One twist is in how U.S. federal employees are paid. Their salaries are higher than those of their counterparts in other countries, but not outrageously so. And federal employees work longer hours and receive fewer holidays than government employees in most other countries. The key factor is benefits: U.S. federal employees don’t merely receive more generous benefits than do private-sector workers, they receive much more generous benefits than do public employees in most other developed countries. The OECD data show that U.S. federal employees’ total benefits add up to 37 percent of their wages, compared with 16 percent for central-government employees in Australia, 25 percent in the Netherlands and Belgium, 27 percent in Great Britain, and 23 percent across the OECD as a whole.
While federal-government workers earn a lot more than public-sector employees do in other countries, average incomes in the U.S. are a lot higher as well — for everyone, not just in government. To account for this, I compare the compensation of government employees in a given country to average wages for all workers in those countries. This gives some indication of the pay of public-sector workers relative to the taxpayers who support them.
Average salaries by country are gathered from OECD data and then combined with the amount of employer-paid social-insurance contributions, as these can be seen as a form of compensation and otherwise would likely have been paid as wages. Average annual wages also are adjusted for the length of the work year, which is shorter in most OECD countries. Compensation for government occupations is then divided by the average wage in that country.
The OECD data show that, with the exception of the very highest-ranking civil servants, U.S. federal employees do better than central-government workers in other countries. U.S. public employees ranked as D1 — a level immediately below cabinet secretaries, making up around 0.2 percent of federal workers — receive lower pay relative to the average citizen than in other OECD countries. But in every other category, U.S. federal-employee pay is even with and sometimes substantially ahead of that paid in other developed countries. On average, U.S. federal employees receive 16 percent higher total compensation than do similar workers in other OECD countries, even after accounting for differences in the countries’ average income levels.
Now, do these results prove that federal-government employees are “overpaid” — that is, that they receive higher pay than do similar private-sector workers? Not necessarily. If the U.S. federal government recruited higher-quality employees — say, with better education and experience than individuals filling the same jobs in other countries have — then the federal government’s relatively higher pay might be justified.
But the evidence points against that conclusion. First, we know from previous research that federal employees have less education and experience than do U.S. workers filling the same jobs in the private sector. So for federal employees to be significantly better qualified than their OECD counterparts, foreign-government workers would have to be even further down on the ladder. But that seems unlikely, given anecdotal evidence that many top European students aspire to careers in the public sector rather than in business. And finally, public-employee advocates in the U.S. often argue that the federal government isn’t able to recruit the best and brightest, supposedly because of low pay but perhaps for other reasons — say, the unattractiveness of working in a bureaucracy. In any case, all of this would hint that U.S. federal employees are on average relatively less skilled than their foreign counterparts, not more skilled. And yet the pay gap persists.
We’re not going to balance the budget on the backs of federal employees — nor should we. But, as at the state and local level, federal taxpayers should be able to feel confident that they are not overpaying for the services they receive. Liberals who favor activist government should support pay parity as a means to maintain support for government programs, just as budget hawks should do so to contribute to deficit reduction. But the evidence, from a variety of different angles, suggests we are still far from that goal.
— Andrew G. Biggs is a resident scholar at the American Enterprise Institute.