Federal Pay Continues Rapid Ascent - Is this a problem?

[Ogre]

http://www.cato-at-liberty.org/2009/08/24/federal-pay-continues-rapid-ascent/

The above link takes you to the Cato Institute, so if you’re squeamish, here’s an excerpt:

What is going on here? Members of Congress who have large numbers of federal workers in their districts relentlessly push for expanding federal worker compensation. Also, the Bush administration had little interest in fiscal restraint, and it usually got rolled by the federal unions. The result has been an increasingly overpaid elite of government workers, who are insulated from the economic reality of recessions and from the tough competitive climate of the private sector.

It’s time to put a stop to this. Federal wages should be frozen for a period of years, at least until the private-sector economy has recovered and average workers start seeing some wage gains of their own. At the same time, gold-plated federal benefit packages should be scaled back as unaffordable given today’s massive budget deficits. There are many qualitative benefits of government work—such as extremely high job security—so taxpayers should not have to pay for such lavish government pay packages.

The blog post also contains the data tables released by BEA, and a separate blog post, linked at the bottom, which responds to some of the criticisms leveled against the original post.

The data does indeed appear to show a growing gap between federal salaries and private sector salaries. One might be instantly provoked to outrage over this egregious overspending on federal jobs. It certainly appears that the blogger is thus provoked.

I’m not so sure, though. I’m a biologist, not an economist, so my analysis is likely to be flawed. That’s where the Dope comes in, as usual.

1. Might the data be skewed by the very large base of strictly minimum-wage jobs in the private sector? In general (although not in every case - the feds need janitors and unskilled labor too), federal jobs tend to go to more educated and/or qualified people. This necessarily means a higher starting salary, and the feds tend to contract out the more unskilled labor to private companies.

2. I suppose a more revealing statistic would be to look at the trend of the cost of living. Does it more closely match the private sector or the federal curve over the same period of time? It occurs to me that the private sector’s curve may be flatter for a couple of reasons:

a) Again, the minimum wage base salary. This has increased recently, but previously, there was a long period of time when it did not. Not to mention minimum-wage-with-tips, which might drag the average down even more. There are lots of waiters out there.

b) Cost of living increases. I know the federal government doesn’t determine COL raises arbitrarily, but uses a formula. From the Social Security web page:

How is a COLA calculated?
The Social Security Act specifies a formula for determining each COLA. In general, a COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next. If there is no increase, there is no COLA.

The private sector does not (necessarily) use the same formula, or anything like it.

I would therefore hypothesize that the federal pay raises are more objectively appropriate for any given rise in the actual cost of living, and suspect that the blogger’s reaction that “it’s time to put a stop to this” seems to be a knee jerk “feds are bad, private sector is good, in any given case” type response.

What says the Dope?

[Steve_MB]

Another factor is that the people managing the government, unlike CEOs in private industry, have no way to directly line their pockets by raiding the salary and benefits budget. Thus, private wages (other than upper management) are artificially depressed relative to government ones.

[Dinsdale]

As a federal employee, I am very appreciative of the COLAs and job security. But I am always leery of this type of comparison. IIRC back in Clinton’s day there were significant increases to address what was considered a shortcoming of fed salaries compared to private. Also IIRC, the gov’t consistently reneged on the promised increases. So apparently at that time, at least, someone had some kind of stats they were using to suggest that fed salaries were on the short end of any pay gap.

[Steve_MB]

From the “response to critics” link:

@Chris Edwards

Third, people argue that a better analysis would be to compare similar jobs in the private and public sectors, rather than looking at overall averages. I agree that that would be very useful. Unfortunately, the BEA data is not broken down that way.

Police Officer: Sir, why are you crawling around on the sidewalk?
Chris Edwards: I’m trying to find my wallet.
Police Officer: (starts to help search) Do you know where you lost it?
Chris Edwards: Somewhere near Tenth and Maple.
Police Officer: (double-take) Sir, that’s a half mile away.
Chris Edwards: Yes… but the light is a lot better here.

[RTFirefly]

This reminds me of the poll that determined that Republicans were happier with their sex lives than Democrats were. Unfortunately, it didn’t control for the fact that the GOP is disproportionately male, and the Dems are disproportionately female.

