Which Pays Better Wages? Government or Private Sector

May 25, 2017

The Congressional Budget Office, the federal government’s numbers cruncher, recently completed an analysis comparing salaries and benefits received by employees of federal and large private-sector employers, and concluded that all things being equal, the federal government pays better wages than the private sector.

On average, the federal government’s compensation package pays a 17 percent premium over the private sector.

The analysis, called “highly professional” and “state-of-the art” by former Social Security Administration Deputy Commissioner Andrew Biggs, is an attempt to do an apples-to-apples comparison by taking into account levels of education and experience.

All-in compensation per full-time equivalent federal employee in 2015 was about $123,000. Assuming a 17 percent federal pay premium, this implies that on average a similar private-sector employee would receive total pay and benefits of about $105,000, an annual difference of about $18,000.  …

When averaged over 2.1 million federal employees, the federal compensation premium adds up to real money. Total federal compensation last year was close to $260 billion. A 17 percent difference is about $38 billion per year, equal to what the federal government spends on energy and the environment and substantially exceeding federal spending on transportation.

The CBO report found that 91 percent of federal employees have an education ranging from high school graduate to master’s degree, and that these employees make more than those of equivalent educations at similar jobs in the private sector. The report found, however, that the 9 percent of the federal workforce that have doctoral level degrees make 18 percent less than those with equivalent degrees in the private sector.

Biggs says that the difference in the type of grades, alma maters, and fields of study have not been measured so there’s no way to know whether federal workers are more “middle of the road” students from average colleges compared to those Ivy Leaguers with top grades. He suggests that this lack of information may be where the weakness in the report lies and it could be a notable variable since “most private-sector employers could not attract and retain employees while paying 18 percent less than their competitors.”

Doubling back, however, Biggs then says that the federal pay premium could be hurting innovation because workers who choose to make more money in government than work in the private sector are squandering their potential creative energies.

As the CBO report shows, for less-educated workers federal pay is more than 50 percent higher than private-sector levels. This makes it almost impossible for an employer of less-educated workers to compete and, as a result, the best of that group — employees with the greatest drive, imagination, and leadership — may find themselves employed in government rather than the private sector, where they might make a larger impact on their communities. …

There are many highly-educated, highly skilled, highly-motivated Americans working for the federal government doing important jobs. But we shouldn’t miss the risk that generous federal pay could mean the founders of the next Google or Tesla find themselves working in a federal office building instead of creating the innovations that can change the world.

But perhaps the well-paid average government worker of a decent education isn’t missing his calling. A recently released study that tracked 81 high school valedictorians through their careers found that the best and the brightest often end up in great jobs but ones that lack creativity. The suggestion is that the early track toward professional success pushes these highly motivated students to avoid risk-taking. They do not pursue eminence in one particular field nor devote themselves to a single passion.

“They obey rules, work hard, and like learning, but they’re not the mold breakers. … They work best within the system and aren’t likely to change it.”

In other words, dropouts like Bill Gates, Steve Jobs, and Mark Zuckerberg are unlikely to be interested in government careers in the first place.

Ultimately, the federal government’s high pay does have side effects. It skews the pay scale and impacts the labor market, making it harder for companies to compete for bright employees. However, if the goal is to populate the federal government with good-quality workers, financial benefits are a solid offer to attract them.

Filed Under: Front-Page Feature, Happiness Tagged With: , , ,

Education Department Employee Mantras to Save The Children

January 4, 2017

With every presidential election comes a discussion about the abolition of unpopular federal agencies. Usually the Environmental Protection Agency and the Education Department are at the top of the list.

But with each new administration, the federal bureaucracy revs up to go full tilt. With President-elect Donald Trump’s selection of Betsy DeVos to be education secretary, the Education Department is likely not going anywhere, but it does have a good chance of refocusing on different priorities, including competition and choice in education.

