August 19, 2010

Government Gone Insane

The federal government does not create a traditional sellable product and thus produces no revenue outside of what it collects from taxpayers. As of 2008, the average federal salary was $79,197, compared with $49,935 for the average private sector employee. In other words, the average federal bureaucrat makes almost twice as much as the average working taxpayer. Add the value of benefits like health care and pensions, and the gap grows even bigger. The average federal employee’s benefits add $40,785 to his annual total compensation, whereas the average working taxpayer’s benefits increase his total compensation by only $9,974. In other words, federal workers are paid on average salaries that are twice as generous as those in the private sector, and they receive benefits that are four times greater. - Brandon Greife, The Public Sector Weight Around Taxpayers’ Necks,, May 4, 2010

Public Sector Unions and the Rising Costs of Employee Compensation (Excerpt)

Cato Journal
January 1, 2010

Between 1950 and about 1980, average compensation in the public and private sectors moved in lockstep. But after 1980, public sector compensation growth began to outpace private sector compensation growth, and by the mid-1990s public sector workers had a substantial pay advantage. In the boom years of the late-1990s, private sector workers closed the gap a bit, but public sector pay moved ahead again in the 2000s.

The public sector pay advantage is most pronounced in benefits. Bureau of Economic Analysis data show that average compensation in the private sector was $59,909 in 2008, including $50,028 in wages and $9,881 in benefits. Average compensation in the public sector was $67,812, including $52,051 in wages and $15,761 in benefits (the largest public sector compensation advantages are in health insurance, defined benefit retirement plans, and paid leave)...

In June 2009, total compensation per hour was $39.66 in the public sector, which was 45 percent greater than the average $27.42 per hour in the private sector. The public sector advantage in average wages was 34 percent, while the advantage in benefits was a huge 70 percent...

Retirement plans (defined-benefit or defined-contribution) are available to 67 percent of private sector employees but 90 percent of public sector employees. Among full-time employees, the shares rise to 76 percent and 99 percent, respectively. Life insurance benefits are available to 59 percent of private sector employees but 80 percent of public sector employees...

Many state and local governments have expanded their worker retirement benefits during the last couple of decades. Because most public sector workers receive defined-benefit pensions, policymakers have been able to expand promised benefits without incurring a large short-term budget impact. However, generous benefit packages have created large unfunded liabilities in employee retirement plans. Public sector retirement plans are usually more generous than those in the private sector. The annual benefit of the median public sector defined-benefit pension is more than twice the benefit in the median private plan. One factor driving that difference is that nearly all public sector defined-benefit plans calculate benefits based on earnings during the last one to three years of work (Braden and Hyland 1993: 19). By contrast, private sector defined benefit plans are more likely to use a lower-cost approach, such as basing benefits on career-average earnings.

Another difference between public and private compensation regards retiree health benefits. In the public sector, employees can retire early-usually at age 55-and then enjoy years of health care coverage at taxpayers' expense before Medicare kicks at age 65. Such retiree health care coverage is a very rare perk in the private sector ...

Public Sector Pay Outpaces Private Pay

Innovation and Growth
May 3, 2010

We all know that state and local government finances are a mess. This chart helps explain why.

The top line tracks the real compensation of all state and local government workers–wages and benefits, adjusted for inflation. The lower line tracks the real compensation of all private sector workers. The data comes from the Employment Cost Index data published by the BLS.

The chart shows that public and private sector pay rose in parallel from 2001 to 2004. Then the lines diverged. Since early 2005, public sector pay has risen by 5% in real terms. Meanwhile, private sector pay has been flat.

This one fact explains much of the fiscal stress at the state and local level—why states such as New York, New Jersey, and California are in such a mess. State and local governments pay more than $1 trillion in compensation annually (actually, that’s an astounding number–I had no idea it was that high). If compensation is 5% higher than it should be, that’s $50 billion in excess pay costs for the state.

And lo and behold, that $50 billion would roughly cover the total size of the state budget gaps. For example, in February a survey found that the combined budget gap of all 50 states was $55 billion for the 2011 budget year and $62 billion for the 2012 budget year . (The survey was done by the National Governors Association and the National Association of State Budget Officers)

Now, I’m not anti-government, by any means. But this trend is disturbing. In times of crisis and economic struggle, government workers should not be getting bigger pay increases than the private sector. The domestic private sector has really been struggling for a decade, both in terms of job and pay. But the public sector kept paying higher compensation.

