Widest Ever Margin for Public/Private Pay Gap

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Wildest Margin Ever for Public/Private Pay Gap

Depending on where you focus your attention, the various studies looking into federal employee compensation will normally bring different numbers. However, the Cato Institute has been working on a project entitled ‘Downsizing the Federal Government’ in which the pay and compensation gap for public and private workers has been shown to be at its largest point yet.

In 2016 alone, federal employees earned 80% more than private sector workers while they also earned over 40% more than state and local government workers. Of course, the pool of workers is much smaller – 2 million vs 114 million – but the federal average wage has been growing at a faster rate over the past 15 years.

In addition to this, benefits are also more advantageous with retirement and health care additions. In 2016, federal compensation hit $127,000 while this was just $70,000 for the private sector. Although many lawmakers have suggested changes to federal pay and benefits, federal employee groups are suggesting these comparisons are actually useless. Furthermore, they suggest the federal government should be seen as a model employee for top talent.

Of course, this news comes not long after the Congressional Budget Office’s report which showed the government spending 17% more on compensating all employees. In addition to this, it seems as though education is now playing a large role with federal employees earning a high school diploma (or less) earning around 50% more than the same group in the private sector. With bachelor’s degrees, this is 21% more. This being said, it isn’t a universal system since those with a doctorate earn 18% less compared to the private sector.

Other Studies

As mentioned at the beginning, there have been several reports and studies into this relationship with many choosing different data or measures. If we look towards The Heritage Foundation as an example, they found federal salaries to be 22% higher than the private sector while The American Enterprise said the same statistic was 14%.

Every year, we also get an assessment between federal and private pay from the Bureau of Labor Statistics and Office of Personnel Management. On average, they say federal employees earn 34% LESS than private sector workers. Why the difference? For BLS and OPM, they calculate their pay gap using data provided by the Occupational Employment Statistics Program and the National Compensation Survey. Regarding the numbers, they compare pay alone (without benefits and compensation). To calculate locality pay rates, the Federal Salary Council uses this measurement.

Back in the 1990s, a law was passed by Congress which started the journey towards eliminating the pay gap using these calculations, but the funding has never been provided by lawmakers. According to some sources, the solution can be found in partial wage freezes, and we actually saw this between 2011 and 2013 with the Obama Administration. Alongside this, experts suggest changes to the retirement system to reduce the disparity between private and public workers.

For example, the defined benefit pension plan could be coming to an end in the coming years, and there are also rumors of some public sector jobs being privatized, and this includes air traffic controllers, postal workers, and Amtrak employees.

Although we need competent workers in all areas of the federal government, many are struggling with the fact they’re the third-highest paid industry in the country. With a reduction in federal pay, a larger turnover would occur, and this might just open the government up to younger employees and fresh ideas!

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