Could pay freeze send feds to private sector?

Retirement, step raises also could suffer under proposals

Even though it's likely that federal salaries will be frozen for at least the next two years, the White House says federal employees aren't likely to leave the government workforce, nor will it deter qualified people from seeking government jobs.

Jeffrey Zients, federal chief performance officer, said government work offers a deeper sense of accomplishment than many other jobs do. And that, as many people agree, is a bonus that private-sector companies don’t offer.

“I’m confident that we have an overall value proposition for employment that’s quite strong and that a lot of people do want to serve,” Zients said during a conference call Nov. 29 about President Barack Obama’s proposal to eliminate federal pay raises for two fiscal years.

Zients has also said the government needs to recruit the most qualified workers, and the pay freeze would not be an impediment.

“This freeze will not get in the way of our efforts to bring in the best and brightest,” he said.


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But it's Zient's boss proposing the pay freeze. Do experts outside of the administration agree?

At least one does. Jennifer Kerber, vice president of federal and homeland security policy at TechAmerica, said the private sector might not have much more to offer federal employees. Industry is still coming out of an economic recession, which means budgets are tight and hiring is slow, said . Companies are wrestling with the ramifications of the recession and taking tough actions, such as cutting employees’ pay to avoid layoffs. Furthermore, the benefits packages in the private sector often are not as generous as the government’s.

“I think if a government employee wanted to jump ship for a better paying private-sector job, it might not be so easy to find, and in the end, the net pay increase would be less because of the decrease in benefits,” Kerber said.

Meanwhile, the pay freeze's impact on federal employees' retirement income is a major concern for labor unions. Pensions are calculated based on the average of the employee's highest income for three consecutive years. Because of the impending pay freeze, employees who will be eligible to retire soon might face lower retirement income.

"Your last three years are usually your highest-paid three years," said Joan Golden, who was a federal employee for 34 years and is now a consultant at Topside Consulting. "Looking at two more years of flat salaries, they may leave now and take federal contractor jobs."

“Everything for federal employees is tied to their retirement. Folks lose sight of that,” said Jessica Klement, government affairs director at the Federal Managers Association (FMA). “If I don’t get a raise this year, it doesn’t affect my retirement, but it does for federal employees.”

The American Federation of Government Employees echoed that concern, saying the freeze will have a cumulative effect. The union calculates that the proposal would reduce employees’ retirement annuities by 3 percent to 4 percent.

Further, the Obama administration has chosen not to increase locality pay, another issue of concern to FMA. Klement said denying federal employees a raise and locality pay adjustment widens the gap between employees in the private and public sectors.

It remains to be seen how Congress will handle pay increases for federal employees who receive promotions. Obama’s proposal and the debt commission’s report, which was released today, have different stances, and it will be up to Congress to decide what to do.

Without congressional approval by the end of the month, federal employees would automatically get a 0.9 percent pay raise, in addition to a 1.9 percent pay increase earlier this year, according to an infograph on the GovLoop website.

Overall, Klement said she thinks the proposed pay freeze could damage the morale of the federal workforce.

“Federal employees feel like they have a big target on their back,” she said, adding that the Obama administration is “picking at the low-hanging fruit” to reduce the federal deficit.

About the Authors

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Alyah Khan is a staff writer covering IT policy.

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