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We’re No. 1 — In Public-Employee Pay
The U.S. pays its public sector better than the private sector — and other countries, too.


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Amid the recent hubbub over municipal bankruptcies and rising public-employee pension costs, pay for state and local government employees has gotten a great deal of publicity. Lost in the press attention, however, is that federal-employee compensation remains a problem, too, and new data again indicate that Washington, D.C., may be overpaying for the two million workers it employs.

In a 2011 AEI paper with Jason Richwine, I concluded that federal workers receive salaries and benefits around 37 percent higher than do private-sector workers with similar levels of education and experience. This prompted congressional requests for the Congressional Budget Office to conduct its own analysis, which, the requesters hoped, would rebut ours. Using slightly different methods, the CBO showed a smaller wage premium for federal workers. They omitted a $2.3 billion per year federal subsidy to government workers’ accounts held by the Thrift Savings Plan, but still reached qualitatively similar conclusions: Federal workers receive pay and benefits 16 percent above private-sector levels.

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There are other ways to assess government-employee pay, such as analyzing how a given person’s pay changes when he switches from a private-sector job to a public-sector one. Contrary to myth, most federal workers take a pay cut when they switch to private jobs, and most private-sector workers receive a salary increase when they move into the federal workforce. Likewise, we can look at the low rates at which federal employees quit, which may indicate that they consider their jobs superior to the alternatives. All of these measures point to the conclusion that federal employees receive higher pay and benefits than they would in private-sector jobs.

But here’s another approach, thanks to data from the Organization for Economic Cooperation and Development, the “rich man’s club” whose membership includes most of the world’s developed, high-income countries. The OECD figures let us compare how U.S. federal-government employees are paid relative to central-government employees in 18 other countries.

The OECD analyzed the salaries, benefits, and paid leave for government employees; the combined value of these three categories equals total compensation. The OECD looked at four main categories of public employees:

  • Senior management. These are top-level public employees classified at the D1 and D2 levels. D1 designates a civil servant immediately below cabinet level; D2 managers are immediately below the D1 level. These are the highest-paid civil servants in most governments.
  • Middle management. These civil servants, whose positions are designated D3 and D4, are far more numerous than senior management and often oversee professional staff.
  • Professionals. The OECD examined two specific professional positions, statisticians and economists/policy analysts.
  • Secretarial staff. This category is made up of two groups, senior/executive secretaries and office secretaries/general office clerks.

The results aren’t surprising. U.S. federal employees receive significantly higher total compensation than do central-government workers in other countries. For instance, in the U.S. federal government, a secretary receives total annual compensation of over $69,000; in the central government of the average OECD country, less than $48,000. With apologies to my friends in federal-policy shops, U.S. economists, policy analysts, and statisticians appear to do best of all, earning nearly twice the OECD average.



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