Are Federal Employees Overpaid Or Underpaid?

government employee pay debateThe debate over federal employee pay is an old and always fiery one. Every year, the Federal Salary Council comes out with a report that states that federal workers receive significantly less pay compared to private workers in similar jobs. Then conservative think tanks strike back with their own analyses, which say the opposite. And then politicians pick the conclusion they like and stick it in their stump speeches.

They're Underpaid!

This year's Federal Salary Council report came out last week, and stated that federal civilian employees are underpaid by 26.3 percent, based on Bureau of Labor Statistics salary survey data. This "salary gap" is 2 percentage points wider than last year, largely because federal salaries were frozen in 2011, according to the report.

The Office of Personnel Management numbers are often cited by unions, like the American Federation of Government Employees, and Democratic supporters.

The Federal Salary Council does not include benefits in its calculations, however, which experts on both sides of the debate agree are more generous for federal employees.

"It's extremely suspicious," says Chris Edwards of the libertarian Cato Institute, who wrote a report in 2010 which showed that federal employee wages grew much faster over the last decade than private sector wages. "They've been claiming the exact same wage gap for 15 years now."

The Federal Salary Council's methodology is also opaque, he points out. "It's a big black box where they do a massive amount of statistical modeling. So one thing I've called for is for a private sector auditor to audit the government's procedure here."

They're Overpaid!

Edwards' report argued that federal employees in fact enjoy a much heftier compensation package than their privately employed peers, and that this advantage is growing.

The average federal civilian employee received a salary of $81,258 in 2009, according to this analysis, which is 61 percent higher than that year's average private sector employee salary of $50,462.

The Cato Institute found that if benefits are included, then federal employees receive over twice the compensation of private sector workers: $123,049 to $61,051.

This latter comparison was picked up by several conservative politicians. "Federal employees receive an average of $123,049 annually in pay and benefits, twice the average of the private sector," said Tim Pawlenty.

Sen. Rand Paul (R-Ky.) rounded out the digits to say, "The average federal employee makes $120,000 a year. The average private employee makes $60,000 a year."

"It's gotten to a point where the average federal worker makes twice as much as the average private sector worker," echoed Speaker of the House John Boehner.

But the Cato numbers are deeply flawed, says The sum for federal employee benefits is inflated because it tacks the money that's going to retired employees onto the benefits enjoyed by current workers. It also talks about average salaries, which ignore differences between the sectors in terms of education, experience and job types.

Federal workers are significantly more likely to be college-educated, and engaged in management and professional work, especially since the government increasingly contracts blue collar jobs out to the private sector. The average federal employee is also five years older than the average private sector employee, according to the Census Bureau's 2005 Current Population Survey.

"People need to be more careful with how they use the data," says Edwards.

They're Overpaid! But By A Little Less

The conservative Heritage Foundation had its own whack at the issue in July, 2010. Its study concluded that salaries and benefits are 30 to 40 percent higher for federal employees "for identical jobs." Aligning federal pay with the market rate would be "a simple, and fair, move," it states, that would have saved taxpayers nearly $47 billion this year.

Mitt Romney touted this result at an event last week organized by the Koch brothers-backed Americans for Prosperity: "Public servants shouldn't get a better deal than the taxpayers they work for.... And by linking government pay with private sector pay, we will save as much as $47 billion a year."

Also in July of last year, Andrew Biggs of the conservative American Enterprise Institute, and Jason Richwine of the Heritage Foundation, wrote in The Wall Street Journal that federal employees were paid 12 percent more than private employees in the same job, controlling for education, experience, race, gender, geography and numerous other variables.

Biggs and Richwine were the co-authors of another touchy piece of analysis last week, which stated that public teachers were overpaid by over 50 percent.

Some Are Overpaid, Some Are Underpaid

Public sector pay is clearly an ideological lightning rod, so much so that Barack Obama justified the federal employee pay freeze without reference to "overpayment" or "underpayment." It was just a way to reduce spending, he said.

But he later told a group of journalists that "high-skilled workers in government are slightly underpaid. Lower-skilled workers are slightly overpaid relative to the private sector."

"I think that's exactly right," says Edwards. "I think there are people in their 20s and 30s who are overpaid. But when you get to the highly-skilled PhD scientists and lawyers, yeah they could probably make more in the private sector."

Secretaries and administrative assistants seem to do better on government payrolls, but no taxpayer funded salaries reach anywhere near the heights of the seven-figure take-home pay of some CEOs. The CEO of the government, after all, has his pay capped at $400,000.

Asked if an increase in starting salaries could be a way to attract the most talented people to the public sector, Edwards says, "Do you really want the most skilled people in society working for the federal government? We need competent people in Washington, but I don't think we want Bill Gates or Steve Jobs working in a Washington bureaucracy."

Next:Follow-Up Report: Are Teachers Really Overpaid?

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