Same thing here: there’s a need to control for professional category, education, and experience. The Federal work force has a lot of highly educated, highly trained professionals; people like that make a good deal more money than average. How do the salaries of government statisticians compare with those of private sector statisticians, for instance?

The author semi-responds to that point as follows:

many people argue that the federal government has an elite workforce with many highly educated people. Certainly, that’s an important factor to consider. However, that is the reason why I focused on the pay trend over the last eight years. The federal worker compensation advantage rose from 66 percent in 2000 to 100 percent in 2008. Has the composition of the federal workforce really changed that much in just eight years to justify such a big relative gain? I doubt it.

The answer to that one, I think, is that during the Bush Administration, virtually none of America’s economic gains went to the bottom 80-90% of earners; it all went straight to the top. So the author’s argument appears to be that, since the private sector was successful in giving its workforce a screwing-over lately, the same thing should be done to the Federal workforce. I’m missing the logic in that.

[Steve_MB]

@Chris Edwards

Has the composition of the federal workforce really changed that much in just eight years to justify such a big relative gain? I doubt it.

(emphasis added)

Translation: Mr. Edwards is floating the first notion that flutters through his skull because he can’t be bothered to do actual research and determine what the facts say. He’s the anti-Cecil.

It took me about five seconds to type a fairly obvious search (federal contracting rate “bush administration”) into Google. The first paragraph of the first hit reads:

Under the Bush Administration, the “shadow government” of private companies working under federal contract has exploded in size. Between 2000 and 2005, procurement spending increased by over $175 billion dollars, making federal contracts the fastest growing component of federal discretionary spending.

So, it turns out that, yes, there has been a significant shift in federal workforce composition that tracks the time period in question, and fits the hypothesis that the apparent shift in average pay is a result of increased concentration of high-end professionals (basic service and maintenance tasks are much easier to contract out).

[Shodan]

Might the data be skewed by the very large base of strictly minimum-wage jobs in the private sector?

Since only about 1.5% of the US work force earns minimum wage, I doubt it.

Regards,
Shodan

[Ogre]

Uh, 1.5% is plenty to skew the numbers, especially if the 1.5% is very far away from the average.

Although you only addressed one tiny point, so I vote “stricken as unresponsive.”

[Shodan]

@Ogre

Uh, 1.5% is plenty to skew the numbers, especially if the 1.5% is very far away from the average.

Although you only addressed one tiny point, so I vote “stricken as unresponsive.”

Well, you said

the feds need janitors and unskilled labor too

so I see no reason to believe that there are any more minimum wage workers in the private sector as in private companies working under federal contract.

You want me to do the rest of your points?

federal jobs tend to go to more educated and/or qualified people.

Cite, please? Especially one that shows that this trend has increased since 2000.

This necessarily means a higher starting salary, and the feds tend to contract out the more unskilled labor to private companies.

Again, are you including private companies under federal contract in your figures?

2. I suppose a more revealing statistic would be to look at the trend of the cost of living. Does it more closely match the private sector or the federal curve over the same period of time? It occurs to me that the private sector’s curve may be flatter for a couple of reasons:

a) Again, the minimum wage base salary. This has increased recently, but previously, there was a long period of time when it did not. Not to mention minimum-wage-with-tips, which might drag the average down even more.

Okay, prove it.

b) Cost of living increases. I know the federal government doesn’t determine COL raises arbitrarily, but uses a formula.

Okay, let’s see a cite that proves that the federal government calculates COLAs from this formula, and what the formulae are in the private sector.

If you want me to do all your research for you so you can hand-wave it away, no thanks.

You’ve made an assertion -

I would therefore hypothesize that the federal pay raises are more objectively appropriate for any given rise in the actual cost of living,

Let’s see your evidence.

Regards,
Shodan

[Steve_MB]

@Shodan

Cite, please? Especially one that shows that this trend has increased since 2000.

I already provided the cite earlier in the thread. Please try to keep up with the class.

Again, are you including private companies under federal contract in your figures?

They are, of course, included with the other private-sector employees.

[Voyager]

@Shodan

Okay, let’s see a cite that proves that the federal government calculates COLAs from this formula, and what the formulae are in the private sector.

Regards,
Shodan

I’ve worked in the private sector for 30 years, and have done salary administration, and there has never been a COLA. Clearly inflation has an impact on setting wages, but it is factored in with other things.