The arithmetic is very clear. State and local governments can’t keep funding higher wages and better benefits for their workers, while the private sector struggles. As a wise man once said, you can’t wring blood from a stone. And you can’t ask troubled taxpayers to pony up bigger pay gains for government workers than they are getting themselves.

It's Time to Freeze Government Wages

January 19, 2010

There’s a recession going on, but you wouldn’t necessarily know it by looking at public employee earnings. If you work for the government, you’re far less likely than your private-sector counterparts to have been laid off in the recession, and you probably also saw relatively fast wage growth.

As states and localities continue to fight budget crises, they have an opportunity to close gaps by freezing employee wages. Because public employee compensation rose too fast over the last three years, they should be able to do this while retaining quality employees at least as well as they could back in 2006.

During the recession, public employees have done better than private ones on two measures: total employment and hourly compensation. Over the last two years, private payrolls shed 7.3 million jobs, but public sector civilian employment actually grew very slightly, adding 98,000 jobs.

This makes sense: public-sector layoffs cause anti-stimulative ripples through the economy, and governments might even capitalize on a recession as a good time to hire employees cheaply.

The trouble is, that’s not what they’ve been doing. Instead, they’ve been retaining employees expensively.

In a recession when wages are stagnating, you would expect governments to capitalize on the loose labor market by holding the line on employee compensation. But public sector compensation (as measured by the Department of Labor) rose 42% faster than private sector compensation over the last three years.

Since the end of 2006, hourly total compensation (wages plus benefits) has risen 6.5% for private sector workers, essentially keeping pace with inflation. But state and local government workers saw their hourly compensation rise 9.2%.

Federal civilian workers (about 10% of the public sector civilian workforce) are excluded from the above measure, but they did even better, receiving Congressionally-approved wage rises totaling 9.9% over the same period.

Why have public sector wages grown so fast? In some cases, it’s because employees are receiving scheduled raises under contracts negotiated before the economic crisis. New York public employees will see a 4% pay increase in April, under a contract negotiated in the middle of the last decade.

But in other cases, governments have agreed to pay increases during the recession, or been forced into them by arbitrators. Transit agencies in New York and Washington, D.C., have seen their budget crises exacerbated by arbitrator-mandated pay increases, leading to service cuts. And Congress just approved another 2% pay increase for federal workers, effective this month.

If states and localities had kept pace with private sector wage growth over the last three years, state budget gaps would be approximately $36 billion less than they are today. Or, put differently, the last three years’ excess growth in public sector compensation necessitates an extra $36 billion in annual tax collections or program cuts.

Given the magnitude of state budget crises, it’s hard to imagine that outstripping private sector pay in a loose job market is the best use of limited fiscal resources.

Fortunately, some states are belatedly figuring this out. California Governor Arnold Schwarzenegger has proposed a significant cut in public sector salaries. And after two years of increases that outpaced the public sector, the Employment Cost Index for state and local employees was flat in the third quarter of 2009 -- meaning that two years after the recession began, states and localities have frozen pay, on average.

But while public sector compensation was flat on average in the third quarter, many governments (including the federal one) haven’t yet gotten on board the wage freeze train. And it will take an extended period of flat-line public sector compensation before the private sector catches up, as private sector pay growth remains anemic.

Those states can follow California’s lead (even in less draconian form) and put significant dents in their budget gaps. A recent report from the Empire Center for New York State Policy, which I co-authored, estimates that New York State could save over $800 million annually from a three-year employee wage freeze, while localities could save billions more.

It’s also a good time for states to revisit union-friendly bargaining laws, particularly binding arbitration, which have deprived lawmakers of the ability to manage employee compensation costs.

Or, states and localities can continue to hand out expensive employee wage and benefit hikes, while raising taxes or cutting services used by taxpayers. That would be good for public employees, but not much good for anybody else.

The largest-ever federal payroll will hit 2.15 million people in 2010 and 2.11 million in 2011, but the true size of the federal government is much larger: it is estimated to be 15 million or more. - The U.S. Government's Hidden Workforce

Private Paychecks Drop to Lowest Level Ever in the U.S. as Government-Provided Benefits Rise to Historic Highs

May 25, 2010

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.

At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.

Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says.
"This is really important," Grimes says.
The recession has erased 8 million private jobs. Even before the downturn, private wages were eroding because of the substitution of health and pension benefits for taxable salaries.

The Bureau of Economic Analysis reports that individuals received income from all sources — wages, investments, food stamps, etc. — at a $12.2 trillion annual rate in the first quarter.

Key shifts in income this year:
  • Private wages. A record-low 41.9% of the nation's personal income came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December 2007.

  • Government benefits. Individuals got 17.9% of their income from government programs in the first quarter, up from 14.2% when the recession started. Programs for the elderly, the poor and the unemployed all grew in cost and importance. An additional 9.8% of personal income was paid as wages to government employees.
The shift in income shows that the federal government's stimulus efforts have been effective, says Paul Van de Water, an economist at the liberal Center on Budget and Policy Priorities.
"It's the system working as it should," Van de Water says. Government is stimulating growth and helping people in need, he says. As the economy recovers, private wages will rebound, he says.
Economist Veronique de Rugy of the free-market Mercatus Center at George Mason University says the riots in Greece over cutting benefits to close a huge budget deficit are a warning about unsustainable income programs.

Economist David Henderson of the conservative Hoover Institution says a shift from private wages to government benefits saps the economy of dynamism.
"People are paid for being rather than for producing," he says.

Should Federal Workers Be Asked to Take Pay Cut, Too?

Unlike state and local governments that are cutting workers due to the budget crunch, the federal government will hire hundreds of thousands of people over the next few years. In calendar year 2009, federal pay increased by 3.9% for civilian federal government employees; in calendar year 2010, pay increased by 2%.

McClatchy-Tribune News Service
May 28, 2010

During Public Service Recognition Week earlier this month, hundreds of job seekers converged on the National Mall to learn about career opportunities in the federal government.

While economists don't expect the private-sector job market to reach its pre-recession hiring levels until 2015 or later, the federal government, America's largest employer, suffers no such recessionary hangover.

The full-time federal civilian work force -- excluding postal service employees -- is expected to top 2.1 million in fiscal year 2010, and more than 560,000 new workers will be hired in the next four years, said John Palguta, the vice president for policy at the Partnership for Public Service.

For a nation battered by layoffs, plant closings and an unemployment rate near 10 percent, Uncle Sam's hiring largesse should be a source of hope and inspiration. However, 98 percent of working Americans aren't federal employees, and many are wondering aloud why federal civil servants haven't faced the wage freezes, layoffs, furloughs, pay cuts and hiring freezes that many in the general work force have endured.

Surely, the bulging federal deficit, diminished income tax revenue and massive war budget should warrant some sacrifice at the federal level. Shouldn't it?

"To the extent that the American people are tightening their belt, Washington should tighten its belt too," said Brian Reidl, a research fellow in federal budget policy at the conservative Heritage Foundation. "It's important that federal employees aren't exempted from the sacrifices that other people are making."
That same logic prompted President Barack Obama, on his first full day in office, to freeze the pay of about 100 senior White House staffers who earn more than $100,000 a year.

It was a nice symbolic gesture. However, Chris Edwards, the director of tax policy studies at the libertarian Cato Institute and the author of "Downsizing the Government," said the freeze should be extended to all federal civilian employees for the next several years, or at least until the economy recovers and private-sector wages improve.

After all, average compensation for federal civilian workers increased nearly twice as much as it did for the private sector from 2000 to 2008, federal data show. In fact, the average annual compensation for federal civilian workers -- $119,982, including earnings and benefits -- ranks seventh among 72 occupations, behind only high finance, energy and company management professions.

Then there are the benefits.
"Federal workers get a 401(k)-style plan, but they also get an old-fashioned defined-benefit pension plan with inflation protection," Edwards said. "They also get health care benefits when they retire above and beyond Medicare. You just don't see that kind of stuff in the private sector anymore, and I think the federal work force ought to reflect the private work force. It shouldn't be an elite island separated from the rest of us."
Palguta said some government compensation and staffing levels should be "readjusted," both up and down. "But the rational and logical thing to do is to go in with a scalpel, not with a sledgehammer," he said.

Paul C. Light, a professor of public service at New York University's Robert F. Wagner Graduate School of Public Service, agreed that a rigorous restructuring of the federal government is needed.
"But I think blunt instruments like pay cuts and hiring freezes have proven absolutely ineffective in the past," Light said.
That's because they can be circumvented through promotions and advances through the dense federal employee classification system. "So unless you simultaneously freeze movement of employees through the pay grades, you've done nothing more than create more layers of bureaucracy," Light said.

