Mythbusting: Federal Workers Are NOT Underpaid by 35 Percent

In my misspent youth, I took a job as an "economist" at the Federal Energy Regulatory Commission in Washington, D.C.

In my misspent youth, I took a job as an "economist" at the Federal Energy Regulatory Commission in Washington, D.C. Yes, I was a bureaucrat for three whole soul-destroying years. But I certainly did not feel underpaid. I once asked one of my new colleagues at FERC who had just left an engineering job in the natural gas industry why he'd done it? "I like the pace of work in the government," he replied. Let's just say that the pace was not blistering.

Given my experience, I have ever since been annoyed whenever a report is issued claiming that federal bureaucrats are generally underpaid. Last month, the Federal Salary Council issued yet another such report asserting the bureaucrats are underpaid by 35 percent in comparison with private sector workers in similar jobs. That figure was a jump of nearly 10 percent over the previous year's number.

In an op-ed in today's Washington Post, American Enterprise Institute scholar Andrew Biggs, and Heritage Institute policy analyst Jason Richwine set the record straight:

If these figures are to be believed, federal employees are paid only 65 cents for every dollar received by nonfederal employees doing the same work. Put another way, the average federal employee who shifts to a job outside government would increase his salary by 54 percent.

The figures are implausible on their face. How could government pay employees more than one-third less than the going rate, yet keep employee turnover at only a fraction of the private-sector turnover rate? Data from the Bureau of Labor Statistics Job Openings and Labor Turnover survey show that, from 2001 to 2010, federal employees quit their jobs at less than half the rate of workers in large private-sector companies.

First, the pay agent doesn't consider fringe benefits, even though benefits for federal workers are famously generous. In addition to a 401(k)-type pension with a handsome employer match, federal workers receive a traditional defined-benefit pension — for which they contribute less than 1 percent of salary — as well as retiree health coverage. A Congressional Budget Office study published in January found that the federal retirement package was 2.7 times more generous than what is paid by large private-sector firms. Federal workers also receive more paid vacation and sick days. Even if they endured a salary penalty of 35 percent, their benefits would make up much of the difference.

But federal salaries are not 35 percent below private-sector levels. All five outside studies reviewed this year by the Government Accountability Office found that federal pay is equal to or higher than those of comparable private-sector workers. This is consistent with three decades of academic research. According to our analysis of Census Bureau data last year, the typical private-sector worker who shifts to a federal job receives a salary increase, while federal workers who leave for the private sector tend to get a salary cut.

I am not saying that Federal workers are all shirkers; many do hard creditable work. But if some bureaucrats find the pace of Federal work too grueling or the salary too low, they can always seek a nice cushy sinecure in private industry.