Federal Government Pay Tops Businesses: CBO Report

Jan 31, 2012 2:51pm

It pays to work for the government. Compared with private sector employees, federal workers are paid about 16 percent more when benefits including health insurance, retirement plans and paid vacation are taken into account, according to a new report from the Congressional Budget Office.

While wages are fairly equal, on average, between public and private employees, the benefit packages for government workers far outpaces those of their counterparts in private businesses. Federal employee benefits cost about 48 percent more than benefits for private employees from 2005 to 2010, the CBO report shows.

“The differences in compensation, the issue is are you taking your compensation up front or are you taking it over your lifetime in terms of a better pension,” said Linda Barrington, managing director of the Institute for Compensation Studies at Cornell University.

The federal government spent about $200 billion on employee salaries and benefits in fiscal year 2011, according to the CBO. And at a time when the federal deficit is set to exceed $1 trillion for the fourth year running, that taxpayer-funded compensation is a prime target for many budget-cutters.

Two GOP presidential candidates–Mitt Romney and Ron Paul– have vowed to shrink the federal workforce by 10 percent.

“Public servants shouldn’t get a better deal than the taxpayers they work for,” Romney said at the Americans for Prosperity conference in November. “The American people are increasingly working to support the government. It ought to be the other way around.”

Paul calls for the immediate elimination of five entire departments: Interior (70,000 employees), Commerce (56,800 employees), Energy (16,000 employees), Education (4,400 employees) and Housing and Urban Development (9,500 employees). Together these departments employed about 156,700 people in 2010, according to Census data.

Romney said he will chop the public payrolls through attrition, not layoffs.

But the size of the federal workforce is already shrinking. Public sector employment has decreased in 18 of the past 24 months, according to the Bureau of Labor Statistics, while private sector employment has increased in all but two of those months.

“Shrinking federal government deficit by laying people off, that may be the right thing in long run but it is having a contractionary effect on the labor market,” Barrington said. “In the short run we need to acknowledge that it may be pushing the number in the wrong direction.”

From 2008 to 2010 the federal workforce, not counting postal employees, shrunk by 20,000 people, according to Census data.

Federal salaries, on the other hand, went up by nearly $4,000, on average, over the same time period, despite a federal pay freeze that’s been in place for the past two years.

One explanation for why federal workers are more expensive than their private sector counterparts is that they are often “older, more educated, and more concentrated in professional occupations,” CBO director Douglas Elmendorf wrote in a blog post explaining the study.

Government employees are, on average, about four years older than private employees. More than half of federal employees — 51 percent – have at least a bachelor’s degree compared with 31 percent of non-government workers.

People without a college degree are better off working for the government, while people with advanced degrees tend to make more in the private sector.

Public employees with at most a high school diploma earned, on average, $4 per hour more than comparable private sector employees.

Government workers with advanced degrees, like a graduate degree or Ph.D, on the other hand, earned about $15 per hour less working for the federal government than their counterparts in private businesses.

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