Tag: federal compensation

It’s Fall in Washington and the Livin’ Is Still Good

Drawing on new census data, Newsweek finds that seven of the 10 richest counties in America, including the top three, are in the Washington area. Newsweek’s former sister publication, the Washington Post, summarizes the data. Only three counties in the United States have a median household income over $100,000, and they’re all Washington suburbs.

As we’ve reported here before, these trends began even before the Obama administration started concentrating job creation on the federal sector. In the middle of the Bush bubble, the Washington Post reported:

The three most prosperous large counties in the United States are in the Washington suburbs, according to census figures released yesterday, which show that the region has the second-highest income and the least poverty of any major metropolitan area in the country.

Rapidly growing Loudoun County has emerged as the wealthiest jurisdiction in the nation, with its households last year having a median income of more than $98,000. It is followed by Fairfax and Howard counties, with Montgomery County not far behind.

This of course reflects partly the high level of federal pay, as Chris Edwards and Tad DeHaven have been detailing. And it also reflects the boom in lobbying as government comes to claim and redistribute more of the wealth produced in all those other metropolitan areas.

To slightly amend a ditty I posted a few years ago,

Mamas, don’t let your babies grow up to be cowboys,

Don’t let ‘em make software and sell people trucks,

Make ‘em be bureaucrats and lobbyists and such.

Federal Employees Continue to Prosper

The Bureau of Economic Analysis has released its annual data on compensation levels by industry. The data show that the pay advantage enjoyed by federal civilian workers over private-sector workers continues to expand. This state of affairs is a thumb in the eye of the private sector, which continues to struggle with high unemployment. Many private sector employees have been forced to take pay and benefit cuts while continuing to fund generous federal employee compensation with their taxes.

Figure 1 looks at average wages. In 2009, the average wage for 1.95 million federal civilian workers was $81,258, which compared to an average $50,462 for the nation’s 101 million private sector workers (measured in full-time equivalents). The figure shows that the federal pay advantage (the gap between the lines) continued its steady increase over the past decade.

Figure 2 shows that the federal advantage is even more remarkable when worker benefits are included. In 2009, federal worker compensation averaged a whopping $123,049, which was more than double the private sector average of $61,051.

The disparity between average federal and private employee compensation has risen dramatically over the decade: from 66 percent in 2000 to 101 percent in 2009. Defenders of generous federal employee compensation point to the higher levels of education in the federal workforce. However, it’s doubtful that education accounts for the growing disparity between federal and private compensation.

Figure 3 shows that federal employees also enjoy much greater job security (data is from Table 18 here). In 2009, a private sector employee was more than three times more likely to be laid off or fired than a federal employee.

A good indicator of the adequacy of federal compensation is the quit rate. Figure 4 shows that in 2009, private sector employees quit at a rate that was more than eight times higher than federal employees (data is from Table 16 here). This indicates that federal employees recognize that the generous combination of wages, benefits, and job security is hard to match in the private sector, so they stay put.

Furor over Government Employees

Concern about the pay, benefits, and performance of government employees seems to be growing. Chris Edwards’s articles on how government pay is outpacing private-sector pay have generated media attention, cartoons, and angry rebuttals from the head of the federal Office of Personnel Management. Steven Greenhut has a new book, Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation, and is writing lots of newspaper articles on the high costs of government unions, also the topic of a recent Cato Policy Analysis. New Jersey unions are not finding much sympathy as they try to hold on to their raises, benefits, pensions, and work rules in the face of Gov. Chris Christie’s attempt to cut the budget. Liberal journalist Mickey Kaus is running for the U.S. Senate, trying to warn California’s voters and the Democratic Party about the excessive power and destructive influence of public employee unions.

And now Saturday Night Live. The zeitgeist-riding comedy show had a truly harsh sketch this weekend about the “Public Employee of the Year Awards.” It touched every element of popular resentment toward government workers: “people with government jobs are just like workers everywhere – except for the lifetime job security, guaranteed annual raises, early retirement on generous pensions, and full medical coverage with no deductibles, office visit fees, or copayments” – “retirement on full disability” by an obviously young and healthy worker – “Surliest and Least Cooperative State Employee” – “3200 hours [a year] on the job, all of it overtime” – New York school janitors living in Florida – employees with two current jobs and full disability – an entire workday at the DMV without serving a single customer – no-work contracts –  surprisingly early closings – and “he’s on break.”

Time for unions to start worrying?

Federal Salaries Explode

That’s the subject of a USA Today analysis, which reveals an outrageous increase in salaries at the top levels of the federal workforce. I’ve been complaining about excessive federal pay for some time based on one set of data, and now Dennis Cauchon provides strong support for my thesis using a different set of data.

Cauchon finds that since the economy fell into recession, the number of federal workers earning more than $150,000 has more than doubled. The federal government has become extremely bloated and top heavy, even as families and businesses across the nation have had to tighten their belts. With 383,000 workers earning six-figure salaries, the government has become an elite island of overcompensated administrators immune from the competitive job realities of average families.

There are a remarkable 22,000 federal civilians earning salaries of over $170,000, illustrating that Big Government works for the benefit of well-off insiders, not average Americans. And Cauchon only looks at salaries and wages. Average annual federal benefits are more than $41,000, which pushes total federal compensation even further ahead of the private sector average.