I would highly doubt that salaries of contract employees are factored into federal wage data. It is not even clear to me that the government has this, unless they are billed individually like the solid gold security guards in Iraq.

[Voyager]

sigh. When are the clowns at Cato ever going to realize that when you are in the middle of a recession driven in no small part by lack of demand, it is not the time to complain about some part of the work force making decent wages? Without a direct job category match between public and private sectors, I don’t believe there is a problem - except that government job wages haven’t stalled the way private ones have. I bet government workers aren’t getting their houses foreclosed either - the horror! How ever will they understand the problem.

I had a good friend who was a high state official - appointed - high enough to be on TV all the time. When his side lost the election, he went to the private sector, to a much less stressful job at double the salary. CEOs make tens of millions; governors with more employees and bigger budgets make a few hundred thousand, at most. Cry me a river.

[Xema]

@Voyager

CEOs make tens of millions; governors with more employees and bigger budgets make a few hundred thousand, at most.

The OP pertains to the average of all workers. The salaries of CEOs and Governors seems of dubious relevance to this (except possibly to give a small boost to the average salary of non-govt employees).

[Ravenman]

I have a lot to add to this, but for now, I’ll just focus on three items.

1. The Federal government uses the Employment Cost Index to adjust Federal workers’ wages annually. It is the law.

2. The comparison between Federal employees and private sector employees is not an apples to apples comparison. Why is it not a fair comparison? Not because Federal employees are better educated or do more technical work, on average, than a private sector employee. It is because the Federal government simply doesn’t employ many people in certain employment sectors. Take, for example, construction workers.

If the Federal government wants to build a building, they don’t hire carpenters and plumbers. They contract for those services. So while construction is a sizable part of the US employment sector, the government simply doesn’t employ those people. So when there are changes in the employment trends of a sector, those trends don’t get adequately represented in Federal pay statistics.

For example, I don’t think it is terribly controversial that illegal immigration holds down wages in several employment sectors, such as construction, agriculture, various services like janitorial and other unskilled labor. If those wages stagnate, it has more effect on the overall level of private wages than it would in the government. What does wage stagnation in these areas, or other areas like retail or manufacturing that are responding to globalization and other competitive pressures, have to do with how the government compensates file clerks, program managers, FBI agents, and park rangers?

And let us keep in mind how many Federal employees there really are: excluding DOD, there’s somewhere around 1.2 million workers for Uncle Sam. There’s about 13 million Americans in the manufacturing sector. Since we know that the manufacturing sector is in the dumps, of course the data is going to be skewed. Private employment sector data here, Federalemployment here on table 17.1.

3. As I said before, the government contracts for a great deal of services, from cleaning bathrooms to building buildings. Especially starting in the 1990s, the number of Federal government jobs stagnated or declined because a lot of services were contracted out. Which sectors of employment do you think were contracted out? Sure, a lot of technical work, but you don’t see a lot of government employees working in the cafeterias of your Federal building or taking the trash out of the courthouse. That further leads to a reason why the data looks like Federal employees are highly paid: because there are fewer and fewer Federal employees in jobs that are lower paid.

[intention]

Well, I don’t trust anyone, left or right. As is my invariable custom, I go to the source document and run the numbers myself. First I looked at what’s causing the rise. I calculated the percentage change in total compensation (salaries plus benefits) for each of the categories. This covers the period from 1998 - 2008. Here’s what I get:

