generous disability benefits protections.  The Bureau of Economic Analysis calculated that in 2012 federal employee benefits was worth $33,271 a year, versus just $10,921 for the private sector.
The federal government does need competent workers for federal jobs and they 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 $1 trillion dollar deficit this year and the total debt of the federal government is $17.2 trillion.  An important piece of that deficit is the $248 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.

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