The Other Pay Gap

The gap in pay between the private and public sectors can be bridged, experts say, by changing to a more market-based federal pay system.

By Julie Davidson

While the public/private sector pay gap continues to be hotly debated, experts agree that the federal government should have a more flexible pay system to recruit and retain a world-class workforce.

Partisan differences on the interpretation of a recent Congressional Budget Office report on federal pay were evident during a House Oversight and Government Reform Committee recent hearing, but Rep. Mark Meadows, R-N.C., pledged to work on a bipartisan basis "to get it right for federal employees."

Ultimately, Meadows said, "we need a fiscally sustainable pay and benefits system that allows the government to reward performance and compensate [employees] on the importance of their position, and not simply on tenure."

CBO report

Joseph Kile, assistant director for microeconomic studies at the CBO, said the CBO study found federal employees make about 17 percent more than the private sector, but that federal employees with a high-school diploma made about 53 percent more than their private-sector counterparts, while federal employees with a bachelor's degree made about 21 percent more. Meanwhile, Kile said, federal employees with professional degrees made about 18 percent less than their private-sector counterparts.

Witnesses all had different interpretations of these conclusions, but generally advocated for a more market-based federal pay system.

Robert Goldenkoff, director of strategic issues at the Government Accountability Office, agreed that a more flexible system is desirable, but admitted "it won't be easy" and said agencies must make better use of the tools currently available to them.

"Agency leaders must set the example that human capital management is directly linked to performance, and that it is not simply a transactional function," he said, stressing that the entire lifecycle of human capital activities must be "fully aligned with the cost-effective achievement of an organization's mission." This includes: workforce planning, recruitment, onboarding, compensation, engagement, training, succession planning and retirement programs.

Goldenkoff also recommended that Congress work with the Office of Personnel Management and agencies to: improve the hiring process by reforming, consolidating and eliminating less effective hiring authorities; strengthen performance management, including lengthening the probationary period and improve the capacity of agency HR staffing.

Rachel Greszler, a senior policy analyst from the Heritage Foundation -- an organization the Trump administration has reportedly looked to for budget advice -- argued that the current federal pay structure "stifles productivity because it is not effective in rewarding top performers and dealing with poor performers," which she said is a "recipe for driving out most productive employees and retaining the least productive" ones.

She supported increasing the length of the probationary period, suggesting three years, and recommended lowering the burden of proof necessary to fire federal employees, limiting and expediting appeals; reducing the level of within-grade increases and using the savings to recognize top performers.
Greszler also advocated changing the federal retirement system for new employees.

"With the federal government paying as much as three to four times the level of retirement benefits as the private sector, Congress should reduce the overall amount of retirement compensation for federal employees," she said. "Additionally, the government should shift towards defined contribution benefits that prevent future taxpayers from having to pay for the compensation of past government employees."

While most lawmakers seemed to agree that the current system for dealing with poor performance isn't working, the American Federation of Government Employees' Jacqueline Simon staunchly defended due process protections.

"There are numerous ways managers can get rid of poor performers and those who engage in misconduct," she said. "It's not the legal authorities that are lacking, it's the willingness of federal managers to take on their responsibilities. The protections federal managers whine and complain about protect taxpayers from a corrupt government."

Rep. Gerald Connolly, D-Va., agreed that the process to fire employees takes too long, but also stressed the need to maintain due process protections.

"They may need to be streamlined, but, to be fair, federal employees are entitled to due process even though sometimes that may aggravate us in terms of how long it takes or even the end result," Connolly said.

Moving forward

Meadows acknowledged some of the criticisms about the CBO pay report, especially those raised by Simon, who argued flaws in methodology and elements that were not considered skewed the findings. She said the Federal Salary Council job comparison methodology is more accurate and determined a 35 percent pay gap in favor of the private sector.

Meadows asked if the CBO and the other organizations, including Heritage and the American Enterprise Institute, would take another look at the study considering some of the factors suggested.

"We are going to have civil service reform and all the testimony today will play a factor in that," Meadows said, "All I want to get at are the facts . . . so we can make a decision."

Julie Davidson is cyberFEDS® editorial director. Send questions or comments about this story to


May 25, 2017
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