Federal Workers Overpaid, Say Federal Workers at CBO
Employees of the US Federal Government earn substantially more in salary and benefits than their private sector comparables.
Employees of the US Federal Government earn substantially more in salary and benefits than their private sector comparables, according to the new Congressional Budget Office report “COMPARING THE COMPENSATION OF FEDERAL AND PRIVATE-SECTOR EMPLOYEES.”
Wages
Differences in wages between federal employees and similar private-sector employees in the 2005-2010 period varied widely depending on the employees’ level of education.
- Federal civilian workers with no more than a high school education earned about 21 percent more, on average, than similar workers in the private sector.
- Workers whose highest level of education was a bachelor’s degree earned roughly the same hourly wages, on average, in both the federal government and the private sector.
- Federal workers with a professional degree or doctorate earned about 23 percent less, on average, than their private-sector counterparts.
Overall, the federal government paid 2 percent more in total wages than it would have if average wages had been comparable with those in the private sector, after accounting for certain observable characteristics of workers.
Benefits
The cost of providing benefits—including health insurance, retirement benefits, and paid vacation—differed more for federal and private-sector employees than wages did, but measuring benefits was also more uncertain.
- Average benefits for federal workers with no more than a high school diploma were 72 percent higher than for their private-sector counterparts.
- Average benefits for federal workers whose education ended in a bachelor’s degree were 46 percent higher than for similar workers in the private sector.
- Workers with a professional degree or doctorate received roughly the same level of average benefits in both sectors.
On average, the benefits earned by federal civilian employees cost 48 percent more than the benefits earned by private-sector employees with certain similar observable characteristics.
Total Compensation
Differences in total compensation—the sum of wages and benefits—between federal and private-sector employees also varied according to workers’ education level.
- Federal civilian employees with no more than a high school education averaged 36 percent higher total compensation than similar private-sector employees.
- Federal workers whose education culminated in a bachelor’s degree averaged 15 percent higher total compensation than their private-sector counterparts.
- Federal employees with a professional degree or doctorate received 18 percent lower total compensation than their private-sector counterparts, on average.
Overall, the federal government paid 16 percent more in total compensation than it would have if average compensation had been comparable with that in the private sector, after accounting for certain observable characteristics of workers.
So, overall, federal employees earn only fractionally more than their civilian counterparts in terms of salary but significantly more when benefits are factored in. But the difference is mostly seen at the bottom of the education curve–and actually flips for those with graduate and professional degrees. Note that the survey excludes the uniformed military; otherwise, the skew would be even higher, as junior enlisted personnel make far higher salaries and receive phenomenally better benefits than their high school graduate peers.
Public sector employment is much closer to the progressive ideal than employment in the private sector. For one thing, it’s capped at the upper end. Even the president only makes $400,000 and no civil service employee makes more than the $179,700 ceiling. On the lower end, even the most junior person (a GS-1, Step 1) makes $17,803 a year–roughly $8.55 an hour. Further, the benefits are comparable across the board, so even those at the bottom of the scale get good health coverage, paid vacation, and retirement benefits.
Medical doctors and attorneys who work for the federal government make a decent living and have tremendous protections unavailable in the private sector. But most start as GS-12s making $60,274 a year; an entry level attorney at a top DC law firm makes as much as the president. Then again, the study likely doesn’t factor in that many of the professionals working for the federal government got a free ride through very expensive schooling.
I think we should only discuss this in quiet rooms. 😉
Seriously, though: I see a few different problems here:
1) The public sector/private sector disparity, particularly at the low end, drives resentment of supposedly lazy gummint worker leaches. Private sector labor has been getting the shaft now for decades, and they’re pissed the goverment workers have largely avoided that. Though I don’t like it much, the clear implication here is that the federal workers will have to accept some benefit cuts.
2) The high-end pay situation could (maybe) be a factor in the apparent haplessness of regulators. I’m guessing the best & the brightest aren’t working for the SEC. Plus, when the guys you’re trying to regulate are making a killing, and you can get a job there later… eek. The incentives are pretty obvious. You can counter that somewhat with espirit de corps, but that doesn’t seem to be working. Of course, if that really is the problem I worry it is, fixing it feeds right into the increasing income disparity problem we have. Sigh.
Most entry level attorneys at top DC law firms are graduates of the top 20 law schools, law review, etc. Most attorneys working for the federal government aren’t.
In the practice of law it makes a difference. Incomes in the practice of law occur in a bimodal distribution. The median income for the higher section of that distribution make just over $80,000 a year and, generally speaking, are graduates of the top law schools, etc. The median income for the lower section (everybody else) is closer to $30,000.
