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A Project of The Annenberg Public Policy Center

CBO Offers Its Two Cents on Federal Pay

Federal workers overall get just 2 percent higher wages than private-sector employees holding similar jobs, but they receive 16 percent more in total compensation because of generous benefits.

There are, however, great differences in wages and benefits depending on education levels; less-educated federal workers receive higher wages and benefits compared with private-sector employees, while those with advanced degrees are paid less.

That’s the conclusion of a new Congressional Budget Office report that dispels misinformation spread by both sides in a long-running debate over federal pay. As we wrote once before, it’s simply not true that the average federal worker is paid twice as much as the average private-sector employee doing similar work and with similar qualifications. But it’s even less true that federal employees are vastly underpaid, as public-employee unions would have you believe.

The CBO report found:

  • The gap in wages between the private and public sectors isn’t that wide. Federal employees overall are paid about 2 percent more than private-sector counterparts.
  • There is a significant gap, however, in benefits — largely because most federal employees have defined-benefit pension plans that are becoming less common in the private sector. Federal employees on average receive 48 percent more in benefits than those in the private sector.
  • Bottom line: The federal government paid 16 percent more on average in total compensation — wages, plus benefits — than private employers paid similar employees.

But the picture is not so good for federal workers with professional or doctorate degrees. Even generous federal benefits cannot make up for the big wage gap between them and their higher-paid private-sector counterparts.

In addition, the CBO report is chock full of data that help illuminate the ongoing pay debate:

  • Federal workers make up a declining percentage of the U.S. workforce. The figure was 1.7 percent in 2010, down from 2.3 percent in 1980. However, since President Obama took office, the size of the federal civilian workforce (exclusive of the U.S. Postal Service) has gone up by nearly 149,000 workers, an increase of 7.2 percent.
  • The federal government spends about $200 billion a year on federal civilian wages and benefits. “Of that amount, $80 billion goes for civilian personnel who work in the area of national defense,” the CBO report says.
  • Nearly two-thirds of federal civilian employees work in four departments: Defense, 35 percent; Veterans Affairs, 14 percent; Homeland Security, 8 percent; and the Department of Justice, 5 percent.

Federal Pay Debate, Continued

The CBO produced the report at the request of Sen. Jeff Sessions of Alabama, the ranking Republican on the Senate Budget Committee. The report was issued Jan. 30, and it was used two days later by House Republicans to support legislation to freeze federal and congressional pay for one year. As other reports have been in the past, this one was misused for partisan purposes during floor debate.

Rep. Dennis Ross, a freshman Republican and cosponsor of the pay freeze bill, incorrectly said “hardworking taxpayers” in the private sector “take home 72 percent less in benefits than their government counterparts.

Ross was wrong on two levels. First, the CBO report said federal workers who have no more than a high-school diploma earn 72 percent more in benefits than those of similar education in similar private sector jobs, so that figure applies only to some workers — not all. Second, Ross made a common math mistake. While it is true that federal workers who have no more than a high-school diploma earn 72 percent more in benefits than those in the private sector, it is not true that those private sector employees “take home 72 percent less in benefits.” Actually, the figure is 42 percent. (That’s because the $6.50 difference figures out to 72 percent more than $9, but 42 percent less than $15.50.)

Rep. Steny Hoyer, a Maryland Democrat who represents many federal workers, correctly cited the CBO when he responded to Ross by saying that “[t]hose on the upper end of the scale aren’t doing so well” compared with their private-sector counterparts. But Hoyer falsely said of those highly educated federal workers: “None of them are getting paid as much as the gentleman [Ross] is who made this speech or that I’m getting. None of them are making as much as we are.” That’s not so. Rank-and-file members of Congress, including Ross and Hoyer, receive $174,000 in wages. As of September 2011, 19,592 federal workers were paid $180,000 or more, according to the Office of Personnel Management’s online database. Most were Veterans Affairs doctors, as USA Today reported in an article relying on September 2010 data.

Democratic Rep. Elijah Cummings sought to rebut the CBO report by citing the Bureau of Labor Statistics’ National Compensation Survey, which he said shows “that Federal employees were paid 26 percent less than private sector employees.” That’s true, but as we reported previously, the pay survey does not include federal benefits. And critics say it is flawed because the survey is too broad and not job-specific.

Rep. Henry Waxman, a California Democrat, claimed that “[f]ederal employees actually earn less than their private sector counterparts when factors such as skill and education level are taken into account.” That’s not what the CBO found in its report. The CBO says it compared federal and private-sector employees based on “similar observable characteristics.” The CBO “sought to account for differences in individuals’ level of education, years of work experience, occupation, size of employer, geographic location (region of the country and urban or rural location), and various demographic characteristics (age, sex, race, ethnicity, marital status, immigration status, and citizenship).”

Clearly, the federal pay debate will continue. The House pay freeze bill easily passed by a bipartisan vote of 309-117. In the Senate, a group of Republicans has introduced a bill — citing the CBO report — that goes even further. The Senate bill would freeze pay for federal civilian workers for two years, not one.

The CBO report will be cited by both sides and, if history is a guide, not always accurately.

Correction, Feb. 8: An alert reader noted that Rep. Dennis Ross made a common math error — one that we missed — when Ross misquoted the CBO report on federal benefits. We have rewritten that paragraph to correct the record.

— Eugene Kiely, with Michael Morse