Public-Private Pay Gap Continues to Widen


10/4/07: Federal employees now make an average of 23 percent less in salaries than their counterparts in the private sector, according to new data released yesterday by the Federal Salary Council (FSC).

That federal employees earn less than employees doing similar work in the private sector has long been acknowledged but new compensation surveys using more refined data, performed by the Bureau of Labor Statistics (BLS) and released today by the FSC, indicate that the gap is larger than previously thought. The advisory body put the growth in the public-private pay gap over the past year at six percentage points, higher than it had anticipated.

“Each year federal employees must fight for a higher pay raise than the administration wants,” said National Treasury Employees Union President Colleen M. Kelley. “And we need to do this despite a 1994 federal law that was aimed at closing this gap. Pay is a critical factor in the government’s ability to recruit and retain skilled and talented employees and we must do better.”

The law she was referring to is the Federal Employees Pay Comparability Act (FEPCA), which became effective in 1994 and established the present system of labor-cost-based locality pay using survey data compiled by BLS. FEPCA called for the closing of the public-private pay gap in stages over 10 years. It has not, however, been implemented as intended, and a serious gap clearly remains. In fact, the average 23 percent pay gap includes locality pay and many locality pay areas have even larger public-private pay gaps.

“Virtually every study of the factors that motivate people in the workplace show that pay is a vital component,” President Kelley said. “Short-changing people on pay is a sure way to erode the effectiveness of any enterprise, including the federal government whose highly-skilled and experienced professionals are in great demand by the private sector.”

She added: “Without competitive pay, agencies simply cannot hope to attract and keep the people they need to perform their missions in the manner in which the public has come to expect.”

At present, there are a variety of legislative vehicles making their way through the congressional appropriations process calling for a 3.5 percent raise in 2008 for both federal civilian employees and members of the military. Such a raise would be 0.5 percentage point higher than that proposed and still supported by the White House.

At 1.7 percent for the bulk of federal employees, the 2007 pay raise was the lowest in nearly 20 years.

The FSC recommended, as it has done in the past, that funds allocated for locality pay increases —- which are based on employment costs in 32 separate pay areas across the country, and a catch-all area known as the ‘Rest of U.S.’ -— be distributed so that locations with the largest pay gaps receive the largest increases; and that federal employees in each locality pay area receives at least some portion of the locality pay funds. Locality pay is added to employees’ base pay under the General Schedule.

President Kelley and NTEU National Executive Vice President Frank Ferris are members of the FSC.