Thomas E. Mann, senior fellow for governance studies at the Brookings Institution, a center-left Washington research group, said freezing federal wages wouldn't save much money anyway, since most of the federal deficit stems from transfer payments to states, social programs, defense spending and payment on the national debt.

As for federal salary and work force cuts, Mann said that's a "lousy idea."
"The public has a notion that in the face of an economic downturn, everybody needs to cut back and the government budget should be run like a family's budget. But what seems viscerally fair and the right thing to do can make just dreadful policy sense," Mann said. "Cutting efforts of any kind when the economy is still shaky is really a dumb thing to do."
Others say that canceling promised raises for government workers would be like imposing a tax on one narrow segment of the work force -- one that had nothing to do with causing the economic crisis.
"How do you get from the bailout of Wall Street to cutting the pay of the janitor or food service worker in a VA hospital? We bailed out millionaires and to pay for it, we should cut the pay of civil servants?" said Jacqueline Simon, the public policy director for the American Federation of Government Employees, which represents more than 600,000 federal workers. "Whatever problems the federal budget is experiencing has literally nothing to do with the size or compensation of federal employees."
To keep the wheels of government churning, Uncle Sam requires a diverse work force. The mammoth federal civilian payroll includes brain surgeons, janitors, attorneys, accountants, police officers, lawyers, economists, food service workers, scientists, housekeepers, physical therapists, weapons analysts, linguists, pharmacists and scores of other positions.

While the mission of government changes with the times, the size has been fairly stable for decades. The federal payroll, at roughly 2.1 million civilian employees, is up from about 1.8 million during the Clinton administration's "reinvention of government." However, the federal work force is roughly the same size as it was during Gerald Ford's administration and has about 100,000 fewer workers than it did when President Ronald Reagan left office, Palguta said.

The executive branch is projected to add about 274,000 full-time civilian workers from 2007 to 2011. About 80 percent of these new employees will work in support of war and counterterrorism efforts at the departments of Veterans Affairs, Homeland Security, Defense, Justice and State.

Despite these additions, the federal civilian work force has been shrinking relative to the general population. In 1953, there was one civil servant for every 78 residents. That ratio fell to one for every 110 residents in 1988 and one per 155 residents in 2008.

A big part of that decline stems from the loss of lower-paid and lower-skilled federal workers whose jobs have been farmed out on a contract basis; they're not on the federal payroll, but they're still paid with U.S. tax dollars. These contract workers cost the government more than $500 million a year, more than twice the amount in 2001. Last year, the Office of Management and Budget directed federal agencies to cut their contracting budgets by 7 percent to save $40 billion a year.

As more lower-paying positions leave the federal payroll, they've been replaced by higher-paying positions that require better-educated and better-skilled workers. That's one reason why the average compensation for federal employees increased at nearly twice the rate of the private sector from 2000 to 2008, according to data from the Commerce Department.

Average earnings in the private sector, which includes minimum-wage workers, CEOs and everyone in between, increased 31 percent, from $45,772 in 2000 to $59,909 in 2008, federal data show. However, earnings for federal civilian workers rose about 54 percent in that period, from $51,518 to $79,197.

Federal workers also have seen more generous contributions and faster growth in the area of benefits. From 2000 to 2008, the average annual value of private-sector benefits -- mainly pension and health insurance contributions -- have increased 43 percent from $6,910 to $9,881. However, benefits for federal civilian workers jumped 65 percent from an average of $24,669 in 2000 to $40,785 in 2008.

In March, Rep. Ann Kirkpatrick, an Arizona Democrat, introduced legislation to cut congressional salaries by 5 percent, from $174,000 to $165,300. If enacted, it would be the first pay cut for Congress since the Great Depression.

A similar measure for federal civilian employees would be difficult to do, especially for Democrats in an election year, but fiscally worth considering, said Pete Sepp, the executive vice president of the National Taxpayers Union.
"By expanding the scope beyond (members of) Congress, the savings at stake go from the millions into the billions," Sepp said. "In Washington, any talk of cutting salaries seems taboo, but outside the Beltway, where many people are making do with smaller paychecks or none at all, there might be a lot of receptive ears to the idea."
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House Kills Republican Effort to Cut Federal Pay

By Ed O'Keefe, The Washington Post
May 28, 2010

The House on Friday essentially killed Republican efforts to freeze the salaries of federal workers next fiscal year, voting 227 to 183 to table a proposal introduced by Rep. Michele Bachmann (R-Minn.).