In other words based on qualifications it may be the case that lawyers working for the federal government over paid higher than their private sector counterparts as well because lawyers working for the top DC law firms may not be their counterparts.
In other categories of those with PhDs I think it’s pretty hard to make a comparison. What does an individual with a doctorate in public administration do outside of the government or education?
I guess you can blame it on human nature. People should take jobs for lower salary when they come with higher total compensation, but that’s just hard to do. We compare ourselves based on gross cash earnings.
FWIW, in this harder economy, governments (at all levels) should be offering less in salary and should have plenty of takers.
It’s probably harder for them to clamp down on salary increases, but they should do that too.
2%? That’s what Republicans have been screaming about for all these years? 2%? I mean…I assume 2% of the federal payroll is a bunch of money…but really…2%?
What a confused bunch of flipping idiots. Republicans that is…not public sector workers.
@Dave Schuler:
That’s my thought as well, and especially if you factor out of the equation (which this study may, I’m not sure) the “government attorneys” who clerk for Supreme Court and Court of Appeals Justices, who do tend come from Top 20 Law Schools. Of course, those attorneys are typically only government employees for a year or two at most after which they’re in the private sector making far more than they did in their brief stint in the public sector.
So is Rand Paul lying when he says: “…The average federal employee makes $120,000 a year. The average private employee makes $60,000 a year…”
@Hey Norm:
As you may have noticed later, it’s the jump from a 2% difference in wages to a much higher difference in total compensation.
@Hey Norm:
I don’t know. Is the $120K defensible as a “total compensation” number?
@Hey Norm:
So is Rand Paul lying when he says…
Yes.
@Dave Schuler: Agreed that “law school graduate” — or even “college graduate” — is a very wide category. Federal jobs are much sought after, though, so I’ve guessing at the median the comparables work in the favor of the private sector. It’s true that the feds get fewer of the Harvard grads but they also get almost none of the night school and non-ABA accredited grads–except for those who are already in the system and then game it by credentialing.
@Hey Norm: If you look at the Related Posts under this post, you’ll see that this is a recurring topic. See particularly the post titled “Federal Workers Earn Twice Private Sector Counterparts?”
The CBO report that’s the subject of this particular post tries to compare apples to apples, finding a relatively small overall difference within education cohort. But most Americans are in the lower educational cohort.
For the professional class, I think it would also be interesting to see how many have careers of mixed public and private employment. That’s not much of an option for those with high school or college degrees, but being part of a credentialed profession means one can use government service to gain higher private compensation. These are not necessarily seperate tracts.
I suppose I’m in a unique situation to address this as I recently accepted a GS-13 position doing the exact same job I’m doing now as a contractor. The government job is a 10K cut in salary, but it comes with more leave and a slightly better insurance plan. The contractor job offers 401(k) matching, but the government job does not.
Which leads me to this point–I’m not sure if the study took this into account, but it has often been my experience that contractor professional staff makes more (and sometimes a lot more) money than the permanent government staff. I understand that the contract staff affords the government a little bit more flexibility, but it is simply ludacrious to have two people doing almost exactly the same job for vastly different compensation.
Hmmm…anyone know if this study considered the various Federal contractors as Federal employees or private sector? Just curious. There are a lot of people doing government work at private firms. How do they figure in?
@James Joyner:
Maybe you are saying 16 percent isn’t much …
But it certainly adds to the total budget outlay when totaled across … 2.65 million workers?
Let’s do some rough math, with $60K as average total compensation. 0.16 * 2.65M * $60K = $26B
Can that be right? $26 billion in excess compensation?
@Herb: Contractors are treated as private sector workers in the study, per page 2 of the full report [PDF].
So how much money are talking about? Check my math.
According to the Census folks the Federal Civilian Payroll for March, 2010 was $16.2B.
Times 12 months = $194.4B yearly.
If we paid 16% too much in overall compansation…then that comes to $31B. That’s for 2.6M full-time, and 3M total employees. So each employee is making about $1033 a year too much on average.
OK…that’s some money. But really…out of a $3,456B budget? .9%…that’s what Republicans have their panties in a twist over? Less than 1% of the budget? C’mon ladies…you can do better.
BTW…$1,033 a year is $86 a month. That’s less than I pay DirecTV every month.
