The Truth About Federal Pay

The never-ending debate over federal employee pay resurfaced again recently, this time because of a report by the Cato Institute. They argue that federal worker (not including military) pay and benefits, on average, are 80% higher than those in the private sector.

OK. Let’s start unpacking this claim and see if it rings true. Whenever you hear someone making an argument about pay and benefits, begin with an understanding of what is being compared. In this case, the point of comparison is “average” compensation of federal workers and average private sector workers. All of them. Comparisons of average apples to average oranges are meaningless, and should always be a warning signal of a bias that needs to be hidden in fake or misleading data. Here is a simple example of why. Let’s say 7 ChiefHRO readers have dinner with Jeff Bezos. His net worth is about $80 billion dollars. The average net worth of the people at the dinner table is $10 billion. On average, they are all multi-billionaires. But they’re not.

The “feds are overpaid by 80%” argument relies on a comparison of the pay of a policy maker in the government to a fast food restaurant worker, or of a government contracting officer to a someone who mows lawns for a living. There is nothing wrong with any of those jobs, but comparing them the way the most recent report does presents a conclusion that is factual, but not complete and certainly not useful. It is a bit like testifying in court and swearing to tell the truth, the incomplete truth, and nothing but the truth. It is also no different than our dinner with Jeff Bezos. We know the federal government does not have that type of minimum or low wage job. In fact, the ones the government has have been outsourced to the private sector.

If we really want to look at federal pay compared to the private sector, we can. The same source data the report used (from the Bureau of Labor Statistics) also provides more granular information. We can compare the pay of computer specialists to computer specialists. We can compare other industries and occupations as well. The problem with that comparison is that it does not support the narrative that federal workers are overpaid by 80%. In fact, the Bureau of Labor Statistics itself is a great example of the problem with this type of comparison. The average base pay in BLS is over $90K per year. Why? Because the work they do is complex, requires substantial education and training, and is tremendously important to the US. Taxpayers may not know who the BLS is and what they do, but their data is used daily across the country. The average BLS employee’s compensation is far higher than the average private sector employee, when the private sector average includes every minimum wage job in the country. That fact is not relevant to what it costs to hire a highly trained statistician or other BLS employee.

The other arguments people typically make about federal pay are also biased. The annual reports that say federal employees are underpaid by 25% or more are also not realistic. So what we end up with is pro-federal worker folks claiming the government grossly underpays its workers, while the anti-government side says the opposite. There is no path to a solution with warring camps making biased arguments that are based on cherry-picking the data to tell the story they want to tell.

Here is the truth. Federal employees are generally well-paid. They get better benefits that the typical private sector worker. When people who want to do meaningful analysis of federal pay vs. the private sector look at occupation-by-occupation and labor market by labor market comparisons, sometimes federal employees come out ahead. In other occupations or in other regions, they come out behind. If there is any sweeping overgeneralization that makes even a remote bit of sense, it is that feds in the lowest grades tend to make more than private sector workers, and feds at the highest grades or in the most in-demand jobs tend to make less than the private sector. Even there we can find exceptions.

If we want to pay federal workers fairly, the only real solution is a fact-based look at local market pay rates based on the occupation, the demand for the work, and the qualifications required. Anything else is just a politicized or ideology driven argument that does not serve the American people.