2010 November 11 Thursday
US Government Salaries Outpacing Inflation

Obama love for our rulers?

•Government-wide raises. Top-paid staff have increased in every department and agency. The Defense Department had nine civilians earning $170,000 or more in 2005, 214 when Obama took office and 994 in June.

You can't tell from the figures above what this really means, A large number of people below but close to the $170k threshold could have crossed over. Simple thresholds can be chosen to present a distorted view. But these figures are more telling:

•Long-time workers thrive. The biggest pay hikes have gone to employees who have been with the government for 15 to 24 years. Since 2005, average salaries for this group climbed 25% compared with a 9% inflation rate.

25% pay hikes while the public at large isn't even keeping up with inflation. That's telling.

Federal pay and benefits are going up like the whole country used to experience back in the 1950s and 1960s.

Since 2000, federal pay and benefits have increased 3% annually above inflation compared with 0.8% for private workers, according to the Bureau of Economic Analysis.

A 3% per year increase in wages and benefits above the rate of inflation would translate in 10 years into a 34.4% increase in inflation-adjusted income.

A moral outrage, sure. But this trend in USG employee compensation will come to an end as the US sovereign debt crisis builds up over the 2010s and 2020s. I like Stuart Staniford's take on Debt Confidence Phase Transitions. He is right that the US government should not go so far into hock in reaction to the latest economic downturn because that accumulated debt will just make the crisis when Peak Oil hits full force that much worse. The US government will go into Peak Oil without any sort of reserve to throw at it. Rather, the US government will be weighted down by debts that will explode as a percentage of GDP as the economy shrinks.

Share |      By Randall Parker at 2010 November 11 09:54 PM  Economics Government Costs

Mark said at November 12, 2010 10:46 AM:

The disparity between public and private sector pay is actually much worse than it looks. I've worked as a civilian employee for the Dept. of Army for 29 years. I would say that the average government worker probably doesn't work more than four hours a day. The rest of the day is spent talking to coworkers or people on the phone, drinking coffee, reading the newspaper, surfing the internet, wandering the halls etc. In my office, for example, I figure that if they pay the average worker $200 per day and they work four hours daily, then that comes to $50 per hour of work. That's their real hourly pay, not the $25 per hour listed pay. Private companies have much more incentive to make sure their employees are actually spending most of the day doing something productive because they are trying to make a profit and keep from going out of business.

bbartlog said at November 12, 2010 10:55 AM:

This is one of the paths by which inflation enters the system. Government prints $600 billion, uses it to buy bonds (QEII) which is to say, finances its own spending; this allows federal salaries to increase while private sector salaries languish (or even deflate, if you believe the inflation stats from shadowstats). Remember, inflation doesn't happen everywhere at once - it allows real goods and services to flow to the first recipients of the new money. Good luck bidding for a retirement home against a federal employee who's done their time!

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