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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Reader comments

Tue, Feb 15, 2011

you can easily tell the politicians who are evil because they will vote to freeze our pay and not their own. They need to be publicly embarrassed because they are being blatantly hypocritical and don't deserve any respect.

Tue, Jan 4, 2011

There's a fallacy on the pension impact. If I retire today, my three highest years will be lower than if I retire three years from now because my salary today is higher than the two prior years. In a world of 2% and 3% merit budgets, the actual impact is minor.

Wed, Dec 22, 2010

President Reagan froze federal civilian salaries when I worked as s government attorney. This is not a first. Most of us rolled with the punches and did our job, one that had security and a sense of purpose. The freeze will not affect instep raises for years of service and more than a third will receive some instep increase over the next two years. If the economy improves, the COLAs will be reinstituted in 2 years. Don't expect a flood of departures. There are few job opportunities at these salaries in the private sector.

Wed, Dec 22, 2010

They keep talking about how important the benefits are to us. What they forget about is the rising costs in healthcare, food, gas, the cost of travel, and the cost to live-period! We are not going to have a decrease in pay because everything is increasing except for our pay. I AM VERY DISSAPOINTED. If you are going to freeze ALL federal employees, no one should be exempt! This is horrible and I cannot wait til the next election!

Wed, Dec 22, 2010

I make 31k a year, I work over 45 hrs a week. I am the bread earner of a household with two children. So you think I should take a freeze while milk continues to rises up to $5. a gallon? How am I going to feed and cloth my children. I work my butt off for you the public! I carry my weight and then some. Now you want me to pay for the hole that the people you elected got us into? This is not fair. You want to freeze the big dogs fine, maybe they will have to cut down on vacations and dry-cleaning. But for me it is a matter of survival. You want to trim the fat get rid of the people that do not do the work, stop giving the jobs to people who knows so and so, hire the ones that are competent for the job. Right here in this office you could more then likely cut the employees in half and still have a fully functioning staff, which earns every penny they make! I am disgusted at the government! I am disgusted with the Senate! Why don’t you give back half of what you make a year! With the base salary of $165,200 to start I’m sure they you won’t feel the heart ache as I do when trying to put milk on the salvation army table bought years ago, knowing if I don’t water the milk down more you will run out, but if you do water it down they will taste it and then wont drink it. I am great full to have a job but at this cost unemployment would net me more money!!!!

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