The answer would appear to be go and get a job with the govt if you want a nice secure niche in a large bureaucratic machine. I’m not quite sure what point you’re making here Jim. You’d rather have a large poorly paid bureaucracy that’s not particularly attractive as a career path for the well educated rather than a large well paid one that is likely to attract good quality people. Is your plan to dumb down the bureacracy and make govt less effective?
@john personna: I’m not saying 16% isn’t much–I’m saying 2% (the salary difference) isn’t much.
@Brummagem Joe: I’m not actually taking a policy position here; just analyzing the data.
Whether they’re making “too much” depends on whether we’re getting any marginal increase in quality for the disparity. My gut instinct is that it’s hard to make up that much in quality for uneducated, low skill workers so we’re likely overpaying those at the low end. Conversely, we’re almost surely underpaying a lot of our senior regulatory staff, meaning the agencies are at a huge disadvantage compared to those we’re regulating. But that’s a case-by-case judgment unlikely to be answered by this particular study.
It’s interesting that people look at this discrepancy and think the federal workers are overpaid, rather than that the private sector workers are underpaid.
In the past 50 years, we’ve gone from where one income could support a family to where two incomes can barely support a family. Benefits have been slashed, and most families are a medical problem away from bankruptcy. The middle class is slowly sliding backwards, but the problem is that the federal workers aren’t sliding backwards at the same rate.
I suppose it is a lot easier to simply cut the wages of the federal workers, rather than address the problems of the vanishing middle class.
@john personna: Maybe it’s not “excess compensation.” Maybe it’s fair compensation. Maybe it’s the kind of compensation that workers in the private sector used to get until corporations decided to loot pension funds and slash health benefits in order to pay their top executives tens of millions of dollars every year.
Maybe the answer is not to beggar the federal workers but to demand real benefits from private sector workers — even if that means the CEO can only afford six jets instead of five.
Well, yeah. If you have a plan that would result in broadly-shared prosperity, please do share it. Our workforce faces far stiffer competition than it used to. That’s taken its toll. Government policy hasn’t helped, overall, but it doesn’t look like the driver to me.
@Gustopher: That’s sort of where I was going with the second analytical paragraph in the post. The federal workforce mirrors the progressive ideal more closely, paying a living wage and good benefits to all with no one getting rich at the top. The problem is that the private sector competes in a global economy, which therefore pits American workers against their counterparts in China, Singapore, Bangladesh, and elsewhere whereas the feds only have to compete against the American private sector for employees.
@James Joyner: I’m not actually taking a policy position here; just analyzing the data.
Really?
Federal Workers Overpaid, Say Federal Workers at CBO
I’d actually agree with your little bit of analysis of the low and high end. Two of my kids btw graduated from good law schools and wouldn’t dream of working for the govt. because it doesn’t pay enough.
Which goes a long way to explaining the pay differential for the lower education/skill levels.
It would be interesting if they studied total employee cost; salary, benefits, costs to employer for employee, e.g., regulatory compliance, workers comp insurance, etc. It may be that with government having far less regulatory risk, self funding their worker injury compensation fund and employee action liability, sovereign immunity, etc. that total employee cost is similar with government passing on some of there cost savings in expense to compensation,
@James Joyner:
Why the heck would you focus on that?
@James Joyner: “the private sector competes in a global economy, which therefore pits American workers against their counterparts in China, Singapore, Bangladesh, and elsewhere…”
German private sector workers must not compete in the same global economy. Or Dutch workers. Or Swedish workers. A German executive somehow functions perfectly well without making 400 times as much as the average worker in his company. The upper 1% in the Netherlands can afford their french fries and mayonnaise without making as much, collectively, as the bottom 50%. The job creators in Sweden struggle on, despite paying a capital gains tax twice as large as ours. The laws of economics must be different in these countries. But of course they aren’t. The reason we’ve developed a two-class society is more due to cultural factors than to the laws of economics. Our rich shed their consciences some time ago. Or maybe they never had one. The view of America I used to have, one that I held for an awfully long time, is that it’s a country in which a hard worker, even one without much in the way of natural gifts, can support a family and live a decent life. I no longer believe this, and I think anybody who does is a sucker.
@WR:
The problem with that logic is that we can always go higher.
Heck, give everyone raises!
Or, use vacancies in both situations, public and private, to determine nominal wages. There is, after all, an important question of economic inefficiency here. If you overcompensate for Job A, some other Job B will likely be neglected.
(WR, if you offer to overcompensate me for Job A, I will gladly not do Job B 😉
Seems to me there are two elephants in the room.
