Government Dependency

Should Federal Workers Be Asked to Take Pay Cut, Too?

Unlike state and local governments that are cutting workers due to the budget crunch, the federal government will hire hundreds of thousands of people over the next few years.

May 28, 2010

McClatchy-Tribune News Service - During Public Service Recognition Week earlier this month, hundreds of job seekers converged on the National Mall to learn about career opportunities in the federal government.

While economists don't expect the private-sector job market to reach its pre-recession hiring levels until 2015 or later, the federal government, America's largest employer, suffers no such recessionary hangover.

The full-time federal civilian work force -- excluding postal service employees -- is expected to top 2.1 million in fiscal year 2010, and more than 560,000 new workers will be hired in the next four years, said John Palguta, the vice president for policy at the Partnership for Public Service.

For a nation battered by layoffs, plant closings and an unemployment rate near 10 percent, Uncle Sam's hiring largesse should be a source of hope and inspiration. However, 98 percent of working Americans aren't federal employees, and many are wondering aloud why federal civil servants haven't faced the wage freezes, layoffs, furloughs, pay cuts and hiring freezes that many in the general work force have endured.

Surely, the bulging federal deficit, diminished income tax revenue and massive war budget should warrant some sacrifice at the federal level. Shouldn't it?

"To the extent that the American people are tightening their belt, Washington should tighten its belt too," said Brian Reidl, a research fellow in federal budget policy at the conservative Heritage Foundation. "It's important that federal employees aren't exempted from the sacrifices that other people are making."

That same logic prompted President Barack Obama, on his first full day in office, to freeze the pay of about 100 senior White House staffers who earn more than $100,000 a year.

It was a nice symbolic gesture. However, Chris Edwards, the director of tax policy studies at the libertarian Cato Institute and the author of "Downsizing the Government," said the freeze should be extended to all federal civilian employees for the next several years, or at least until the economy recovers and private-sector wages improve.

After all, average compensation for federal civilian workers increased nearly twice as much as it did for the private sector from 2000 to 2008, federal data show. In fact, the average annual compensation for federal civilian workers -- $119,982, including earnings and benefits -- ranks seventh among 72 occupations, behind only high finance, energy and company management professions.

Then there are the benefits.

"Federal workers get a 401(k)-style plan, but they also get an old-fashioned defined-benefit pension plan with inflation protection," Edwards said. "They also get health care benefits when they retire above and beyond Medicare. You just don't see that kind of stuff in the private sector anymore, and I think the federal work force ought to reflect the private work force. It shouldn't be an elite island separated from the rest of us."

Palguta said some government compensation and staffing levels should be "readjusted," both up and down. "But the rational and logical thing to do is to go in with a scalpel, not with a sledgehammer," he said.

Paul C. Light, a professor of public service at New York University's Robert F. Wagner Graduate School of Public Service, agreed that a rigorous restructuring of the federal government is needed.

"But I think blunt instruments like pay cuts and hiring freezes have proven absolutely ineffective in the past," Light said.

That's because they can be circumvented through promotions and advances through the dense federal employee classification system. "So unless you simultaneously freeze movement of employees through the pay grades, you've done nothing more than create more layers of bureaucracy," Light said.

Thomas E. Mann, senior fellow for governance studies at the Brookings Institution, a center-left Washington research group, said freezing federal wages wouldn't save much money anyway, since most of the federal deficit stems from transfer payments to states, social programs, defense spending and payment on the national debt.

As for federal salary and work force cuts, Mann said that's a "lousy idea."

"The public has a notion that in the face of an economic downturn, everybody needs to cut back and the government budget should be run like a family's budget. But what seems viscerally fair and the right thing to do can make just dreadful policy sense," Mann said. "Cutting efforts of any kind when the economy is still shaky is really a dumb thing to do."

Others say that canceling promised raises for government workers would be like imposing a tax on one narrow segment of the work force -- one that had nothing to do with causing the economic crisis.

"How do you get from the bailout of Wall Street to cutting the pay of the janitor or food service worker in a VA hospital? We bailed out millionaires and to pay for it, we should cut the pay of civil servants?" said Jacqueline Simon, the public policy director for the American Federation of Government Employees, which represents more than 600,000 federal workers. "Whatever problems the federal budget is experiencing has literally nothing to do with the size or compensation of federal employees."

To keep the wheels of government churning, Uncle Sam requires a diverse work force. The mammoth federal civilian payroll includes brain surgeons, janitors, attorneys, accountants, police officers, lawyers, economists, food service workers, scientists, housekeepers, physical therapists, weapons analysts, linguists, pharmacists and scores of other positions.

While the mission of government changes with the times, the size has been fairly stable for decades. The federal payroll, at roughly 2.1 million civilian employees, is up from about 1.8 million during the Clinton administration's "reinvention of government." However, the federal work force is roughly the same size as it was during Gerald Ford's administration and has about 100,000 fewer workers than it did when President Ronald Reagan left office, Palguta said.

