Overpaid Government Workers? It Depends

Earlier this week, the Cato Institute came out with a report (here) indicating that federal workers earned 78% more than their private sector colleagues in 2014.  It appears that the study took the average salary for all workers to come up with the figure.  That gives me a little bit of a pause because I don’t know for sure that they’re really comparing apples to apples.  It also obscures a fact mentioned later in the report that other studies (on both the left and right) tend to show that the pay disparity is greater for lower-educated workers than for higher-educated ones.  That is, workers with lower levels of education will make much more in government than in the private sector, while better-educated workers see less of a government advantage (if any).  Another interesting area of analysis is that federal salaries have grown far more rapidly than private sector salaries.  It is unclear why that may be, but, if true, it might be because there is almost never a salary reduction in the government due to economic circumstances the way there might be in the private sector.  Also, government employees are almost guaranteed a small annual raise.

Yes, I’m skipping through the Cato Institute study pretty quickly.  And yes, I have a personal interest in this.

So, are my colleagues and I overpaid?  Hard to say.  For some skill sets, probably.  For entry-level, almost certainly.  I’m not certain I buy the 78% figure, though, just because it isn’t granular enough.  I can see paying a janitor with a security clearance a bit more than in the private sector to make sure that janitor doesn’t run with protected information.  That could wind up skewing the figures quite a bit.

Here’s the personal angle.  I know that my starting salary, just out of university, is more than I could have gotten in the private sector with basically zero experience.  I sure wouldn’t have been able to pay off my student loans in three years if I hadn’t taken a government job and gone to a hardship post.  Also, the report points to the other benefits (health insurance, vacation days, etc.) and job security as key factors that make the government compensation package disproportionate.  I definitely have job security (hey, not everyone wants to go to sub-Saharan Africa or Central Asia), and our health insurance is really quite good.  So, yes, compensation, in total, is pretty good.

OK, if the compensation is good, is it adequate for what we have to deal with?  Well…I can only speak to the Foreign Service.  We have to move to a new country every two or three years.  Our lives get disrupted as we adjust to new climates, new work environments, new societies, new languages, new schools for the kids, and so on.  Unlike our military colleagues, we usually don’t have a base providing for all our needs, so we’re living closer to the local economy.  Yes, that makes it more fun, but also more challenging.  Sure, in hardship posts there are often financial incentives, but, again, unlike the military, we get taxed on it.  Lest you think that the financial incentives are overwhelming (and driving up the average) until my recent promotion, I was right about at the “average government salary” cited in the Cato Institute report.  So, even with all of that considered, I would say the pay is adequate.  I’m a bit of an odd duck among my peers, though.

In my mind, the report probably overstates the pay gap, but does point at an underlying problem.  Are federal workers adequately compensated for what they do?  Are they overcompensated?  Are any of them undercompensated?  There isn’t consensus on this by any stretch of the imagination.  Maybe a better question to ask is if we need federal employees performing all of these functions.  Could some of them be handled at the state, county, or city level?  I would venture to say yes.  Education is the classic example of a function that should be handled at the lowest possible level; get the central government out of it.  Yes, my line of work would be kept at the federal level, as would defense (well…probably on both, unless we could come up with a way to conduct coherent foreign and defense policy based on state-level administration). Once we figure out what we want the government to do, then we can figure out how many people to hire, and what to pay them, to get the job done.

Until we can have a rational discussion on the issue about which functions should actually be handled by the center, which should be handled at a lower level, and which are best handled outside of government, entrenched interests, bureaucratic inertia, and political polemics will conspire to keep the situation at the status quo.