2006 August 29 Tuesday
US Federal Workers Better Paid Than Private Sector

Chris Edwards of the libertarian Cato Institute says US federal government workers are very well paid.

The Bureau of Economic Analysis released data this month showing that the average compensation for the 1.8 million federal civilian workers in 2005 was $106,579 -- exactly twice the average compensation paid in the U.S. private sector: $53,289. If you consider wages without benefits, the average federal civilian worker earned $71,114, 62 percent more than the average private-sector worker, who made $43,917.

The high level of federal pay is problematic in and of itself, but so is its rapid growth. Since 1990 average compensation for federal workers has increased by 129 percent, the BEA data show, compared with 74 percent for private-sector workers.

In the last 5 years federal pay has increased at over twice the speed of private sector pay.

The structure of that workforce has also changed over time. There are fewer low-pay typists and more high-pay computer experts in the government today than there were a generation ago. But that doesn't explain why, as the BEA data show, federal wages have risen 38 percent in just the past five years, compared with 14 percent in the private sector.

Federal workers have excellent benefits including very high job security.

Federal workers receive generous health benefits during work and retirement, a pension plan with inflation protection, a retirement savings plan with generous matching contributions, large disability benefits, and union protections. They often have generous holiday and vacation schedules, flexible hours, training options, incentive awards, flexible spending accounts, and a more relaxed pace of work than private-sector workers.

Perhaps the most important benefit of federal employment is extreme job security. According to Bureau of Labor Statistics data, the rate of layoffs and firings in the federal workforce is just one-quarter the rate in the private sector. All these advantages in worker benefits suggest that, in comparable jobs, federal wages ought to be lower than private-sector wages.

Modest proposal: Make most federal jobs have the equivalent of term limits. Work for the federal government? For most jobs you should have to leave after 10 or 12 years. This would bring in new blood that is more experienced with how the private sector does things.

Share |      By Randall Parker at 2006 August 29 10:46 PM  Economics Government Costs

Stephen said at August 30, 2006 3:22 AM:

Are they comparing apples with apples? For instance, there are millions of low wage jobs in the private sector that don't have federal equivalents (ie McDonalds etc). Including those jobs in the private sector figure would drag the average wage down, so I'd have hoped they were removed from the data before calculating the average private wages.

Randall said: This would bring in new blood that is more experienced with how the private sector does things.

I've been reading about recent theories in government administration and there's a developing school of thought that contracting out isn't really very efficient in the very long run (and I think we all agree that government needs to think very long term). A good example is Eisenhower's fears of the military/industrial complex.

As a thought experiment, ask yourself what would defence expenditure look like if all expenditure on weapons systems happened entirely inside the government without the private sector getting a slice of the pie (ie gov employees at gov aircraft factories, building planes crewed by gov employees and armed by governement owned/staffed armament factories). The idea is that the very long run expenditure would have been less (even assuming large inefficiencies in government) because corporate interests wouldn't have had a slice of the defence expenditure pie and therefore wouldn't go around encouraging/bribing/lobying for increased expenditure.

Stephen said at August 30, 2006 4:27 AM:

That said, the above theory might well be Stalinist nonsense...

crush41 said at August 30, 2006 6:36 PM:

Are they including the Gates' of the world? At $53,000, it appears that the mean rather than the median was used for wage determination.

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