      All employees, 47%
Domestic industries, 47%
  Private industries, 45%
    Agriculture, forestry, fishing, and hunting, 57%
      Farms\1\, 57%
      Forestry, fishing, and related activities, 62%
    Mining, 62%
      Oil and gas extraction, 90%
      Mining, except oil and gas, 39%
      Support activities for mining, 66%
    Utilities, 72%
    Construction, 46%
    Manufacturing, 50%
      Durable goods, 47%
        Wood products, 42%
        Nonmetallic mineral products, 43%
        Primary metals, 47%
        Fabricated metal products, 41%
        Machinery, 44%
        Computer and electronic products, 63%
        Electrical equipment, appliances, and components, 64%
        Motor vehicles, bodies and trailers, and parts, 24%
        Other transportation equipment, 57%
        Furniture and related products, 44%
        Miscellaneous manufacturing, 67%
      Nondurable goods, 55%
        Food and beverage and tobacco products, 43%
        Textile mills and textile product mills, 44%
        Apparel and leather and allied products, 83%
        Paper products, 46%
        Printing and related support activities, 31%
        Petroleum and coal products, 91%
        Chemical products, 57%
        Plastics and rubber products, 42%
    Wholesale trade, 38%
      Durable goods, 36%
      Nondurable goods, 42%
    Retail trade, 27%
      Motor vehicle and parts dealers, 19%
      Food and beverage stores, 28%
      General merchandise stores, 35%
      Other retail\2\, 27%
    Transportation and warehousing, 35%
      Air transportation, 39%
      Rail transportation, 31%
      Water transportation, 49%
      Truck transportation, 38%
      Transit and ground passenger transportation, 44%
      Pipeline transportation, 64%
      Other transportation and support activities\3\, 45%
      Warehousing and storage, 25%
    Information, 49%
      Publishing industries (includes software), 53%
      Motion picture and sound recording industries, 34%
      Broadcasting and telecommunications, 46%
      Information and data processing services, 67%
    Finance and insurance, 61%
      Federal Reserve banks, credit intermediation, and related activities, 49%
      Securities, commodity contracts, and investments, 72%
      Insurance carriers and related activities, 55%
      Funds, trusts, and other financial vehicles, 70%
    Real estate and rental and leasing, 45%
      Real estate, 46%
      Rental and leasing services and lessors of intangible assets\4\, 41%
    Professional, scientific, and technical services, 45%
      Legal services, 55%
      Computer systems design and related services, 34%
      Miscellaneous professional, scientific, and technical services\5\, 45%
    Management of companies and enterprises\6\, 65%
    Administrative and waste management services, 60%
      Administrative and support services, 61%
      Waste management and remediation services, 37%
    Educational services, 47%
    Health care and social assistance, 47%
      Ambulatory health care services, 39%
      Hospitals, 54%
      Nursing and residential care facilities, 47%
      Social assistance, 49%
    Arts, entertainment, and recreation, 42%
      Performing arts, spectator sports, museums, and related activities, 56%
      Amusements, gambling, and recreation industries, 31%
    Accommodation and food services, 44%
      Accommodation, 42%
      Food services and drinking places, 46%
    Other services, except government, 44%
  Government, 56%
    Federal Gov't, 74%
      General government, 87%
        Civilian gov't employees, 71%
        Military\7\, 112%
      Government enterprises, 23%
    State and local, 51%
      General government, 51%
        Education, 50%
        Other\8\, 54%
      Government enterprises\8\, 51%

You are free to draw your own conclusions. Mine, inter alia, is that the rise in federal compensation is due to an increase in military pay and benefits over that 11 year period.

Next, I looked at total compensation. Here’s those numbers, in thousands of dollars:

