Topic: Government and Politics

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.

A New Book from David Boaz? Tax Tips for Democrats

Okay, well maybe Tax Tips for Democrats won’t ever make it to the publisher, but while speaking at Cato University this summer, David Boaz offered a few tips to any more Democrats with tax problems who are thinking about joining the current administration.

“Some people say the best thing about electing a Democratic president is all the back taxes we collect from their appointees,” says Boaz. “It helps to balance the budget.”

Watch the whole thing:

C-SPAN 2 will air Boaz’s talk on the state of freedom in America this Sunday at 11:30 AM EST.

35,000 Earmark Requests — Just 50 Reps to Go

WashingtonWatch.com’s project to collect congressional earmark data continues to make great strides. Over 35,000 earmark requests are in the database, and fewer than 50 representatives remain on the “wanted” list.

It’s not all good news. Even some appropriations committee members published their earmark disclosures as scanned PDFs. That’s transparency in name, but not in spirit. Cato’s December policy forum on government transparency was titled “Just Give Us the Data!”, and scanned PDFs are not data … .

On the WashingtonWatch.com earmarks home page, the earmark requests collected so far are mapped by state and sortable by member of Congress and senator. Visitors can vote and comment on earmark requests, or edit a wiki article about requests, adding personal knowledge about projects they are familiar with.

Federal Pay Continues Rapid Ascent

The Bureau of Economic Analysis has released its annual data on compensation levels by industry (Tables 6.2D, 6.3D, and 6.6D here). The data show that the pay advantage enjoyed by federal civilian workers over private-sector workers continues to expand.

The George W. Bush years were very lucrative for federal workers. In 2000, the average compensation (wages and benefits) of federal workers was 66 percent higher than the average compensation in the U.S. private sector. The new data show that average federal compensation is now more than double the average in the private sector.

Figure 1 looks at average wages. In 2008, the average wage for 1.9 million federal civilian workers was $79,197, which compared to an average $50,028 for the nation’s 108 million private sector workers (measured in full-time equivalents). The figure shows that the federal pay advantage (the gap between the lines) is steadily increasing.

Figure 2 shows that the federal advantage is even more pronounced when worker benefits are included. In 2008, federal worker compensation averaged a remarkable $119,982, which was more than double the private sector average of $59,909.

What is going on here? Members of Congress who have large numbers of federal workers in their districts relentlessly push for expanding federal worker compensation. Also, the Bush administration had little interest in fiscal restraint, and it usually got rolled by the federal unions. The result has been an increasingly overpaid elite of government workers, who are insulated from the economic reality of recessions and from the tough competitive climate of the private sector.

It’s time to put a stop to this. Federal wages should be frozen for a period of years, at least until the private-sector economy has recovered and average workers start seeing some wage gains of their own. At the same time, gold-plated federal benefit packages should be scaled back as unaffordable given today’s massive budget deficits. There are many qualitative benefits of government work—such as extremely high job security—so taxpayers should not have to pay for such lavish government pay packages.

Update: I respond to some criticisms of this post here.

Update 2: Compensation data for federal workers vs. other industries here.

Update 3: In September, the government revised the data for private sector workers. On 9/30/09, Figure 1 and the related text were updated to reflect this change.

Steele and the Left-Wing Republicans

One of the most disturbing things about the current health care debate is that some Republicans are positioning themselves as defenders of Big Government Medicare and against efforts to trim the program’s costs.

Yet the taxpayer costs of Medicare are expected to more than double over the next decade (from $425 billion in 2009 to $871 billion in 2019), and the program will consume an increasing share of the nation’s economy for decades to come unless there are serious cuts and reforms. Even the Obama administration talks about “bending the cost curve” to slow the program’s growth.

Yet Republican National Committee chairman, Michael Steele, takes to the Washington Post today to defend Medicare against any cuts, while at the same time criticizing the Democrats as “left-wing ideologues:”

  • “Under the Democrats’ plan, senior citizens will pay a steeper price and will have their treatment options reduced or rationed.”
  • “Republicans want reform that should first, do no harm, especially to our seniors.”
  • “We also believe that any health-care reform should be fully paid for, but not funded on the backs of our nation’s senior citizens.”
  • “First, we need to protect Medicare and not cut it in the name of ‘health-insurance reform.’”
  • “Reversing course and joining Republicans in support of health care for our nation’s senior citizens is a good place to start.”

Steele uses the mushy statist phrasing “our seniors” repeatedly, as if the government owns this group of people, and that they should have no responsibility for their own lives.

Fiscal conservatives, who have come out in droves to tea party protests and health care meetings this year, are angry at both parties for the government’s massive spending and debt binge in recent years. Mr. Steele has now informed these folks loud and clear that the Republican Party is not interested in restraining government; it is not interested in cutting the program that creates the single biggest threat to taxpayers in coming years. For apparently crass political reasons, Steele defends “our seniors,” but at the expense of massive tax hikes on “our children” if entitlement programs are not cut.

Entrepreneurship for Good

At last week’s Mont Pelerin Society meeting in Stockholm, Deirdre McCloskey argued that it was important for society to affirm entrepreneurship.  How right she is.

The economic benefits of the new technologies and processes constantly created by people with new economic ideas is obvious.  But the social benefits of such inventions also are enormous.

Consider James C. Marsters, who helped end the isolation of the deaf around the world.  The Wall Street Journal reported on his death:

As an orthodontist, a licensed pilot and a sometime-professional magician, James C. Marsters mastered fields challenging for anyone, even more so for a profoundly deaf person such as himself.

His greatest feat was to conjure the text telephone, or TTY, which for the first time gave deaf people independent access to the telephone via teletype machines. It was the first in a string of technologies that help deaf people communicate.

Mr. Marsters, who died July 28 at 85 years old, defied the isolation many deaf people of his generation experienced. He willed himself into the mainstream long before there were technologies and programs to help deaf people do so.

People like Marsters exemplify how the market encourages people to do good while doing well.  Markets are not perfect, nor are the entrepreneurs who drive them.  But then, human beings are not perfect.  However, human liberty – in the form of economic freedom in this context – is the best environment in which to foster a society that is both prosperous and good.