Will Proposed Compensation Changes Help or Hurt Federal Hiring?

Recent proposals from the Office of Personnel Management and the Office of Management and Budget would freeze federal pay for a year, and decrease federal employee compensation by increasing the employee contribution to the Federal Employees Retirement System by one percent per year until it reaches 50 percent. They would also eliminate cost of living adjustments (COLAs) for FERS retirees, and reduce CSRS retiree COLAs by 0.5 percent. They would eliminate the FERS Special Retirement Supplement for those employees who retire before Social Security eligibility age, calculate employees’ annuity based on the “High-5” salary years instead of “High-3” salary years, and reduce the “G” fund interest rate.

Needless to say, those proposals have generated a lot of controversy. Some critics argue they have not gone far enough, while others say federal workers have carried a disproportionate share of budget cuts in recent years. The proposals do not appear to have enough support in Congress to pass, so any discussion of them might appear to be academic. On the other hand, the proposals are not going away and we should expect to see them surfacing again and again.

The reason proposals such as these are popular with some folks is that federal benefits are typically more generous than what rank and file employees in the private sector receive. Combined with greater job security, many argue that the benefits more than offset the lower pay that many higher graded employees and those in in-demand occupations receive relative to the contemporaries in the private sector.

Is that true? And, if it is, should that drive federal compensation decisions? I am going to try to unpack the issue a bit and look at some of the arguments and where I think this debate will finally land. Let’s start with the basic question regarding federal pay relative to the private sector.

There are more than two million non-postal federal employees. Some people will tell you they are grossly overpaid, while others argue they are underpaid. Neither of those broad-brush assertions is true. Federal pay is a bit like Goldilocks’ porridge. Some is too low, some is too high, and some is just right. The biggest problem is that we are not using any reliable process to determine which jobs are in each category. For the most part, federal pay decisions lump different types of jobs into grades with no consideration at all of how such jobs might be compensated in the private sector. That approach invites the overly broad “everyone is overpaid” and “everyone is underpaid” arguments, because the pay decisions themselves are overly broad. If federal pay decisions were based more on data about jobs and how they are compensated in the labor market, it would be much more difficult to make sweeping statements about federal pay. The political debates regarding the federal workforce would have to stand on their own merits, rather than using federal pay and benefits as a proxy.

Some people will assert that federal pay should not be compared to the private sector, because the government is different. The part about the government being different is true, but the reality is that the federal government is an employer that competes for talent in the same labor market as the private sector, not-for-profit organizations, and academia. There has to be some way of evaluating how the government pays its employees, or the government cannot effectively compete for talent. Because public service is a public trust, it is also important for government to not overpay its employees using the tax dollars of people who are not paid so generously.

When we look at the current proposals, one statement I have heard repeatedly it that these proposals would result in government having trouble recruiting the right talent. The pay freeze proposal might serve as a deterrent to applicants in high-demand jobs, but I do not believe the retirement proposals will harm recruiting. Particularly when we are looking at younger applicants, retirement planning is not high on the list on priorities. As long as the government offers the Thrift Savings Plan with a decent match, the retirement benefits will be adequate to compete in a market where defined benefit plans such as the FERS annuity are almost extinct. Do I think the government should be an average employer? That is another question for another post.

That does not mean these proposals would have no impact on recruiting. The fact that they are, in effect, changing the conditions of employment for people who have already been hired may make some applicants think twice about applying for federal jobs. On the other hand, the private sector does that often, based upon the changing business environment.

One additional factor that has to be taken into consideration is the stability of federal employment. Federal jobs are remarkably stable. Federal employees do not have to worry about their employer going broke, merging with someone else, or deciding to drop a line of business. The number of people separated by reduction in force in fiscal 2017 was 135. Out of 2.1 million. That extraordinary stability of employment has to be factored in somehow.

OPM’s recent proposals are not radical changes. In fact, if the proposals had been to make prospective changes that would affect only new hires, the reception on the Hill might have been more positive. It is far easier to change the rules for people who have not been hired than it is for those who are on the payroll today and who have made career decisions based upon today’s rules. Even though these changes are not likely to pass any time soon, we should not expect them to go away. Until federal pay is brought into the 21st century and based on comparisons of jobs to similar jobs in the private sector, the debates will continue.

