This week, experts duked it out over federal pay, and readers weighed in as well.
In the FactCheck Mailbag, we feature some of the e-mail we receive. Readers can send comments to editor@factcheck.org. Letters may be edited for length.
Experts Dispute Data
FactCheck.org conducted a serious and thoughtful analysis of federal-private pay differences ["Are Federal Workers Overpaid?" Dec. 1], but it omitted any mention of three decades of peer-reviewed research on public sector pay, leaving readers to infer that experts have reached no conclusions. FactCheck adjudicated between two extreme claims — that federal workers make double what they deserve (the position of some politicians) and that they make 22 percent less than they deserve (the position of government unions). FactCheck decided, correctly, that neither of these claims is true.
However, FactCheck’s ultimate conclusion — “we truly don’t know” if federal workers are overpaid — is incorrect. A large academic literature beginning in the 1970s has examined this question. This research carefully controls for worker characteristics that affect pay (such as education and experience) using regression analysis. Economists have found that federal employees receive wages about 10 to 20 percent higher than similar private sector workers. We recently updated this research with two separate analyses and reached similar conclusions.
FactCheck’s main expert interviewed, Howard Risher, has a strange view of the academic studies. He contends that “both sides rely on analytical methods that even the most astute economists would have trouble understanding.” However, regression analysis is the standard methodology used to compare pay and virtually every economist understands it. Risher also claims that our dataset, the Current Population Survey, is not designed for this kind of comparison. In fact, the CPS is the standard data researchers use to control for differences between the public and private sector labor forces. Economists routinely use the CPS to compare the pay of men and women, blacks and whites, union and non-union workers, and — yes — government and private employees. We used straightforward methodology and confirmed the findings of previous academic studies.
FactCheck concludes that no one really knows whether federal workers are overpaid. On the contrary, we are confident that they are.
Andrew Biggs, resident scholar, American Enterprise Institute
Jason Richwine, senior policy analyst, Heritage Foundation
James Sherk, senior policy analyst, Heritage Foundation
Washington, D.C.
Since Andrew Biggs, Jason Richwine and James Sherk mentioned me by name in their letter, FactCheck asked me if I wanted to respond. Of course I do.
In my discussion with FactCheck as well as in columns published by Government Executive, I stated that I thought the analyses by Heritage were solid (I was not aware that AEI completed similar analyses until recently) but based on (1) assumptions that I question and (2) data that are not adequate for this purpose.
I am very critical of the USA Today claim that federal workers are paid twice the average in the private sector. That is simplistic and misleading. It is very apparent that the reporter did not dig into the facts or seek an explanation. Moreover, the comparison assumes federal workers are comparable with the millions working in mom-and-pop businesses.
According to Census reports, the U.S. has 5.7 million businesses and 4.5 million have less than 10 employees. Another million have between 10 and 50 employees. Few are competing for talent in the same labor markets as federal agencies. USA Today’s use of average pay data is not, in my opinion, a meaningful comparison. I have that concern with any analyses that based on the overall U.S. workforce, including Bureau of Labor Statistics’ surveys.
I agree the Current Population Survey data are “standard” for these analyses. That is not the same as my point that the CPS database was not designed for comparing federal and non-federal pay. I doubt if Census would agree that was its intent. The CPS data are, I believe, the most comprehensive and easily available. But the data fail to specify a number of facts that are known to be determinants of an individual’s salary (the most obvious is job level).
I was not critical of human capital analyses. To borrow a phrase, they are “academic studies” and until this year were reported primarily in academic journals. I have read a number of the studies over my 30-plus years of consulting, but I have never seen them used by policy makers. Yes, the results are interesting.
However, federal agencies compete in hundreds of labor markets across the country, each has a different mix of employers competing for talent, and the comparison of federal and non-federal salaries varies from location to location. The Heritage analyses cannot tell us what, for example, a senior nurse should be paid at Walter Reed or an SEC lawyer paid in Manhattan. No regression equation can answer those questions.
My comment from a Government Executive column about economists understanding the methods was focused on the way the conclusions have been reported. Both sides to this debate have issued broad statements with little supporting data or useful explanation of their methodology. Both sides are essentially saying, “You have to trust us.”
I am by no means a defender of the federal pay system. I am one of many who believe the General Schedule system should be replaced. Significantly, Jim Sherk, the Heritage analyst, and I agree federal salaries should be aligned with market rates. That will involve a very different methodology than the human capital analyses. The period of the freeze would be an ideal time to develop the information.
Howard Risher
Wayne, Pa.
Readers Contribute Anecdata
Many of the assumptions made in this article strike me as oversimplified. For example, the fact that there are “more white collar jobs,” etc. seems to be a bit of an exaggeration. I’ve worked for the FAA, and there are a lot of jobs that pay a great deal that do NOT require a degree. Many of my in-laws still work for the FAA, and several of them hold NO degree, and I can assure you that they are overpaid.
My mother-in-law is a prime example of overpaid federal employees. As an uneducated woman working in purchasing, she is closing the gap on a three-figure income. I work in an engineering office full of paid employees that are intelligent and educated in a fairly difficult degree program. These men make approximately half or a bit over half of what this woman does.
She receives better benefits and better pay and started from within the FAA Credit Union inside the base. Is this untypical? No. I’ve known many, many overpaid and uneducated people from the FAA. Consider the air traffic controller. Typically has no college degree, but is one of the highest paid careers in the country.
A lot of the people I worked with included a mixture of people with doctorates, masters, bachelors, vocational schooling, and some cafeteria-type employees. Think about it. Someone still has to clean the buildings, feed the employees, run the gyms, work the convenience store, work the fast food, etc. You really think that the number of uneducated is unsubstantial? I think not. And I’ll also place a bet that they are generally paid better than non-government employees.
For one, they get an AUTOMATIC raise every year. Regardless of their performance!
Paul S. Little
Oklahoma City, Okla.
One factor that perhaps isn’t being considered is the ineligibility of a federal retiree to receive a spouse’s social security. I am a federal retiree and based on my 40-year salary high of about $45,000, my annual retirement pay is $38,600. When I was still working, I received my deceased husband’s social security. When I retired, I no longer received my husband’s social security. I have enough quarters to receive social security on my own, but my retired pay is too high for that. If I were receiving a private pension, those restrictions would not apply.
Shirley Rish
Mesa, Ariz.
FactCheck.org responds: The writer is referring to the workings of the Government Pension Offset in Social Security. That offset may reduce the widow’s or widower’s benefits to a person who receives a pension of their own from a federal, state or local government, if that was based on work where they did not pay Social Security taxes. This offset currently affects nearly half a million federal retirees, according to the American Federation of State, County and Municipal Employees. But all federal workers hired after 1983 are covered by Social Security and will not be affected when they retire.