The executive branch is projected to add about 274,000 full-time civilian workers from 2007 to 2011. About 80 percent of these new employees will work in support of war and counterterrorism efforts at the departments of Veterans Affairs, Homeland Security, Defense, Justice and State.

Despite these additions, the federal civilian work force has been shrinking relative to the general population. In 1953, there was one civil servant for every 78 residents. That ratio fell to one for every 110 residents in 1988 and one per 155 residents in 2008.

A big part of that decline stems from the loss of lower-paid and lower-skilled federal workers whose jobs have been farmed out on a contract basis; they're not on the federal payroll, but they're still paid with U.S. tax dollars. These contract workers cost the government more than $500 million a year, more than twice the amount in 2001. Last year, the Office of Management and Budget directed federal agencies to cut their contracting budgets by 7 percent to save $40 billion a year.

As more lower-paying positions leave the federal payroll, they've been replaced by higher-paying positions that require better-educated and better-skilled workers. That's one reason why the average compensation for federal employees increased at nearly twice the rate of the private sector from 2000 to 2008, according to data from the Commerce Department.

Average earnings in the private sector, which includes minimum-wage workers, CEOs and everyone in between, increased 31 percent, from $45,772 in 2000 to $59,909 in 2008, federal data show. However, earnings for federal civilian workers rose about 54 percent in that period, from $51,518 to $79,197.

Federal workers also have seen more generous contributions and faster growth in the area of benefits. From 2000 to 2008, the average annual value of private-sector benefits -- mainly pension and health insurance contributions -- have increased 43 percent from $6,910 to $9,881. However, benefits for federal civilian workers jumped 65 percent from an average of $24,669 in 2000 to $40,785 in 2008.

In March, Rep. Ann Kirkpatrick, an Arizona Democrat, introduced legislation to cut congressional salaries by 5 percent, from $174,000 to $165,300. If enacted, it would be the first pay cut for Congress since the Great Depression.

A similar measure for federal civilian employees would be difficult to do, especially for Democrats in an election year, but fiscally worth considering, said Pete Sepp, the executive vice president of the National Taxpayers Union.

"By expanding the scope beyond (members of) Congress, the savings at stake go from the millions into the billions," Sepp said. "In Washington, any talk of cutting salaries seems taboo, but outside the Beltway, where many people are making do with smaller paychecks or none at all, there might be a lot of receptive ears to the idea."

The Hidden Public Costs of Low-Wage Jobs in California

Originally Published on November 1, 2004

University of California - ... California’s new economy is fostering far more growth among high- and low-wage jobs compared to middle-income jobs. The development of the hourglass economy means that there is a growing number of low-wage workers who cannot support their families even if they work full-time. As a consequence, they must turn to public assistance to meet the basic needs of their families. Working families are not the only ones who bear the burden of increasing numbers of low-wage jobs. Taxpayers also share the cost. This report focuses on an important outcome of the increase in low-wage work: the hidden costs for taxpayers when California’s working families must rely on public assistance to meet their basic needs. This study is the first to quantify, at a statewide level, the government outlays that occur as a result of low-wage jobs. The study thus informs the current debate about the “Walmartization” of the economy by assessing what happens when costs traditionally borne by employers are shifted to the public ...

Oklahoma's Public Employment Among Highest In Nation

Originally Published on December 4, 2009

Tulsa Today - Oklahoma ranks fifth-highest in the country in the ratio of government employment to private-sector employment, according to a new study.

Overall, 17.7 percent of the state's labor force is in government, the Oklahoma Council of Public Affairs report said, adding that is 29 percent higher than the national average.

And although private sector wages are about 10 percent higher than public sector wages, factoring in the cost of benefits changes that, the study said. Including wages and benefits, government jobs average about three percent higher than private sector jobs.

In their conclusion, the report's authors pointed out:

"If Oklahoma's employment ratio were at the national average in 2008, it would mean 62,394 fewer state and local government employees. This would save Oklahoma taxpayers $2,891,859,576."

A major concern is the state's high "benefit ratio," which is the sixth highest in the country. The benefit ratio is derived by dividing public-sector benefits per job by private-sector benefits per job. For Oklahoma, the benefit ratio for government employees is 71 percent higher than for private sector employees.

"The high benefit ratio is a significant contributing factor to Oklahoma's growing unfunded retirement actuarial liability," the report said.

The authors encouraged policymakers to focus on growing the private sector in both income and employment.

"Policymakers must pursue pro-growth economic policies -- such as fewer regulations, lower taxes, and secure property rights -- that will promote economic development by allowing private-sector businesses to better compensate and hire additional employees. Such policies are a win-win for both the private and public sectors."

For more on this story, including graphs outlining the information, click here.