By SCOTT AMEY
Yesterday, the Congressional Budget Office (CBO) released the study "Comparing the Compensation of Federal and Private-Sector Employees." The study doesn't compare similar occupations, but instead looks at compensation for employees with similar education levels.
CBO found that, overall, “federal workers tend to be older, more educated, and more concentrated in professional occupations than private-sector workers,” and, on average, are paid 16 percent more than similar employees in the private sector. However, that trend occurs mostly in the lower education levels. Public servants with advanced degrees were paid 18 percent less in total compensation than the private sector.
POGO found a very similar disparity (a 20 percent higher total compensation rate for federal employees) in our Bad Business report. However, I have been waiting to hear more from the Office of Personnel Management (OPM), which argues that feds receive lower pay when education and occupation are considered.
The problem with the public vs. private pay comparison is that it wrongly leads to the assumption that the private sector is cheaper and therefore government services should be outsourced. POGO busted that myth last year—finding that contractors for comparable occupations cost, on average, 83 percent more than federal employees.
The CBO report will be a hot issue as policymakers consider extending the freeze on federal salaries and call for more outsourcing. The preface of the CBO report states that “concern about the federal budget and about equity between the public and private sectors has focused greater attention on the costs that the federal government incurs to compensate its employees.” But what is the elephant in the room that CBO didn’t discuss? The total compensation paid to contractor employees and the actual costs (the rates charged as well as all government overhead to hire, administer, oversee, and house contractor employees) to the government for those services. Until the government starts adding contractor total compensation and costs into the mix, like POGO did, public vs. private compensation comparisons don’t have any value.
Some critics are claiming that race, gender, and age discrimination might play a role in CBO’s compensation differentials. That might be true, and there are many other factors that need to be considered to ensure that all federal insourcing and outsourcing decisions are based on appropriate social, economic, and personnel-related criteria. The problem is that no one inside the government knows the actual costs of hiring government or contractors employees, and therefore any such study is nearly impossible.
Chairman Darrell Issa (R-CA) of the House Committee on Oversight and Government Reform, who held a hearing on the topic last March, has requested a public-private pay comparison report from the Government Accountability Office (GAO), so don’t expect this issue to go away this election year. This debate won’t really end until someone in Congress requests or the White House studies public vs. private vs. contractor total compensation and all associated costs. If we are truly looking to save money, cut inefficiencies, and make the government work better for all taxpayers, service contracting should be on the table along with hiring and salary freezes, merging agencies, and cutting social and defense programs. While there are relevant policy concerns related to the 2.3 million civilian federal employees (which cost $200 billion in fiscal year 2011), there are more concerns with service contract awards, which cost about $323 billion in fiscal year 2011.
Scott Amey is POGO's General Counsel.