The first is pensions. It’s not clear to me in the data or post if the present value of pension benefits available to public sector workers at a significant fraction (or even at a premium here in corrupt IL) from age , oh, 50 – 55 until death are considered.
Second, as for current wages, the issue isn’t the dollars but whether the worker should be employed at all. What is the utility? It’s analogous to complaints about union workers – its not the wage, it’s the work rules. You haven’t beaten your head against the wall until you have to call an electrician to change a light bulb. Or call a mechanic to move a chair across an auditorium. This is real.
@Drew: Or fired a police officer for planting evidence in order to get a search warrant only to have an arbitrator rule that he should not have been fired, ordering him rehired and awarding backpay and legal fees.
@john personna: “The problem with that logic is that we can always go higher.”
That may be a “problem with that logic,” but it certainly hasn’t been a problem in reality for decades. Workers’ wages have stagnated since the 70s, and in many cases gone down, while compensation for owners and executives has skyrocketed. We have effectively transferred the wealth of this nation from the broad middle to the tiny sliver of Romneys.
So while concern trolls play slippery slope arguments about how terrible it could be if workers got a raise, thus destroying the country, we move closer to a third world economy while Germany thrives with some of the highest paid laborers in the world .
Perhaps the next step should be a comparative study between private sector and state & local government workers. I know for sure that our (I work for a State) compensation is less than Federal compensation for the most part.
I have an MS Accounting and am a CPA. I took a very substantial pay cut about 18 months ago to move from public accounting to a state regulatory agency. Of course, I also traded 60 hour work weeks for 40 hour work weeks, no longer have to travel 2 weeks out of every month, I get to see my friends, I have time to read books again, etc. And I now get to teach at night at a local University – something I have been wanting to do for years. For me, the trade off was worth it.
I guess I really don’t begrudge the folks on the low end of the federal scale. Not everyone should go to college, but just because you’re more cut out to be a custodian than a CPA doesn’t mean that you don’t deserve some vacation and sick time, a decent health plan, and a secure retirement. As far as I am concerned, the problem is not that the low-end federal workers are overcompensated, it is the private sector folks that are undercompensated.
Isn’t this just market forces at work? Supply and demand? Guvmint jobs can’t be outsourced to India.
@PD Shaw: Or fired a female worker for complaining about sexual harassment, just because her manager kept sticking his hand in her shirt. Damn those meddlings unions.
Forced to face facts…we get “yeah, but, but, but…”
Hah, while there might not be a lot of people in my position, I skew the hell out of this chart. Some college, but I get paid more like I have a professional degree. But I’m an air traffic controller so my job doesn’t have the luxury of pretending that credentials, qualifications, and aptitude are all the same thing.
@john personna:
I’m not sure what you’re on about here. What I said in the post was, “So, overall, federal employees earn only fractionally more than their civilian counterparts in terms of salary but significantly more when benefits are factored in.” I’m just saying that the salary difference is negligible but that compensation skews it tremendously.
Maybe if we put the salary on top of the benefits it would look more like the salaries are the problem.
@WR: I’m not sure what your point is; I can and would fire an employee engaged in that behavior; its not clear that the government always can. And this is often a detriment to public services.
@Hey Norm:
Hey Norm,
You should do a present value type of calculation and include benefits as well.
Drew is correct in that nobody is looking at the sustainability of the pension/benefits associated with the public sector. For places like California and Illinois they are not sustainable. Another issue is that for quite sometime working for the government was seen as more secure, the trade off was that you were paid a bit less. Now that is no longer true. Most of government is non-productive–i.e. it deals with re-arranging the economic pie vs. expanding it. More and more people going into that type of employment makes the system even less sustainable.
@PD Shaw:
WR rarely has a cogent point, so don’t worry about it.
Having worked on both sides of this coin, I can honestly say Government work isn’t all it’s cracked up to be.
They fired (sorry, “Laid off by outsourcing” a very large chunk of the low end last decade. What you’re left with is the ones that you can’t do without. The great retirement is gone but they get a 401(k) equivalent now (TSP). Oh, and you’re not allowed to run for office*.
Most of all — and never forget this — as a Fed you work for Congress (since they are the ones that pay you). That means that for your entire career you will be forced to work for a dysfunctional (self-censored) entity.
It’s not worth it.
* in a partisan election. Which is nearly all of them.
Do the figures include the military?
@ SV…
Well…someone should. Probably not me.
Frankly I’m just not that concerned about the average Government worker making $20 more a week, including benefits. I don’t begrudge anyone a decent retirement. As others (above) pointed out…the problem is probably not the Government…but a private sector that has been stagnant for 3 decades. If California and Illinois mis-managed and/or over-promised their pensions then that’s a different issue.
