Economics

Pushing back against the CBO report on federal pay

Writing for the Washington Post, Colleen Kelley of the National Treasury Employees Union pushes back against the recent CBO report finding that federal employees are, on average, overpaid by around 16 percent.

Kelley notes that the CBO “compared characteristics of the federal and private-sector workforces, rather than comparing jobs done in each sector. The latter is the approach of the Bureau of Labor Statistics, which has consistently found a pay gap in favor of the private sector. The latest BLS report shows that gap to be an average of 26 percent.”

One problem with the BLS report, that CBO noted over 25 years ago and that more recent academic literature has confirmed, is that the federal government may not fill the same jobs with the same employees. A study of BLS occupational data by Melissa Famulari of the University of California, San Diego, found that, “Federal workers have significantly fewer years of education and experience than private sector workers in the same level of responsibility in an occupation.”[1] Famulari finds that these differences play out through federal hiring and promotion practices:

The Federal government, particularly in Washington, DC, hires workers at initially higher levels of work. These differentials are so large that, even after a number of years on the job, private sector workers are employed at substantially lower levels of responsibility than the starting levels of responsibility for DC Federal government workers. In addition, the Federal government, particularly in DC, promotes workers more quickly than in the private sector, conditional on observed worker characteristics.

Famulari concludes: “The large private sector premium paid to workers in an occupation and level is largely explained by the more valuable skills of private sector workers within an occupation and level.”

Most economists agree that the main determinants of pay are the skills and abilities that workers bring to the job. If these differ between the federal government and the private sector, as Jason Richwine and I explained in our AEI paper on federal pay, then it is possible for federal jobs to be underpaid while federal workers are overpaid. But it’s pay to workers that we care about.

                                                                                                                                                                

[1] Famulari, M. “What’s in a Name? Title Inflation in the US Federal Government.” Working paper. 2002. Revision requested by Industrial and Labor Relations Review.

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