What It Will Take to Fix Federal Pay

What It Will Take to Fix Federal Pay

There can be no winners if the contentious debate over federal pay drags on, certainly not federal employees. The incoming chairman of the Senate’s Homeland and Governmental Affairs Committee, Senator Ron Johnson has announced plans to hold hearings. That, no doubt, means the debate could become more heated and continue for at least the next two years.

The senator’s statements are the reason Federal Times and several other publications have referred to him as the “federal workers’ new worst nightmare.”

But in a recent article, Johnson’s comments were more conciliatory and diplomatic. He promised a “businessman’s approach” to policy and management and said, “I’m always impressed with the quality of federal workforce.” He also recognized the need to keep federal salaries competitive “to get the quality of individual we need.”

Johnson intends to hold hearings on the “facts.” Those facts, however, do not exist. There have been several recent analyses that compare federal and nonfederal pay levels, but they fail to tell us whether federal salaries are competitive. The universal practice in every other sector is to rely on salary survey data for commonly defined jobs (referred to as benchmark jobs). That approach has been used for years to adjust Federal Wage System pay levels and by agencies that use market analyses.

It’s been two decades since the Bureau of Labor Statistics compiled relevant pay data. None of the analyses completed by conservative think tanks or by the Congressional Budget Office provides job-specific “facts.” Those studies rely on data sources and statistical methods that are very different than the market analyses common in business. Statistical studies are best understood as macro analyses while benchmark job analyses are micro analyses. Everyone, including the president, seems to know some jobs are overpaid and others underpaid, but recent studies fail to provide actionable facts.

There are hundreds of surveys conducted across the country. In health care alone there may well be more than 50 surveys. Even museums conduct multiple surveys. State governments conduct surveys. Benchmark surveys are conducted in every sector.

But when the facts are assembled, it will not be possible to align the General Schedule salary ranges with market data. That’s important. The 1949 federal job hierarchy is locked in a time warp. The classification system is unable to respond to labor markets trends. The best qualified graduates in occupations now critical to government can command “competitive” salaries well above GS levels.

The General Schedule contributes to five additional problems that can only be fixed by replacing the system entirely.

  1. The classification system is caught in a time warp. The system has not been maintained adequately for more than 25 years. It’s staggeringly time-consuming and costly to maintain. No one knows how many jobs are over graded—and overpaid under the classification system—but the problem is acknowledged by many. Nothing can change without new legislation.
  2. The excessive time needed to classify jobs is an impediment to organizational change and reorganizations. Anticipated delays prompted the first pay demonstration project in 1980, which relied on dramatically simplified job classification. It could be that the recently announced Veterans Affairs Department reorganization will be delayed by the requirement that redefined jobs be properly classified.
  3. The switch to pay for performance is inevitable. It’s effectively universal outside of government for white-collar workers. In today’s climate the automatic step increases are out of sync with public thinking and the expectations of many workers. The underlying problem—ineffective performance management and performance ratings that cannot be trusted—will have to be addressed concurrently.
  4. Managers and supervisors should be accountable for managing employees. Redefining job assignments, however, is burdensome. Firing and disciplining poor performers is exceedingly difficult. To borrow a phrase, managers are “constrained and hamstrung.” Moreover, employee surveys confirm that managers are not good at rewarding the better performers. People management has never been valued in government.
  5. The GS system is an impediment to effective performance management. As long as performance ratings have few, if any consequences, they are likely to be grossly inflated. There is no compelling reason for managers to be honest. That makes the process for managing performance less important.

Johnson also intends to address federal benefits in upcoming hearings. That is a complex analysis that has not been completed by benefits experts for years.

There is no chance Congress will approve the salary increases suggested by the annual gap analysis. So, this holding action will continue for at least the next two years. Morale will continue to deteriorate. Recruiting and turnover will continue to be a problem. Allowing this to drag on is not good government.

If this was the private sector, a CEO could mandate needed changes. But for government, replacing the GS system represents a very complex organizational change initiative.  Johnson is correct—the starting point should be gaining agreement on the facts. There is broad agreement federal pay should be competitive. But until the facts are accepted, the argument will continue.

Howard Risher managed compensation consulting practices for two national firms and has written four books, including Aligning Pay and Results. He has an MBA and Ph.D. from the Wharton School.

(Image via Garsya/Shutterstock.com)

Public-Private Sector Pay Gap Remains at 35 Percent

Public-Private Sector Pay Gap Remains at 35 Percent

Federal employees on average now earn 35.2 percent less their private-sector peers, according to the latest data analyzed by the Federal Salary Council.

The council released its report on Friday, showing the pay gap — which has widened over the last several years — is about the same as last year’s 35.4 percent gulf.

The Federal Salary Council is made up of union representatives and pay policy experts and uses data from the Office of Personnel Management and the Bureau of Labor and Statistics to make its annual calculations. The group reports its findings to the President’s Pay Agent, which in turn makes recommendations on federal pay to the president.

The report urged the Obama administration move forward on its 2012 recommendation to create 12 new localities for pay purposes; so far the administration has not enacted any changes because locality pay has been frozen since 2010. The President’s Pay Agent tentatively approved establishing the new pay localities in a report published in May 2013.

Currently, OPM uses 33 metropolitan or state-based distinctions, as well as a 34th “rest of the United States” category. The recommended locality pay areas are: Albany, N.Y.; Albuquerque, N.M.; Austin, Texas; Charlotte, N.C.; Colorado Springs, Colo.; Davenport, Iowa; Harrisburg, Pa.; Laredo, Texas; Las Vegas; Palm Bay, Fla.; St. Louis, Mo.; and Tucson, Ariz.

“Here we are in October 2014 and the administration is still being coy, saying it cannot move forward just yet,” AFGE National President J. David Cox Sr. said. “The excuses keep piling up. They are scared of the reaction of House Republicans. They are scared that the public won’t understand what they’re doing. They are scared to find out what might happen if they actually do something positive for federal employees, worried that anti-government extremists will somehow hurt them.”

The council also made a new recommendation this year that Kansas City be added as a separate locality pay area as well.

There are two components to federal pay: base pay and locality pay. The latter, which has been frozen since 2010, varies by region. Federal salaries tend to be higher in places where the cost-of-living is higher, like New York City, San Francisco and Washington. But the average pay gap between public and private-sector workers also is higher in these areas as a result.

The council repeatedly has pushed for increases in locality pay adjustments as the primary means to close the gap between public and private-sector pay. The problem has been exacerbated, members of FSC have said, because OPM has not created new regional designations in several years.

Federal employees received a 1 percent base pay raise in 2014, and are expected to receive the same amount in 2015, per President Obama’s proposal. Under the 1990 Federal Employees Pay Comparability Act the annual raise is determined by the change in the Employment Cost Index minus 0.5 percent for federal employees. Presidents, however, largely have ignored the formula under FEPCA, preferring to offer their own figure, which under the law they can do. The commander-in-chief has the authority to set an alternate pay raise for military personnel and civilian employees, citing a national emergency or fiscal concerns, if Congress doesn’t pass legislation adjusting the amount or canceling it.

The Federal Salary Council’s report conflicts with other studies — including those from conservative-leaning think tanks — that show federal employees earn more than those in the private sector. A 2012 Government Accountability Office study concluded there is no definitive way to measure any potential gap. A Congressional Budget Office report found that public and private sector salaries were about comparable, but that education level played a role in pay disparities between the two groups.

(Image via spectrumblue / Shutterstock.com)

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