Government Workers Earn More Than Their Private-Sector Counterparts

A new study from the Congressional Budget Office undercuts the argument from progressive policy shops and union leaders that government workers make less money than their counterparts in the private sector.

The CBO study shows that federal employees earned an average 16% more in total compensation, meaning pay and benefits, versus workers at private companies.

The study comes at a time when President Barack Obama has called for "shared sacrifice" in the form of higher taxes in his State of the Union address and campaign speeches.

The full-time federal workforce has grown by 140,000 employees during the president’s term, to about 2.2 million workers, not counting the military or postal workers, government data show.

Federal-worker compensation was higher versus what private-sector workers receive in almost all categories, the CBO study says.

Compensation was 36% higher on average for federal employees with a high school degree; 32% higher on average for federal workers with some college education; and 15% on average higher for federal employees with a bachelor’s degree.

Total compensation was 8% higher on average for federal employees with a master’s degree and 18% less for federal workers with professional degrees or doctorates.

Compensation for federal workers costs taxpayers about $200 billion a year, the CBO study says. Of that sum, $80 billion was spent on federal workers in national defense, the study says, with the remaining $120 billion spent on personnel in other federal agencies.

Federal benefits drove the swing higher versus the private sector. The average benefits package for federal workers, including health and retirement benefits, costs taxpayers a whopping 48% more on average than what private sector workers get in comparable jobs, the CBO study says.

The CBO study relied on analysis from economists at Harvard University and Princeton University, Boston College, and economic research shops from both sides of the political aisle, the conservative Heritage Foundation and the liberal Economic Policy Institute.

The CBO study compared workers of similar characteristics, including length of employment, level of education and occupation, based on government household data for 2005 through 2010.

Health and retirement benefits were on average 46% higher for federal workers with a bachelor’s degree; 71% higher for federal workers with some college; 36% for federal employees with a master’s degree; and 72% higher on average for federal employees with a high school degree.

Benefits were 2% higher for federal workers with professional degrees or doctorates.

Driving the big 16% swing higher in average total compensation for federal workers are the retiree benefits government workers get. Specifically, the CBO says that federal workers can get “both a defined-benefit pension and a defined contribution plan,” or 401(k), whereas private sector workers tend to only have 401(k) plans. Workers must contribute a percentage of their own salaries to participate in 401(k) plans while workers do not have to contribute to pension plans.

Pension plans "are becoming less common in the private sector,” the CBO study says. Retiree benefits account for 39% of total federal compensation, versus 30% in the private sector, the CBO study adds.

Union membership matters, too. The CBO study notes that the “federal government and the private sector also differ in the extent to which their workers are represented by unions, which can influence employees’ compensation. About 21 % of federal workers are members of unions, compared with only 8% of private-sector workers.” Taxpayers pay federal wages; union dues are then paid out of those wages.

When it comes to just salaries alone, overall, federal workers earn 2% more in total average wages versus private-sector workers.

Federal workers with no more than a high school degree earned 21% more per hour, on average. Federal employees with some college education earned 15% more, whereas federal workers with a bachelor’s degree (about a third of the federal labor force) got roughly the same average wage, or 2% more.

However, federal employees with a master’s degree earned 5% less on average, and those with professional degrees or doctorates earned roughly 23% less than comparable private sector workers.

President Obama is expected to request a 0.5% pay raise for federal workers in his forthcoming 2013 budget. In response to soaring federal debt, two years ago, the President proposed freezing federal cost-of-living increases — increases which were small, anyway, at about 1.4%, due to low core inflation (not counting food and energy prices).

And most federal employees still received increased pay in the form of automatic seniority-based pay increases, called “step-pay” increases, for satisfactory job performance. Government studies show most every federal worker gets a “satisfactory” or passing grade. (See EMac’s Bottom Line, “The Federal Pay Freeze That Isn’t Much of One")

The CBO study comes as House Republicans have scheduled a vote this week on legislation, authored by Rep. Sean Duffy (R-Wisc.), to freeze salaries for federal civilian employees and members of Congress.

House GOP leaders have been pushing to force federal workers to contribute more to their retirement benefits.

"While millions of Americans continue to struggle with stagnant wages and high unemployment, government bureaucrats in Washington continue to enjoy significant advantages over those whose tax dollars finance their compensation," says a statement by the office of Rep. Paul Ryan, (R-Wis.), chairman of the House Budget Committee.

The CBO study comes at a time when cushy government pay is high on the radar screen.

A USA Today analysis of the federal “job for life” issue in July 2011 found that in 2010, federal workers enjoyed a 99.43% job security rate, and in many agencies, employees were more likely to die of natural causes than get laid off or fired by the federal government.

The paper also says the federal government fired just 0.55% of its workers in the budget year ending September 2010, versus a rate of firings in the private sector that was about six times higher, at around 3%.