Andrew Biggs draws our attention to new research from his occasional collaborator Jason Richwine:
As Jason states, “Private-sector workers who switch to federal jobs receive an average real wage increase of 9 percent, while private workers who find another private job earn just an additional 1 percent, implying an 8 percent federal premium.” These are the same workers, with the employer and job being the only difference. Similarly, most people who leave federal employment take a pay cut, undercutting the common claim by federal employees that they could earn much more on the outside.
But does this study, which finds an 8 percent average pay premium for people switching to federal jobs, undercut our previous estimate of a 14 percent pay premium? Not at all. Remember that our analysis found that the federal pay premium is smallest in the initial years after a worker has been hired, and Jason’s new paper calculates the pay premium only in the first year of employment. So it’s actually fully supportive of the cross-sectional results we generated.
I think the real concern regarding public compensation is whether managers are able to deploy compensation budgets effectively to retain the most productive workers. There are a number of domains where more productive personnel are badly needed, e.g., in the upper echelons of the regulatory agencies, and overcompensation of federal employees in other domains and roles soaks up scarce resources that could be more effectively deployed.