      All employees, $63 
Domestic industries, $63 
  Private industries, $60 
    Agriculture, forestry, fishing, and hunting, $37 
      Farms\1\, $39 
      Forestry, fishing, and related activities, $35 
    Mining, $102 
      Oil and gas extraction, $169 
      Mining, except oil and gas, $78 
      Support activities for mining, $86 
    Utilities, $116 
    Construction, $61 
    Manufacturing, $71 
      Durable goods, $74 
        Wood products, $48 
        Nonmetallic mineral products, $62 
        Primary metals, $77 
        Fabricated metal products, $61 
        Machinery, $72 
        Computer and electronic products, $105 
        Electrical equipment, appliances, and components, $74 
        Motor vehicles, bodies and trailers, and parts, $75 
        Other transportation equipment, $93 
        Furniture and related products, $48 
        Miscellaneous manufacturing, $73 
      Nondurable goods, $67 
        Food and beverage and tobacco products, $54 
        Textile mills and textile product mills, $46 
        Apparel and leather and allied products, $47 
        Paper products, $73 
        Printing and related support activities, $56 
        Petroleum and coal products, $145 
        Chemical products, $104 
        Plastics and rubber products, $57 
    Wholesale trade, $76 
      Durable goods, $78 
      Nondurable goods, $72 
    Retail trade, $37 
      Motor vehicle and parts dealers, $57 
      Food and beverage stores, $32 
      General merchandise stores, $30 
      Other retail\2\, $38 
    Transportation and warehousing, $60 
      Air transportation, $82 
      Rail transportation, $102 
      Water transportation, $95 
      Truck transportation, $56 
      Transit and ground passenger transportation, $36 
      Pipeline transportation, $122 
      Other transportation and support activities\3\, $57 
      Warehousing and storage, $50 
    Information, $92 
      Publishing industries (includes software), $99 
      Motion picture and sound recording industries, $83 
      Broadcasting and telecommunications, $89 
      Information and data processing services, $100 
    Finance and insurance, $104 
      Federal Reserve banks, credit intermediation, and related activities, $76 
      Securities, commodity contracts, and investments, $236 
      Insurance carriers and related activities, $86 
      Funds, trusts, and other financial vehicles, $169 
    Real estate and rental and leasing, $55 
      Real estate, $57 
      Rental and leasing services and lessors of intangible assets\4\, $50 
    Professional, scientific, and technical services, $91 
      Legal services, $100 
      Computer systems design and related services, $108 
      Miscellaneous professional, scientific, and technical services\5\, $85 
    Management of companies and enterprises\6\, $121 
    Administrative and waste management services, $42 
      Administrative and support services, $41 
      Waste management and remediation services, $61 
    Educational services, $46 
    Health care and social assistance, $57 
      Ambulatory health care services, $71 
      Hospitals, $65 
      Nursing and residential care facilities, $36 
      Social assistance, $32 
    Arts, entertainment, and recreation, $49 
      Performing arts, spectator sports, museums, and related activities, $89 
      Amusements, gambling, and recreation industries, $33 
    Accommodation and food services, $27 
      Accommodation, $38 
      Food services and drinking places, $25 
    Other services, except government, $40 
  Government, $77 
    Federal Gov't, $111 
      General government, $117 
        Civilian gov't employees, $120 
        Military\7\, $114 
      Government enterprises, $85 
    State and local, $68 
      General government, $68 
        Education, $67 
        Other\8\, $68 
      Government enterprises\8\, $71 

Again, draw your own conclusions. Mine are that state government employees earn only about half what the federal government employees earn. Since they do similar tasks, this is kinda strange …

Also, the federal government average is more than all but 7 of the 96 categories … to me, that seems out of line, that on average the government folks are among the most highly paid people in the nation, up there with the hated oil companies and the like …

Further insights welcome.

[shellofmyformerself]

Just a few points to ponder/questions (full disclosure–I am a Federal employee working for the Air Force)…

What, if any, effect did the introduction of NSPS (and subsequent backpeddaling away from it when it was noted to be costing more money, not saving money) have on the numbers in the OP?

Also, I can’t speak for all the Fed Govt but I can speak for the Air Force regarding outsourcing to contractors. Studies have been conducted (sorry I don’t have cites or time to seek them out–I only have slides briefed by a 3-star 3 weeks ago) and it was found that all the outsourcing to contractors (who raised prices on us at an alarming rate) actually now costs us MORE than if we’d left these functions inhouse, so there is now a mandated move to INsource many of these funtions.

Finally, we were slated to get a 2.9% raise in January but the President has stated that we (Fed workers) should feel the pain like everyone else, so we are probably only getting a 2% raise.

[gonzomax]

@Shodan

Since only about 1.5% of the US work force earns minimum wage, I doubt it.

Regards,
Shodan

When you going to quit throwing that out like it is meaningful. Min. wage 7.25. You make 7.35 ,not min . wage. But does that change anything ? Make 7.75 and you can lump them with the middle class. but it is not true either. the fact is many, many people do not make a living wage, have no benefits and no health insurance. It is terrible.

[dropzone]

@Ogre

Federal Pay Continues Rapid Ascent - Is this a problem?

Not while I continue to try for a Fed job well below my private sector pay grade. I may make up some of the difference, eventually.

[Kimstu]

@intention

Well, I don’t trust anyone, left or right. As is my invariable custom, I go to the source document and run the numbers myself.

Unfortunately, intention, as so often happens when you announce that you’ve “run the numbers” yourself, you are extremely unclear about exactly what source document you’re referring to, exactly what numbers you used, and exactly how you drew your conclusions.

