Obama's pay freeze for federal workers only limits raises
Dec-01-2010

Many federal workers would still get pay raises the next two years despite the limited salary freeze President Obama proposed this week for 2.2 million government employees.
The president's proposal, if approved by Congress, would stop across-the-board pay hikes set for January 2011 and January 2012.

But many federal workers will receive other pay hikes - longevity increases (called steps), promotions in grade, bonuses, overtime and other cash payments.

Most federal employees are ranked at a General Schedule (GS) grade from 1 to 15, and each grade has 10 steps within it.

Step raises are largely automatic, based on longevity, but merit can hasten a step pay raise or even move a worker up multiple steps. Not every worker gets a step raise every year, but the raises average about 2% per year for workers as a group.

Ronald Reagan in 1986 was the last president to freeze across-the-board pay hikes. Bill Clinton tried in 1994, but Congress said no.

The federal government would save $2 billion in the first year and an estimated $28 billion over five years under the limited freeze, Obama says.

Democrat Erskine Bowles and former senator Alan Simpson, R-Wyo., chairmen of the federal deficit reduction commission appointed by Obama, favor a broader freeze on federal pay - stopping all pay hikes for three years, including step raises and bonuses. The commission says the move would save more than double what Obama is calling for.

The proposals anger leaders of federal worker groups who say that the savings represent only a tiny fraction of total federal debt now pegged at $13.7 trillion.

"Our people are upset," says Jessica Klement of the Federal Managers Association. She says federal pay must keep pace with that of the private sector.

James Sherk, a labor analyst at the conservative Heritage Foundation, says pay freezes are needed but the better long-term solution is basing the federal pay system on merit, not longevity.

"Symbolically, the freeze is important," Sherk says. "It's where we should go for savings. But it's not a permanent fix." Federal benefits need to be cut dramatically, more than pay, Sherk says.

Full-time federal employees earned an average of $81,258 in pay last year and $41,791 in benefits, the Bureau of Economic Analysis (BEA) reports.

By comparison, the private worker earned $50,462 in pay and $10,589 in benefits, meaning that federal workers earn about half more in pay but four times as much in benefits, the BEA says.

Federal workers pay a similar share in health care premiums - 29% - as corporate workers. Most federal workers don't get any subsidy for dental or vision insurance.

The big advantage for federal workers over private-sector workers comes in time off, pensions and lesser-known benefits. After three years, federal workers get 20 days of vacation, 10 paid holidays and 13 sick days, Sherk says. "A private worker would be lucky to get that after 20," he says.

For older workers, a federal pension is a sweet reward. Lifetime benefits are based on the highest three years of salary, rather than the five years typical of defined pension plans in the private sector. Retirement can start as early as 56 years old with medical benefits.

Posted by Clay Kohut at 12:43 AM - Link to this entry  |  Share this entry  |  Print