CBO: Federal Employees Are Still Overcompensated

by Jason Richwine

In a report released yesterday, the CBO concludes that federal employees receive total wages and benefits that average 17 percent above what comparably skilled workers earn in large private-sector firms. The federal premium comes from slightly higher salaries — about 3 percent higher than the private sector, on average — coupled with massively higher benefits, which average 47 percent above private-sector levels. The new report is an update of the CBO’s 2012 analysis, which found close to the same thing.

Federal pay was a hot issue back in 2012, when Republicans pointed out that federal employees receive higher average compensation than private-sector workers. The Obama White House insisted, reasonably, that the only fair comparison would adjust for the greater education and experience possessed by federal employees. Several studies (including one by Andrew Biggs and myself for the American Enterprise Institute) took the White House seriously on that point, showing that federal employees enjoyed a compensation premium over comparably skilled private workers. In its 2012 report, the CBO concurred.

The CBO is not the final word on any issue, but its methodology in this case was generally sound, and the results were consistent with the prevailing literature. Unfortunately, public-employee unions did their best to obfuscate the findings, and reporters went along with the “no one can be sure about this” line. Congress did refrain from granting cost-of-living increases between 2011 and 2013, and new workers now must pay more into the defined-benefit (annuity) portion of the federal retirement plan. Nevertheless, significant steps such as phasing out the annuity altogether, loosening tenure restrictions, and allowing more merit-based pay were never enacted.

Will this time be different?

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