@ rudderpedals…
No…including the military, which overcompensates young and under-educated recruits compared to the private sector, would skew the data.
@James Joyner:
It was just really weird for you to tell me this:
@WR:
You complain about trolls, but all you’ve got is this feeling that since you think salaries are low in general, government wages must be low too.
You’ve staked out the far left position, that government wages should be set by general guilt rather than a prevailing wage, or a market wage.
If the market wage sucks, we can talk about how to fix that, but paying government workers more, first, seems attacking the wrong end of the problem.
As a moderate, one who is more in line with Drew and Steve V on this issue than others, let me digress a bit about wage and efficiency.
Every one of us gets up in the morning and decides what to do. In a market economy we balance our desires with our opportunities – the opportunities being bound to a wage. It may not be optimal. We have no benign, omniscient, and communicative God to tell us exactly where our labors are needed. On earth, we suffer human management. And in human systems no direction or planning has ever worked as well as the wage system. It is the least bad option.
We know that because market economies have delivered better health and well-being to their citizens than any of the others.
Who knows, maybe Lady Gaga would make a really great pediatric nurse. In this world it’s not going to happen. We get a lot of fluff. I mean, is the Jersey Shore cast better compensated than I? Even when I was doing socially valuable things like developing medical instruments? Probably.
But we can be fairly confident that, at the margin, people are directing their labor and resources as needed. Why? Again, because the central planners have never done better.
This seems to be consistent with what we see overall when you compare government workers compensation to those in the private sector in recent years. While private sector compensation has been struggling, government employees have seemingly had their compensation not impacted at all (http://bit.ly/pn5weF). The fact that this is happening in a recession is simply unsustainable. Hopefully after seeing these numbers, many more will see how much reform is necessary to get government employee compensation on the right track.
I think we are forgetting tournament theory here. Perhaps workers are willing to accept a lower wage in the private sector in return for a shot at the big prize salaries.
Steve
@Steve Verdon:
Heh. Hey norm is about the last place I look for insightful analysis.
I wonder what this chart looks like when you factor in federal workers paying part of their salary back to their employer in the form of income taxes.
Does it even out?
@James Joyner: The argument that we are overpaying at the low end is almost always the argument of record about wages in almost any industry.
Those low end people simply have to understand that because they are at the low end they simply aren’t entitled to live–comfortably or otherwise.
@Drew: I have worked at union jobs through out the years since I was 18 and I’ll retire soon. Take my word for it, it’s the wages. Every negotiation committee I’ve ever been on had wages as subject one on management’s agenda.
Any one that complains about federal retirement as being the problem or “elephant in the room” couldn’t even remotely tell you what federal retirement currently consists of. If they did, they’d know federal retirement was reformed a long time ago.
@PD Shaw:
Moving between the private sector and public sector only occurs with political appointees. For the civil servants, grades above GS-13 are almost always hired from within and are the people hired for those positions have been in the government for a very long time.
I always found that the most overpaid government employee with the GS-12/GS-13 budget analysis who have a degree from a third tier state university or from a non-traditional university. They generally had very little in the way of credentials but has their position due to being in the government for a long period of time. The human resources people also fit that description.
Also unmentioned is how the government has contracted out the non-college educated positions. There used to be many more wage grade (hourly) positions to do things like facility management but those positions have all been given to contractors. That means they few jobs left that do not require a college degree are generally management positions and overseeing contractors.
@superdestroyer:
Credentialing is pointless for evaluating people with actual work experience so in that sense, I don’t really see the point saying people are overpaid based on where they went to school 15 years ago.
@Hey Norm:
Hey Norm,
You really should use google a bit more. It isn’t “just” California and Illinois that are in trouble. About half the states, IIRC, have similar budge problems. Thing is that most of those states are fairly small by comparison. If California tanks, so does the rest of the country. So your rather meh attitude is also rather foolish, IMO.
Most of the private sector has switched over to defined contribution pension plans which is a big help. The other problem, health care, there is no current solution (no Obama Care wont do much if anything, and there is the possibility it could make matters worse).
And regarding the notion of wage stagnation, it is simply astonishing that nobody seems to consider the following:
If the total compensation wage is set by the market and health care is rising faster than the economy in general, then it stands to reason that the wage has to rise by less than health care benefits and possibly even decline in real terms…maybe even nominal if health care grows fast enough. Basically, with rapidly rising health care employees are paid more in benefits than in wages.