While politicians from the presidential hopefuls to those in local government all seem to be promising that prosperity is just around the corner with boom times ahead, many workers likely shouldn’t expect to see much of a salary bump in the months to come. Staffing giant Robert Half forecasted last month that workers taking a job at a new company can expect on average only a 3.6 percent bump in salary, with those workers in tech, legal and compliance seeing the most to gain.
These numbers were in-line with the 2016-2017 Salary Budget Survey that was conducted by WorldatWork in July, which found that organizations in the United States would boost pay by around 3 percent on average, which was on track for salary raises a year ago.
Those in the government and military should even expect to less of a raise.
In August President Barrack Obama exercised authority to give federal civilian employees and uniformed service members a pay raise for next year, which according to Federal News Radio, would was an across-the-board increase of just 1 percent, with an additional 0.6 percent adjusted in locality pay.
The 1.6 percent is below the raise federal employee unions and many in Congress had called for earlier this year. No sooner had the rate been announced than the finger pointing began.
“President Obama acted because Congress has not,” AFGE National President J. David Cox said in a statement as reported by Federal News Radio. “AFGE reiterates our call for Congress to pass a 5.3 percent pay raise in 2017 that will make up for years of neglect and begin to close the widening gap between employees in the federal and private sectors.”
There are a number of factors that could further constrain where salaries are headed for the next fiscal year.
The LPTA Debate
The debate over the effect that the federal government’s “lowest price, technically acceptable” (LPTA) buying practices has on salaries is one that has gone on for years, but change could be coming. Contractors have accused the government of cutting costs at the expense of workers, and as a result some contractors have made it clear they are simply not interested in playing the LPTA game. In recent years contractors have even increasingly turned away from those contracts; and instead have focused on hiring the best people at a fair price.
“We’re not seeing as much LPTA in the current environment,” said Brad Antle, CEO of Salient CRGT, an analytics and infrastructure provider. “LPTA makes it hard for contractors to fill positions as it constrains contractors.”
The debate even came to a head last year when Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall, issued a memorandum that stated that LPTA had a “clear, but limited place in the source selection best value continuum,” and he narrowly defined when LPTA was appropriate for DOD procurements.
This past spring bills were introduced into both houses of Congress, with the House measure (H.R.4999 – Promoting Value Based Defense Procurement Act) referred to the House Committee on Armed Services. In July committee’s report noted that there was anecdotal evidence suggesting that “widespread over-use of LPTA process and contracts” could have “substantial unintended consequences.”
Congress has since called upon the DoD to provide more information on the use of LPTA contracts.
“Congress has done its part in trying to constrain the use of LPTA, and there is finally a recognition that it has been injurious to meeting mission requirements,” added Antle. “It does no good to have rates in place where the job can’t be filled, or they are filled with less than acceptable personnel.”
The other factor that could be a game changer for pay and salary in 2017 and beyond is the fact that many government contractors are the cusp of an exodus. Simply put, more workers are about to reach the age of retirement.
A report by the Government Accountability Office in 2014 found that 600,000 workers could be eligible to retire next year.
“We’re facing a serious issue; 80,000 government workers retired in 2015 and left the workforce,” noted Antle. “There has been a steady rise of government contractors exiting the workforce. In 2012 only 14 percent were eligible for retirement, but by 2018 more than 24 percent will be eligible and potentially leaving the workforce.”
The need to replace those workers could mean an uptick in pay for contractors.
“Obviously the government has put in new pay practices and initiatives to create an environment that is more attractive to millennial workers,” added Antle. “It is clear the government is trying to create a career track for young workers.”
This has included benefits beyond salary, such as hiring bonuses and even the covering of relocation expenses said Antle. “These have been put in place to address the shortages that are the contractors are facing. They need to replace that workforce and make it more appealing. Salary is just going to be part of the equation.”