Who earns more, federal employees or their private-sector counterparts? It all depends on whom, and how, you ask.
Editor's note: This article was updated June 15, 2012 to attribute a quote about number disparity to Rex Facer, a member of the Federal Salary Council.
Federal pay has never been a straightforward issue, but as many members of Congress and the presidential administration propose freezing, cutting or otherwise changing federal salaries in the name of deficit reduction, it is an important one.
But determining whether government employees are paid more, less or as much as private-sector employees is much harder than it seems.
The complexity is rooted in the different methodologies used when looking at private and public sector compensation, according to panelists at the June 13 Coalition for Effective Change event. The event was held in downtown Washington, D.C., and was sponsored by the Partnership for Public Service.
Rex Facer, a member of the Federal Salary Council and associate professor of public finance and management at the Marriott School of Management at Brigham Young University, stressed the difficulty in evaluating something that’s rarely an apples-to-apples comparison.
What makes the Federal Salary Council’s analysis different is that it aims to ask how much individuals make, regardless of the sector they work in, he said. The council looks only at direct compensation and doesn’t assess any benefits employees receive, Facer said. However, the council does consider locality pay to explore how variations in compensation level within local labor markets differ from the overall, broad patterns of compensation differences nationwide.
That being said, the council has consistently seen a substantial gap between the pay federal employees receive to the compensation their peers outside the public sector get, Facer said.
Considering research by the council and data from the Bureau of Labor Statistics, “federal employees are undercompensated somewhere, on average, between 30 and 40 percent,” he said.
Fellow panelist Joseph Kile, assistant director of the Microeconomic Studies Division at the Congressional Budget Office, agreed there’s no short answer to the question and offered up significantly different numbers.
The makeup of the federal workforce is vastly different from industry, and those dissimilarities shape compensation. Feds tend to have more education than those in industry, Kile said. Half of the government workforce has bachelor’s degrees, while only 30 percent in the private sector has the same level of schooling.
Education has been “by far been the largest explanatory variable” in trying to answer the question of which sector employees earn more, Kile said. “On average, folks with relatively less education tend to earn more in the federal government than in the private sector, and that’s both in terms of cash compensation and benefits,” he explained.
The reverse is also true for employees with higher levels of education. Those individuals are more likely to earn less in government than those in the private sector with the same level of education, Kile said. In general, however, the CBO finds that feds make about 2 percent more than private sector employees, Kile said.
Answering an audience member’s question about the disparity in the numbers, Facer pointed to the possibility of bad data and flawed methodology. “We may not have all the right data pieces; it could be that we aren’t using the right methodological approaches,” he said.
But finding the “perfect” methodology might be tricky as no approach is flawless, Facer pointed out. “It’s really easy to find chinks in the approaches, no matter which way you’re looking at it,” he said.
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