The Bush administration let federal pay and benefits grow completely out of control, as it did with other areas of federal spending. President Obama has an opportunity to fix these problems. He should call for a multi-year freeze on federal pay, work to overhaul a system that moves workers up the pay scales too rapidly, and begin purging the upper ranks of federal management.

Here are some of my recent analyses of federal pay:

Your Tax Dollars at Work

The National Park Service announced Friday that it has removed its superintendent at Gettysburg National Military Park and reassigned him to work in a cultural resources office as an assistant to the associate director. His job duties have not yet been determined.

John A. Latschar said Thursday that his demotion was in response to the public disclosure of Internet activity in which he viewed more than 3,400 “sexually-explicit” images over a two-year period on his government computer – a violation of department policy. The misconduct, which Latschar acknowledged in a sworn statement, was found during a year-long investigation by the Interior Department’s inspector general and was documented in an internal Aug. 7 report obtained by The Washington Post.

The reassignment came after a Post report Monday about the results of the investigator’s forensic analysis of Latschar’s computer hard drive, which showed “significant inappropriate user activity” and numbered the “most sexually-explicit” images at 3,456….

David Barna, spokesman for the National Park Service, said Latschar’s annual salary of $145,000 and his pension will not be affected. The cultural resources office is based in Washington, but Latschar will commute from his home in Gettysburg to a Park Service office about 30 miles away in Frederick, Barna said.

Hey, can I get that deal? If I download 3,500 pornographic images on my office computer, can I get reassigned to a telecommuting job with no defined duties at my current salary and pension? As superintendent of a very visible national park, Latschar had a job with a lot of pressure, lots of criticism, management challenges, etc. Now he’s going to be some sort of undefined “assistant to an associate director in a cultural resources office,” but he won’t have to actually go to the cultural resources office, and he’ll still get the same pay and benefits he was getting for doing a real, stressful job. Does anyone in the federal government ever get fired?

Wall Street, Big Oil, and Federal Workers

What do workers in finance, energy, and the federal government have in common? Very generous compensation packages, according to data from the Bureau of Economic Analysis.

When I posted federal compensation data last week, I received a flood of comments that disputed my contention that federal workers are overpaid. A common retort was that “federal workers are not burger flippers.” That’s true, but workers in the computer systems design, computer manufacturing, and chemicals industries are not burger flippers either, yet those folks also earn less than federal workers, on average.

The Bureau of Economic Analysis presents compensation data for 72 industries that span the U.S. economy (Table 6.2D). Figure 1 shows the 20 industries with the highest levels of average compensation, including wages and benefits. It also shows the average for all U.S. private industries and the average for the industry with the lowest compensation, which, indeed, includes burger flipping. (I’ve simplified the names of the industries in some cases).

Federal civilian workers have the seventh highest average compensation of 72 industries. Compensation in the federal civilian workforce is topped only by compensation in three finance-related and three energy-related industries.

Should federal compensation be so high? We are always told that the 1.9 million federal civilian workers are “public servants,” implying that they are selflessly sacrificing for the good of the nation. I’m sure that most federal workers are dedicated employees, but looking at these compensation levels, I don’t see much sacrificing going on.

It is true that there are some elite agencies in the government that need to have high compensation levels. But the bulk of the federal workforce is in sprawling bureaucracies such as the U.S. Department of Agriculture, which has a huge army of about 100,000 workers. The main job of USDA workers is to administer farm aid, food stamps, and other subsidy programs. That sort of paper-pushing work is not rocket science.

The other point I made last week is that the BEA data makes clear that federal compensation has skyrocketed this decade. Figure 2 provides more support for that claim.

Federal civilian workers had the fifth highest average compensation increase among 72 industries between 2000 and 2008. Average federal civilian compensation increased 57 percent, which compared to the overall average increase in the private sector of 31 percent.

Let’s slow this freight train down. Federal pay ought to be frozen for a period of years, at least until the economy recovers and private sector pay starts catching up.

Federal Pay: Response to the Critics

My post yesterday on federal worker pay generated a large and aggressive response from federal workers, both in my inbox and on websites such as Fedsmith.com. (See also Federal Times and Govexec). Here are four points raised in criticism:

First, people accuse me of producing distorted data somehow. Actually, it’s essentially just raw Bureau of Economic Analysis data, but the data is usually overlooked by the media because I don’t think the BEA puts out a press release on it. Anyway, the average wage data is from BEA Table 6.6D. The average compensation data is simply total compensation (Table 6.2D) divided by the number of workers (Table 6.5D).

Second, people argue that reporting overall averages for wages and compensation is somehow illegitimate. People email me comments like “my federal salary is only $50,000, yet you claim that federal workers make $79,000.” All I can say to folks like this is that there must be a federal worker out there making $108,000 who balances you off.

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. At the same time, the BEA data provides the most comprehensive accounting for the value of employee benefits of any data source. Benefits are a very important part of federal compensation, and so that’s why I look to the BEA data.

Fourth, 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.

A final consideration is to look at a “market test” of the adequacy of compensation in the public sector–the quit rate. The voluntary quit rate in the federal government is just one-third or less the quit rate in the private sector (Table 16 near the bottom here).

That is strongly suggestive of ”golden handcuffs” in federal employment. While many federal workers probably grumble about their jobs (as many private sector workers do), they know that the overall package of wages, benefits, and extreme job security (Table 18 here) is very hard to match in the competitive private market, and so they stay put.