Are Federal workers overpaid? It is discussion that seems to happen frequently with each point of view backed by both facts and hot air. Now the Cato Institute has weighed in on the matter, in a Dec. 2014 piece titled ”Overpaid Federal Workers.”
In any business, including the Federal Government, employee wages and benefits make up the greatest single expense. In order to reduce Federal deficits, payroll cannot be sacrosanct. Yet, Federal workers are entitled to a fair wage and benefits package.
Is the Cato title true? Well.. yeah, but, kinda, sorta.
According to the Office of Personnel Management, about 1.5 million civilian Federal employees fall under the 15 grade General Schedule (GS) classification and pay system. Within each grade, ten steps exist to allow for “an acceptable level of performance and longevity. It normally takes 18 years to advance from step 1 to step 10 within a single GS grade if an employee remains in that single grade.”
That makes the Federal government a huge player in the employment market. Few, if any, non-public businesses, corporations, etc., even approach that number of employees. This fact introduces the caveat to the Cato thesis.
For Uncle Sam, Size Matters
Size matters. While small businesses come and go, losing or creating jobs, in general large employers are able to maintain a workforce over a long period of time. The economy over the last half century has seen giants such as General Motors or Kodak shrink their employment, but, as a rule, big business means big payroll.
With the size of the business comes the ability to offer wages to attract and retain quality employees. In addition, these businesses can afford to offer benefit packages that small businesses cannot. Moe’s barber shop, Larry’s dry cleaners or Curly’s dance studio cannot offer a retirement plan to their employees, and if they offer a health plan, it involves large employee contributions to the cost.
The Federal workforce is an inelastic part of the overall workforce. Few Federal employees are ever laid off because of “business conditions.” Few are fired for poor performance or other offenses that see a private business throw open the exit door. On the other hand, no Federal employees will ever have the chance to earn what some of the employees at Facebook or Merrill, Lynch can earn.
And, those folks you see in Federal offices may not be Federal employees after all. The people who empty the wastebaskets at night probably work for a contractor. The guy behind the desk in the lobby, as well. Even many of the men and women sitting at desks may be employed by outside contractors. The Feds outsource a great many jobs that private businesses hire employees to do. No Federal employee works for the statutory minimum wage.
When Cato compares the average wage of a Federal employee to that of a private sector employee they mix apples and oranges. The gap in 2013 was $81,076 to $55,424. Their comparison of wages and benefits together is equally misleading. Including the wages and benefits from businesses with under 100 employees skews the private data much lower.
Cato quotes that “federal employees earn higher average salaries than private-sector workers in more than 8 out of 10 occupations… accountants, nurses, chemists, surveyors, cooks, clerks, and janitors are among the wide range of jobs that get paid more on average in the federal government than in the private sector.” Many of those occupations are typically employed by small businesses, with the lowest salaries and benefits.
An argument could be made that Federal employees are overpaid but the Cato piece fails to make it. A better, though by no means perfect, comparison, would be to the largest companies in America. The gap would, I suspect, close. Many of those higher average salary jobs would be dropped from such a comparison since General Motors is typically not noted for the number of nurses or cooks that it employees.