Federal Worker Pay Blasts Off

Newly released data show that federal employee wages and benefits continue a rapid ascent above and beyond private sector pay levels. The data was released last week by the Bureau of Economic Analysis. (See tables 6.2, 6.3, 6.5, and 6.6).

The new data show that the 1.8 million federal civilian workers earned an average wage of $77,143 in 2007, which is 61 percent higher than the $48,035 average in the U.S. private sector. That 61 percent pay advantage has increased from a 34 percent advantage in 2000.

Looking at total compensation (wages plus benefits), federal workers earned an average $116,450 in 2007, which is more than double the $57,615 private sector average. The federal compensation advantage increased from 68 percent in 2000 to 102 percent today. Federal workers not only earn much more than private sector workers, their earnings advantage is getting more pronounced every year.

Federal compensation rose quickly during the 1990s, but even faster during the 2000s. I call this the "Bush Bounce" because it appears that the Bush administration has caved into federal union demands for expanded pay year after year. Between 2000 and 2007, average federal compensation increased at an annual average rate of 6.3 percent, which compares to the private sector increase of 3.5 percent. During the 1990s, average federal worker compensation increased at an average rate of 5.1 percent. The charts below illustate the "blast off" in federal wages and compensation. 

The upshot is that with a federal budget deficit of $500 billion, federal pay restraint should be a priority of the next administration. I’ve proposed freezing federal pay for a period of years, while privatizing costly activities such as air traffic control. The BEA data show that compensation for federal civilian workers cost taxpayers $213 billion in 2007, so there are substantial savings possible here. (Those costs do not include the $166 billion in military compensation costs in 2007).

The Wall Street Journal has called the overly generous federal pay environment "Club Fed." How long will average American wage earners be willing to foot the tax bill for this elite Washington club?

For further information, see

https://www.cato.org/pubs/tbb/tbb-0605-35.pdf