Federal Pay Gap Reversed

I’ve long raised concerns about the rapidly rising costs of federal worker pay and benefits. Despite the obvious acceleration of federal compensation above private compensation in recent years, federal unions have continued to claim that federal workers suffer from a giant “pay gap,” which is currently supposed to be 26 percent.

Unfortunately, the pay gap mythology has been spread by Washington Post reporters, one recently writing, “The budget answers critics … who say federal civilians earn much more than private-sector workers… [G]overnment figures indicate that federal employees are underpaid by 26 percent compared with their counterparts in similar position in the business world.”

The Post is generally a great paper, but they seem to have blinders on with respect to federal pay issues. As a result, the USA Today has repeatedly scooped them. USA Today has a groundbreaking piece today revealing that in job-to-job comparisons, federal workers typically have wages 20 percent higher than private-sector workers.

Instead of federal workers suffering from a 26-percent “pay gap,” they actually have a 20-percent advantage over private sector workers. And that doesn’t include benefits, which are four times higher in the federal government than in the private sector, on average.

How could the federal unions get it so wrong? The calculation of the supposed 26-percent pay gap is reported in this annual memo. But the underlying calculations are extremely complex, non-transparent, and subject to a huge degree of statistical modeling.

One reason I’ve been suspicious of the official gap claim is that while Bureau of Economic Analysis data show that average federal wages have grown far faster than private wages in recent years, the official “pay gap” has remained very high. In 2001, the pay gap was said to be 22 percent. By 2008, the gap was said to have increased to 25 percent.

Yet BEA data show that average federal salaries rose 46 percent between 2001 and 2008, much more than the 26-percent average increase in the private sector. Since the BEA data are extremely solid, there must be something wrong with the official pay gap methodology.

Where should we go from here? The first step should be to freeze federal salaries, as proposed by Sen. Scott Brown (R-MA). Then we should start cutting back overly generous federal benefits.

And to get to the bottom of the ”pay gap” mystery, Congress should hire an independent human resources consulting firm to dig into the official methodology and propose a more accurate way to compare federal and private worker compensation.

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