Thank a Government Employee This Week

This is Public Service Recognition Week (PSRW) – a week set aside to recognize the work done by government employees at local, state and federal levels. Government employees do not get the thanks they deserve for the great work they do at every level of government. Instead, we see constant bad-mouthing of government workers, and politicians using them to make political points. Let’s try something different this week. Think about how government workers have supported you in your day-to-day life and where you can, say Thank You to them for what they do every day.

I will start with some “Thank You” PSRW greetings for government workers who I appreciate and I encourage everyone who reads this post to do the same.

Thank you to the Mine Safety and Health Administration. The U.S. Department of Labor’s Mine Safety and Health Administration (MSHA) works to prevent death, illness, and injury from mining and promote safe and healthful workplaces for U.S. miners. I grew up in southern West Virginia, where MSHA’s work has resulted in far safer working conditions for coal miners. Thank you, MSHA.

Thank you to the Environmental Protection Agency. Because of your dedicated team, we have cleaner air, more efficient vehicles, an easy way of knowing how much energy our appliances and other devices consume (via Energy Star), and more. I am old enough to remember when some of our cities had so much pollution that breathing their air was the equivalent of smoking 4 packs of cigarettes every day. Thank you EPA.

Thank you to the Department of Veterans Affairs. What sometimes gets lost in the political scuffle over your agency is the amount of good work you do for America’s Veterans. Thank you VA.

Thank you to the civilian employees of the Department of Defense. DoD civilians include the logisticians at the Defense Logistics Agency, the men and women of the Navy Fleet Readiness Centers and Air Force Logistics Centers who repair and rebuild aircraft and engines, the Shipyard workers, the HR Specialists, the non-appropriated fund employees who run base recreational facilities, mission support professionals in HR, finance, IT, procurement and facilities, and hundreds of thousands more. Thank you to the 700,000+ DoD civilians.

Thank you to the scientists, engineers, doctors and other researchers at the National Institutes of Health, the military laboratories, the Centers for Disease Control, the National Science Foundation, the National Aeronautics and Space Administration and every other scientific organization in government. Your quest for knowledge and the benefits you provide help everyone on the planet. Science still matters. Thank you to the researchers.

Thank you to the clerks and assistants in every agency at every level of government. You do not often get the recognition you deserve for the support you provide to your agencies and their customers. Your contributions may not be as visible, but agencies would not be able to get their jobs done without you. Thank you to the clerks and assistants.

Thank you to the men and women of our armed forces. Your sacrifice provides the security we need to maintain our way of life. Risking your life, spending months at a time away from your families, working long hours in tough and sometimes life-threatening situations, you are truly the guardians of freedom. Thank you to our American Armed Forces.

And while I’m at it, thank you to military families, who keep things going at home while our service men and women are away. They may not be public employees, but they are public servants and without them our armed services could not function. Thank you to military families.

Among those military families is a group no one ever wants to join – the survivors who lost their sons, daughters, husbands, wives, parents or friends while they served. We can never forget the sacrifices of their loved ones, nor can we forget the loss they endure every day. Thank you to the survivors. 

Thank you to the Diplomats. Whether appointees, career Foreign Service, or the people who support them, you represent America abroad, support economic development and are the face of America to other nations. You risk your life to do a vital job. Thank you to the Diplomats.

Thank you to the Law Enforcement Officers. You have some of the toughest jobs in government. You work long hours and risk your life to protect everyone else. You have tough jobs, but you continue to do them day after day, year after year. Our society depends on men and women like you. Thank you to the Law Enforcement Officers.

Thank you to the intelligence community. The nature of your work is such that you rarely get attention for what you do. Even though your work is secret, the results of it are a more secure America. Thank you to the intelligence professionals.

Thank you to everyone else who supports our nation via your work in government. Public service is more than just a job. For many public servants it is a calling – a way to contribute to our society every day. You may not be in one of the highly visible jobs, but we depend on you and your work. You make a difference every day, and most Americans appreciate what you do. Thank you to Public Servants everywhere.