July 14, 2010 | Commentary on Jobs, Jobs and Labor Policy

Who in This Country Has More than They Deserve? Most Federal Employees

Want a raise? How about working for Uncle Sam? And here's the kicker: You won't even have to leave Minnesota to do so. A recent study comparing the average salaries of federal government and private-sector employees by the Heritage Foundation uncovered something very interesting: The federal government pays average wages significantly above those earned by private-sector workers.

The federal government pays hourly wages and total compensation 57 and 85 percent above the private-sector average, respectively. Of course, government employees perform more-skilled work than the private-sector average, so their wages should be somewhat higher. But not that much higher.

After controlling for observable skills and characteristics, federal employees still get paid 22 percent more per hour than comparable private workers. The government also insulates its employees from economic uncertainty. Federal agencies rarely lay off employees for poor performance or in economic downturns. Although unemployment is above 7 percent in Minnesota (and tops 10 percent in many parts of the country), it has risen only slightly -- to 2.9 percent -- among federal employees during the recession. Congress would save taxpayers about $47 billion a year if it reduced federal compensation to market rates.

Most government employees are paid according to the General Schedule. Typically, they increase a "step" and earn more pay every year. One obvious cost-saving measure: Abolish the GS and implement market-based performance pay.

Many jobs that federal employees do could be done by private-sector workers. However, federal regulations deter agencies from contracting out this work to the private sector. Congress should eliminate these regulations and instead require the federal bureaucracy to compete on cost and quality with private-sector workers.

Congress also should reduce the generosity of its benefits to market rates. Further, it should reexamine the utility of the existing "defined benefit" plans and consider moving federal workers to a fully portable and funded 401(k)-style system.

Managers can remove federal workers who have passed their probationary period, but with great difficulty. As a result, some federal employees underperform. Congress should allow managers the same discretion to remove poor performers after probation that they have during it.

Given that our country faces a $13 trillion debt amid an economic slump, lawmakers should look for savings wherever they can find them. Thus Congress should stop giving federal employees inflated earnings before it even considers raising taxes.

Of Minnesota's 2.6 million workers, 33,000 are lucky enough to enjoy the security and economic achievement that accompany federal employment.

However, the route to financial success shouldn't be a government job. Bringing the market into play would be good for private workers in all 50 states.

James Sherk is senior policy analyst in labor economics at the Heritage Foundation.

About the Author

James Sherk Research Fellow, Labor Economics
Center for Data Analysis

Related Issues: Jobs, Jobs and Labor Policy

First appeared in The Star Tribune