Rick Hess, a researcher and author with experience working across the political spectrum to find solutions that often involve ideas from teachers who are actually good at what they do has come up with some thoughts for federal bureaucrats at the Education Department to repeat while they’re at work every day.

Here are a few of the highlights. Just say “Om.”

  • I’ll tell myself every day: “I’m no smarter than I used to be just because I’ve been hired as a federal bureaucrat.”
  • I’m in an office that I haven’t “earned” in any real sense and yet have a significant ability to influence the lives of millions of students, educators, and families. Thus, I’ll strive to remember that many of these people may disagree with me as to what’s “right” or in their best interest, and to accept their criticisms and disagreements in good faith.
  • I will remember that it’s Congress’ job to write the nation’s laws, and that the job of executive branch agencies (like the Department of Ed) is to execute those laws—not to rewrite them or impose their own.
  • I won’t allow all the people sucking up and asking for my time to give me an inflated sense of self. I’ll remember that their affection isn’t actually about me; it’s about access, influence, and money. When I fear I’m forgetting any of this, I’ll call an old friend or colleague who will call bulls$%t . . . and remind me what I used to say about self-impressed federal bureaucrats.

Read the entire mantra by Rick Hess at Education Next.

Filed Under: Education, Front-Page Feature, Life Tagged With: , , , ,

Does the Federal Government Have to Be in Washington?

December 10, 2016

Want to decentralize the federal government, start by decentralizing where the federal government resides. That’s the suggestion from economist Paul Kupiec, who suggests that there’s no real reason why all federal agencies need to be in the nation’s capital.

Kupiec says if the federal government really wants to spread the wealth around, one way to do it would be to let agencies that don’t need to operate in Washington build their headquarters around the country.

Kupiec noted that the FBI and the Labor Department are both ready to move to new buildings. They’ve outgrown the aging facilities where they are housed currently. Combined, the construction costs alone could top $3.5 billion, a pricey bill that not only could benefit other areas, but could actually come down if agencies were built outside the bubble that surrounds the nation’s capital.

But construction costs are not the only consideration for moving these agencies

To understand the potential impact of moving a federal-agency headquarters out of Washington, consider what relocating the FBI headquarters to Detroit would do. Moving 11,000 FBI employees would hardly make a dent in the D.C. economy. Over 275,000 people—over 14% of the workforce—are federal-government employees, according to the Office of Personnel Management. In contrast, 11,000 well-paid federal government jobs and $2.5 billion in construction spending would provide a significant boost to the Detroit economy, where less than 2% of the workforce are federal employees. …

It would also be healthy for the country to more broadly distribute the wealth and power of federal-government agencies across the nation.

According to the 2010 U.S. Census, 11 of the 20 richest U.S. counties—including the three richest counties—are in the Washington, D.C., metro area. Incomes near the national capital are bloated not only by generous federal-government payrolls, but also by ‘Beltway bandit’ consultancy firms that provide contract services to federal agencies. It is little wonder that many Americans view the federal government as a money machine for bureaucrats and political insiders.

Besides reduced construction and maintenance costs, smaller federal payrolls due to cost of living adjustments, and less bloat from special interests, there’s another reason for moving some of the federal government out of Washington.

The concentration of federal agencies in a single area increases the potential for a breakdown of government services in the event of a terrorist attack, a snowstorm, a hurricane, or even the increasingly frequent service interruptions on the Metro, the Washington area’s troubled subway system.

Sure, agencies outside the capital would need to keep liaison offices for cabinet officials and Congress, but modern communications make it easy to decentralize.

Ultimately, Washington is viewed with disdain by many Americans who are disconnected from the administrative functions of government and who look at Washington as an insiders club. To improve perception, and possibly even increase efficiency, it could be helpful and cost-effective to relocate the bureaucracy into the heartland, giving people a closer look at and a larger stake in how government operates.

What do you think?

Read Paul Kupiec’s article in The Wall Street Journal.

 

Filed Under: Front-Page Feature, Liberty Tagged With: , , , , ,