The Minnesota Republican introduced the measure after it won this week's Republican YouCut contest that is identifying potential government spending cuts popular with GOP voters.

Friday's vote means federal workers survived two Republican attempts to cut their pay this week. Sens. Tom Coburn (R-Okla.) and John McCain (R-Ariz.) on Tuesday introduced amendments to the war supplemental that would have trimmed 2011 federal pay increases and instructed federal agencies to sell excess equipment and land. The amendments failed to pass on Thursday.

Both the House and Senate efforts signal, however, that Republican lawmakers and candidates are likely to keep at least the thought of cutting federal pay alive and kicking through the 2010 midterm campaign season.

Database of Salaries of America's Overpaid Federal Employees

Stacie Naczelnik,

Ever wondered where all of your tax money goes?

In a society where salaries are secrets nobody wants to reveal, it is refreshing to find websites that have a tell all approach when it comes to the salaries of federal employees.

If you are interested in finding out just how well (or not) a government job pays, all you have to do is get online and click away.

For a broad view:
2010 Salary Tables and Related Information
For general salary ranges of particular job descriptions, check out this U.S. Office of Personnel Management website.

For an in-depth look:
Federal Employees 2009 search
Find federal salaries based on location, agency, or even name at this site. Jobs that relate to national security are excluded, but other positions are available.

Note that the database shows 2009 salaries plus bonuses. Federal pay for civilian employees increased by 2% in 2010.
Why does it matter?

There are a variety of reasons why you should be able to find out how much federal employees are making.

First of all, it is important to know how tax money is used. This doesn't mean that you, personally as a taxpayer, are paying these salaries. But as a taxpayer, you should find out how taxes are used.

Second, it helps to see the salary differences between the private companies and government jobs. When I first saw some of the federal salaries, I was shocked--I was certain that the private sector paid more. I was wrong.

Government Pay
This is a directory of links to federal, state, county and municipal government salary and employee name databases. These searchable databases of salaries, pay, overtime and compensation of government workers are compiled by news organizations, open government advocates and government agencies.

2011 Federal Pay Scale Tables (GS) and No Raise From 2010 Levels As Obama Freezes Employee Pay

Saving to Inve$t - Following President Obama’s Federal employee pay freeze, 2011 GS tables remain the same as 2010. This includes the special base rates for GS law enforcement officers (GL) at GS grades 3 through 10. Unfortunately this means that the proposed raises discussed in previous updates below will not come to pass in 2011. The latest table is shown below, with rates effective from January 2011.

2011 Federal GS Pay table by Grade

In 1953, about 75 percent of Federal employees had a GS level of 7 or below. By 2009, in contrast, more than 70 percent of the workforce was GS 8 or higher.

The General Schedule consists of 15 pay grades and 10 steps within those pay grades. GS grades 1 through 7 denote entry-level positions, while grades 8 through 12 mark mid-level positions and grades 13 through 15 are top-level and management positions. The General Schedule also incorporates locality pay adjustments to account for cost-of-living differences across the country and overseas.

Pay Scales at TSA (2010)

From the Transportation Security Agency Website

We are unique among our fellow Federal employees because we do not use the standard GS grading system you may be familiar with. We use an "SV" grading system, which is a system of discrete grades with pay ranges that differ from GS pay ranges. These discrete grades, which are identified by letters rather than numbers, have minimum and maximum rates.

In the table below, we show the ranges for each pay band.

Pay Band Minimum Maximum
A $17,083 $24,977
B $19,570 $28,546
C $22,167 $33,303
D $25,518 $38,277
E $29,302 $44,007
F $33,627 $50,494
G $39,358 $60,982
H $48,007 $74,390
I $58,495 $90,717
J $71,364 $110,612
K $85,311 $132,237
L $101,962 $155,500
M $120,236 $155,500

The above rates are basic pay rates and do not include locality pay. 2010 basic pay rates are limited to $155,500. 2010 adjusted pay rates (base pay plus locality) are limited to $172,550.

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