Tag: federal employees

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 and College Costs

For a long time now I’ve been writing about how student aid fuels explosive college costs, while Chris Edwards and Tad DeHaven have been highlighting the ever-cushier compensation of federal workers. Well, I’m pleased to have finally discovered a direct linkage between these topics: A new U.S. Office of Personnel  Management report on student loan repayment programs for federal workers.

According to the report, in calendar year 2009 “36 Federal agencies provided 8,454 employees with a total of more than $61.8 million in student loan repayment benefits.”

Now, 8,454 employees is a small chunk of the entire, roughly 2-million-person federal workforce. Still, $61.8 million isn’t anything to sniff at, and loan forgiveness is one more perk that needs to be considered when thinking of federal worker compensation. And then there’s the trajectory of forgiveness: According to the report, spending on student-loan forgiveness by federal agencies in 2009 was “more than 19 times” bigger than it was in 2002. Were things to continue at that rate, in 2017 the cost would be almost $1.2 billion, and then you’d almost be talking real money!

The important point from a student-aid perspective is to emphasize something that must never be forgotten: While many analyses of student aid will only count grants – because they don’t ever have to be paid back – as “aid,” the reality is that that hugely under counts the true cost of federal aid to taxpayers. In addition to grants, taxpayers fund all federal student loans (and eat them when they aren’t repaid), help finance work-study, and pay for federal expenses that people taking federal education tax credits don’t pay for. So when you look just at federal grants, the bill for taxpayers in the 2008-09 school year was about $24.8 billion (see table 1). Add in loans, credits, and work-study, however, and the bill suddenly balloons to nearly $116.8 billion.

“But wait,” will say the only-grants-are-aid crowd, “isn’t a lot of that $116.8 billion loan money that will be paid back?” Yup – it’s just that at least $61.8 million of that repayment is coming, once again, from beleaguered federal taxpayers. And that, to be sure, is just the tip of the federal loan-forgiveness iceberg.

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.

Growth in Government Employment

The 1990s were a decade of rapid private sector expansion and federal government restraint. The 2000s are a decade of government expansion at all levels and private sector retrenchment.

From 1990 to 2000, private sector employment soared 21 percent. Then, remarkably, private sector employment actually fell during the 2000s and was 3 percent lower in 2010 than it was in 2000.

The chart shows the changes in government employment in these time periods.

(Note: Numbers are for January of each year for consistency and to avoid the inclusion of temporary federal decennial census workers that show up in later months.)

Federal employment declined during the 1990s, when we mainly had Clinton in the White House and Republican control of Congress. However, federal employment increased under the Bush administration and the Obama administration is pursuing further growth. As a Cato essay on overpaid federal employees shows, growth in federal employment will cost taxpayers billions of dollars.

The Obama administration is concerned that the economic recovery will be jeopardized by revenue-strapped state and local governments cutting employees. Therefore, it’s advocating another federal bailout for the states to head off government job cuts. However, government jobs are supported with money taxed or borrowed out of the economy. Diverting more resources away from the private sector in order to sustain the public sector is a recipe for economic stagnation – not growth.

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.

For more, see:

King Canute, Abraham Lincoln, and Wishful Thinking

King Canute famously demonstrated to his advisers that even a king couldn’t stop the sea from rising. Abraham Lincoln told his visitors that calling a dog’s tail a leg doesn’t make it a leg. But lots of people these days think that passing a law automatically makes things happen, that you can pass a law against drug use or racism or homelessness and solve a problem.

Today I heard a traffic reporter on WAMU public radio demonstrate just how widespread that assumption is, at least in Washington. About 9:20 a.m. he said, “The federal government opened on time today [after a week of closings and yesterday’s delayed opening], so most federal workers are already sitting at their desks.” Well, I was stuck in a miles-long backup on snow-blocked roads, and I’m guessing that a lot of the people in the other cars were federal employees. Just because you declare that the federal government will open on time doesn’t automatically mean that federal employees will get there on time. You have to take into account realities like weather, slow clearing of roads, and people’s unwillingness to start their commute much earlier than normal.

Reality, alas, interferes with a lot of grand plans.

The Government IS Creating Jobs

Federal government jobs that is. According to the president’s new budget, federal civilian employment in the executive branch will be 15 percent higher in 2011 than it was in 2007:

*I subtracted out the Department of Commerce because it’s temporary hiring of workers for the 2010 Census skews the chart.

Private sector unemployment remains high despite the the administration’s claim that massive deficit spending was necessary to return the economy to health. Instead of fostering private sector growth, the administration is fostering government growth at the expense of the private sector.