Who’s Better Paid, Private or Federal Workers? A New Twist on an Old Debate
Policy + Politics

Who’s Better Paid, Private or Federal Workers? A New Twist on an Old Debate

iStockphoto/The Fiscal Times

How the wages and benefits of federal workers stack up against those of their private sector counterparts has been the subject of debate for years. A recent analysis by the Congressional Budget Office adds a surprising twist to that age-old debate: The level of education of the government workers in question is often the determining factor in whether they are better or worse off than peers outside the government.

Federal civilian workers whose highest level of education was a bachelor’s degree – the most common level of education within the federal workforce – earned five percent more on average than their counterparts in the private sector, and federal civilian workers with no more than a high school education earned a whopping 34 percent more on average than similar workers in the private sector.

Related: Want to Slash the Deficit? Stop Billions in Improper Government Payments

However, federal workers with a professional degree or doctorate earned 24 percent less, on average, than workers with comparable education in the private sector – a stunning difference that could become a deterrent to government recruitment as more of the 2.2 million civilian government workers retire.

The difference can be attributed to a number of factors, including stepped up recruiting in the private sector as the economy improves, as well as variations in overtime pay, tips, commissions and bonuses.

Moreover, health care benefits for federal workers aren’t directly linked to pay levels, while in many cases they are for employees in the private sector. As a result, overall compensation packages for better educated professional working for businesses often are more substantial than for well-educated government executives, experts say.

Overall, the report found, the government paid 17 percent more in total compensation than it would have if the average compensation had been more in line with that in the private sector.

While the study presented to the Senate Budget Committee on Wednesday by CBO director Keith Hall doesn’t indicate exactly what federal workers would earn if they were employed in comparable positions in the business sector, it highlights the mismatch within the federal government between educational attainment and overall compensation. In recent years, wages grew faster among less educated federal workers than they did among comparable workers in the private sector.

Republican and Democratic lawmakers alike voiced concern about the discrepancy in compensation, including Sen. David Perdue (R-GA), who fretted that it could harm government efforts to compete for top talent in the country.

Related: The Government Spent About $4 Trillion Last Year. How Much Went to Your State?

Hall replied, “I think those are exactly the right questions to be asking: Can we recruit and retain better people?”

Senate Budget Committee Chair Mike Enzi (R-WY) said it was important for Congress “to ask if we are using taxpayer dollars wisely, and operating the government as efficiently and effectively as the managers of a private sector company would.”

There has long been a debate over how well the federal workforce is paid, with labor groups and employee advocates arguing they trail their counterparts in the private sector, while conservative groups like the Heritage Foundation and American Enterprise Institute marshal data showing federal workers running ahead.

There are roughly 2.2 million civilian workers, according to CBO, not counting an estimated 500,000 federal contract employees spread out among more than 100 departments and agencies. The government spent $215 billion in salaries and benefits in fiscal 2016, with two thirds of it going to the three largest departments – defense, veterans affairs and homeland security.

Related: 3 Government Programs That Are Dangerously in the Red

For federal workers at all levels of education, government expenditures for benefits including health care and retirement were 47 percent higher on average than for workers in the private sector. That’s largely because of generous defined benefit pension plans available to government workers that have become increasingly rare in the private sector.

However, government workers’ total compensation packages began to flag after Congress eliminated annual across-the board increases for most federal civilian workers in 2011, 2012 and 2013. That put a limit on periodic pay raises based on performance, longevity and changes in private sector pay.