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Tuesday, January 25, 2011

Federal Pay

Earlier posts (here and here dealt with federal salaries. At Government Executive, Andrew G. Biggs and Jason Richwine write:

Is the overpaid federal worker really just a myth? Not according to academic research. Economists have studied federal pay since the 1970s, and their methods and conclusions differ markedly from those of the government. Economists use statistical techniques that account for differences in workers' age, education, experience, gender, race, marital status and other characteristics.

Why is this research so inconsistent with claims that federal workers are underpaid? Because economists compare similar workers, while OPM looks at similar jobs.

Those studies generally have found a federal pay premium in the range of 10 percent to 20 percent, according to the 1999 Handbook of Labor Economics. A private sector worker earning $50,000 per year, for example, might receive $55,000 to $60,000 per year as a federal employee. The largest premiums are for lower-skilled employees, with smaller benefits as education increases. Interestingly, foreign studies also have found pay premiums for their government employees, suggesting government's weaker budget constraints allow public sector pay to rise above market levels.

Using the Census Bureau's 2009 Current Population Survey, the authors calculated an average federal pay premium of 12 percent over comparable private workers. Other studies tackle the issue from different angles, such as following the same workers over several years. Economists have demonstrated that private workers who switch to federal employment enjoy a substantial boost in wages.