In this case, you give us two lists of industry names, with the names in the first list accompanied by percentages and the names in the second accompanied by amounts in thousands of dollars. What are those supposed to represent? What part of what “source document” did you extract them from? What bearing do they have on the question of how federal employee compensation has been rising compared to that of private sector employees? Where do they even have any connection with federal employee compensation?

@intention

I calculated the percentage change in total compensation (salaries plus benefits) for each of the categories. This covers the period from 1998 - 2008. Here’s what I get:

[list of industry names and percentages, of unknown and unexplained relevance]

You are free to draw your own conclusions. Mine, inter alia, is that the rise in federal compensation is due to an increase in military pay and benefits over that 11 year period.

Sorry, but this is gibberish. There may have actually been a coherent train of thought behind this post that revealed a meaningful deduction of valid conclusions from original data, but so little of it is left in the fragments and snippets that you actually posted that it’s impossible to tell with any clarity what you were trying to say.

@intention

Next, I looked at total compensation. Here’s those numbers, in thousands of dollars:

[list of industry names and dollar amounts, of unknown and unexplained relevance]

Again, draw your own conclusions. Mine are that state government employees earn only about half what the federal government employees earn.

Again, there is no useful way to assess this statement, because it has no visible connection to the data you actually provided. What do these industry names and dollar amounts have to do with state government employee compensation?

The pity of it, intention is that I do believe you are telling the truth when you assert with self-satisfaction that you’ve gone to the trouble of looking up original source data and performing some kind of computations on it in order to answer some kind of questions that you’ve formulated about it and deduce some kind of conclusions from it. It’s lamentable that your explanations of what you did and how you made your deductions are so elliptical and incoherent that they convey little or no useful information.

[intention]

@Kimstu

Unfortunately, intention, as so often happens when you announce that you’ve “run the numbers” yourself, you are extremely unclear about exactly what source document you’re referring to, exactly what numbers you used, and exactly how you drew your conclusions.

My apologies for the lack of clarity. I used the exact same source document that was used in the original citation. You did read the original citation? You did notice that they reference the source document for the numbers they graphed? That’s what I called the “source document”, sorry if that wasn’t obvious.

@Kimstu

In this case, you give us two lists of industry names, with the names in the first list accompanied by percentages and the names in the second accompanied by amounts in thousands of dollars. What are those supposed to represent? What part of what “source document” did you extract them from? What bearing do they have on the question of how federal employee compensation has been rising compared to that of private sector employees? Where do they even have any connection with federal employee compensation?

Well, the first one lists the percentage rise in total compensation by industry sector (including state and federal government compensation by sector) over the period 1988 -2008. Compensation is wages plus benefits. Which is what I said. Or thought I said.

The second one lists the average compensation by industry sector (including state and federal government compensation by sector) in 2008. Compensation is wages plus benefits. Which is what I said. Or thought I said.

@kimstu

Sorry, but this is gibberish. There may have actually been a coherent train of thought behind this post that revealed a meaningful deduction of valid conclusions from original data, but so little of it is left in the fragments and snippets that you actually posted that it’s impossible to tell with any clarity what you were trying to say.

kimstu, the fact that you have not taken the trouble to understand something does not mean it is “gibberish”. And insulting someone because you fail to grasp what they are saying is foolish, all you need to do is ask. The fault, dear Brutus, is not in our stars but in ourselves …

@kimstu

Again, there is no useful way to assess this statement, because it has no visible connection to the data you actually provided. What do these industry names and dollar amounts have to do with state government employee compensation?

Well, you might look at the sector identified as state government employee compensation down at the bottom of both lists, my wild guess is that might possibly be a place to start …

@kimstu

The pity of it, intention is that I do believe you are telling the truth when you assert with self-satisfaction that you’ve gone to the trouble of looking up original source data and performing some kind of computations on it in order to answer some kind of questions that you’ve formulated about it and deduce some kind of conclusions from it. It’s lamentable that your explanations of what you did and how you made your deductions are so elliptical and incoherent that they convey little or no useful information.

Oh, please. Just because you can’t be bothered to scroll down to the bottom of a list, don’t blame me and insult me. A simple “I didn’t understand X, what did you mean?” is quite sufficient, thanks.