Why Federal Workers Get Paid More

Benefits and education levels have a lot to do with it. And, yes, politics.

Not as big as you'd think.

Photographer: Andrew Harrer/Bloomberg

As measured by head count, the federal government isn't growing, and it hasn't really grown since the 1970s. The number of federal workers was 2.83 million in February, according to the monthly employment report released last week by the Bureau of Labor Statistics. 1 As I wrote in a subsequent column, that's about as many federal workers as there were in 1975 -- and while the rising use of government contractors changes the picture somewhat, it doesn't seem to change it much. Over this same period, total nonfarm payroll employment in the U.S. has almost doubled.

So that's really interesting -- and seemingly at odds with the widespread view that "big government" just keeps getting bigger and scarier. It also raises questions about whether the massive spending cutbacks at most government agencies that President Donald Trump is proposing today are really such a brilliant idea.

But employee head count is not the only valid measure of government size and scope. One reader suggested, for example, that I look at what federal workers are paid relative to private-sector workers. So I did:

The Growing Federal-Private Pay Gap

Average weekly wage

Source: Bureau of Labor Statistics

In the third quarter of 2001, the average weekly wage of federal workers was 1.39 times that of private-sector workers. By the third quarter of 2016, that ratio had grown to 1.58.

Some version of this chart gets trotted out pretty frequently, usually to make the point that federal workers are overpaid and we could save taxpayer money by paying them less. It's a bit more complicated than that; federal workers do different things and do them in different places than private-sector workers, and the pay differential in part reflects that.

Various attempts have been made to correct for these differences and have arrived at dramatically different conclusions. The Federal Salary Council, a government advisory body composed of labor experts and government-employee representatives, regularly finds that federal employees make about a third less than people doing similar work in the private sector. The conservative American Enterprise Institute and Heritage Foundation, on the other hand, have estimated that federal employees make 14 percent and 22 percent more, respectively, than comparable private-sector workers.

Part of the issue is whether and how you count benefits. When the Congressional Budget Office looked into this matter in 2012, it found that federal workers were paid about the same (2 percent more, to be precise) than private-sector workers with "similar observable attributes" (age, education level, race, etc.) from 2005 through 2010. But when the CBO included estimated benefits, federal workers were 16 percent ahead. The biggest difference in benefits is that most federal workers get a defined-benefit pension, while most private-sector workers don't.

The CBO also found that the relationship between federal and private-sector compensation depends a lot on how much education a worker has:

source: congressional budget office

The most educated government workers make less than they could in the private sector. Other college-educated government workers get similar or slightly worse pay, but they come out better after benefits are counted. And workers without college degrees are far better off with the feds than in the private sector.

But here's the thing: The federal civilian labor force (none of the numbers in this column include active-duty military) is skewed toward the better-educated. Only 20 percent of federal workers had a high school diploma or less, the CBO reported, compared with 41 percent of the private-sector workforce. And 21 percent of federal workers had a master's degree or higher, compared with 10 percent of the private-sector workforce.

This high percentage of highly educated workers is probably the biggest reason average federal wages are so much higher than private-sector wages -- even though those highly educated federal workers make less than they could in the private sector. It may also be a reason why the government is so distrusted.

The federal government, to use the terminology of populist Trump precursor George Wallace, employs a lot of "pointy-headed intellectuals who can't park their bicycles straight." Or, to use the terminology of Brookings Institution senior fellow Philip Wallach, which I have cited before:

Only specialist elites seem to possess any ability to guide policy development, and trust in them has been diminished both by their increasing segregation and their evident failures.

So do federal workers get paid too much? I don't know! But the mere fact that they get paid more than private-sector workers seems to be of some political significance.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

  1. That's the seasonally adjusted number. Without the adjustment it was 2.80 million.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net

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