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The Real Pay Debate – Not A Number, But Proper Compensation

Your pay is up for debate, yet again. A new Congressional Research Service report, Selected Characteristics of Private and Public Sector Workers, continues the debate that came to the forefront during the 2010 election season over whether federal employees are overpaid, or in the view of some, underpaid.

But, comparing wages and benefits of government employees and private sector workers is an imperfect science, accounting for many variables including age, education, different pay scales and bonus opportunities. There are no janitors in the federal government, but there are rocket scientists.

Pay, and whether there’s a discrepancy, is there a problem between public and private sector pay, and so many issues associated with that.

Rex Facer is an associate professor of public finance and management at the George Romney Institute of Public Management at Brigham Young University. He also sits on the Federal Salary Council.

Facer told Chris Dorobek on the DorobekINSIDER program that location, rank and position are just a few of the data sets you need to consider if you are making a pay comparison.

Government employees on average are older and more educated than private sector workers — factors that generally contribute to higher pay, but those aren’t the only factors that make a side to side comparison difficult.

“Most organizations find some set of comparison organizations to look at, then they may make some regional adjustments or some other measure of cost of living. But the federal government’s a little bit different because when we make comparisons, Congress has mandated that we compare ourselves to essentially all of the other organizations. The Bureau of Labor Statistics conducts a very large sample to get pay data from you know private sector organizations from across the country,” said Facer. “We then have to match what’s going on in a specific job in the private sector to a specific job in the public sector. That’s where it gets very tricky. That’s also where you see some of the real differences in some of the approaches that are highlighted in the Congressional Research Service study.”

Make the Comparison?

The Federal Salary Council tries to match job to job, because, otherwise you might have an entry level accountant and a senior level accountant, and if you compare the pay of those two, of course they’re gonna be different. We wanna compare essentially senior accountants to senior accountants.

What so often happens in federal pay is, the comparisons gets balanced to an average number. So you’re talking across the whole country and across a whole skill set. When people look at the bottom line number that the Federal Salary Council puts out, there’s an over 30% gap between the public sector and the private sector,” said Facer. “But what is much more important is looking at specific jobs within specific grades, and we see that, that the gaps vary substantially when you start looking within a grade and at specific jobs, and across the country. The gap in San Francisco for example, is enormously huge, where the gap in a place like Des Moines, while still significant, is not nearly as large.”

A Whole New Civil Service?

The Partnership for Public Service has a report that looks at the entire civil service system. One of their assessments is that the biggest discrepancies are at the executive level. “What’s been happening is over the last 40 years, in the federal government, we’ve been getting more and more of those kinds of senior positions,” said Facer. “We don’t have very many clerks. In the lower grades, GS1 through 6, there are only .2% of federal employees. Over 90% are in the GS10 and above. These are positions that require advanced education, advanced skills, and, that’s where you see the big gap. Even the research done by folks at places like Heritage Foundation and the Cato Institute, they know that when you look at senior positions that require high levels of education, there is a significant gap.”

Some critics say when the pay debate is brought up, that although pay might not be great, there are other benefits to being a federal employee like 401K’s and health benefits.

“When you start looking at large significant organizations, the differences between benefits packages are not all that different for these kinds of administrative positions. So if you look at another large organization, whether it be a Google or an Apple, you’re going to find a very similar benefit package as to what you get in the federal government,” said Facer. “The big difference is going to be on the way retirement benefits are structured. In the private sector we’ve seen a dramatic move towards what we call defined contribution retirement plants were essentially that’s the 401K kind of strategy, where the federal government has been slower in moving in that direction, in part because we have a large portion of vested employees that have had that as part of their expectation. They’ve been willing to accept a lower you know compensation, in part for those reasonable retirement benefits. But that dialogue and that dynamic is changing. As the workforce changes, the expectation of young employees change, we’re having to rethink you know federal employment, and the strategies we use to attract, recruit and retain you know bright folks.”

The Future of Pay and Recruitment

Recruiting the next generation of federal employees is key right now, because the often talked about retirement tsunami is actually here. The Office of Personnel Management received 12,025 retirement claims in February — nearly 23 percent more than the projected 9,800.

“If you look back over the past last 15 years, we’ve been talking about this oncoming tsunami, and everybody kept going, ‘When’s it gonna get here?’ We’d look at the data, and it’s very obvious the aging population in the federal government. The retirement tsunami should have hit around 2008, but then you had the great recession, people’s portfolios decreased. Well the economy’s come back around better, there’ve been no raises, you know all of these things that you’ve been talking about, they’re like okay, I think I can walk out the door now,” said Facer. “We’re going to have a significant challenge, because as we recruit new folks, they’re driven by a much broader set of issues than just you know pay, than just benefits; they’re looking for making a difference among other things, and they have a whole host of other organizations that are available to ‘me, whether it’s state and local governments, whether it’s nonprofits. Now the great news for the federal government is if you wanna be involved in public policy, and that connection with public service is what’s driving you, they still have a significant advantage in terms of the kinds and the challenges that they’re dealing with, and the public problems.”

Adjusting the System

The Partnership for Public Service assessment of the civil service is that the federal government basically needs a start over.

“I think by tinkering, by making those adjustments at the margins that are smart, that are well designed, we can make real meaningful progress, realigning the system. I think the fundamental issue that the Partnership is raising is that the nature of work is changing. We need to, to realign the federal system. But I think we can do it within the broad notion of a GS structure where we classify jobs, and we differentiate the kinds of work that are going on, and we have some level of flexibility to compensate people, give them the ability to grow,” said Facer. “I’m much more hopeful about marginal changes, especially when it comes to, to federal civil service reform, than I am about wholesale trying to you know throw the whole thing out and start from, from new.”

Next Steps

There is a strong need for change. But finding those first steps can be a challenge.

  • “We did some work on a project that was sponsored by the American Society for Public Administration and the National Academy for Public Administration, where prior to the last election, we got together and we asked how can we restructure the civil service system to try and make it work better? We suggested that one of the things that you could do is broaden the pay ranges. Currently, from top to bottom within a GS grade, the distance is only 30%. The norm in most private sector organizations, in many public organizations, is 50%. So, just allowing that additional 20% of growth would allow some of those salaries for example, to be able to keep up,” said Facer.

  • “The other issues issue is trying to get the classification of jobs right. We’ve got to have a system that allows classification to be revisited on a regular basis. We haven’t put any serious money in that in probably 20 years in the federal government,” said Facer.

  • “We need to be willing to treat different grades differently. If you look at the data, to a large extent, folks below a grade 8 are in pretty competitive positions. The data suggests that they may even be doing better than some of their private sector peers. I don’t necessarily think we ought to lower those wages, because we might be paying much more appropriate wages, and I think that’s an important role for government to play. But when you start getting in grades 9, 10, and above, those gaps start widening because of all those issues we talked about earlier, that’s where you get the people with much higher levels of skills and education required, etcetera. And so if we allowed for a different increase in those upper grades, we could move those up at a faster rate, because that’s what we’re seeing happening in the market generally,” said Facer.

It wasn’t that long ago, 6 years ago where we were talking about making government cool again, and it certainly feels like we’re far away from that.

“We didn’t quite get as cool as John Berry had, had promised. Although I think, you know, John did some terrific things. But we, we still have a bit to go on the coolness factor,” said Facer. “Now some of that I think got washed away when they said, well it might be cool, but you’re not getting’ paid any increases for 6 years. That’s not so cool.”

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