Lawmaker Asks CBO to Respond to Critics of Federal Pay Report

The House Oversight and Government Reform Committee asked the Congressional Budget Office to respond to critiques—mostly from federal union officials and Democrats—of its methodology for calculating the compensation gap between federal workers and private sector employees in a recent report.

The report, released last month, compares the pay and benefits of federal employees and their private sector counterparts, broken down by educational attainment. CBO found that overall, total compensation for federal workers was 17 percent higher, on average, and the cost of federal benefits was 47 percent higher, on average, than for comparable private sector employees. The discrepancy in benefits stems largely from the fact that much of the federal workforce still falls under systems that include a defined benefit pension, which has mostly fallen out of practice in the private sector.

At an Oversight Committee hearing Thursday, much of the discussion mirrored the initial reaction to the report, with Republicans and conservative groups arguing the study highlights the need modernize the civil service system to provide greater flexibility in the General Schedule pay system, make it easier to hire and fire federal workers, and to consider phasing out the use of defined benefit pensions.

“A better retirement benefit system for taxpayers and employees would include shifting all new and non-vested federal employees into an exclusively defined contribution retirement plan, maintaining already accrued benefits for workers with five to 24 years of service and allowing them to choose from three options for future benefit accruals, and grandfathering in workers with at least 25 years of service,” said Rachel Greszler, a research fellow at the Heritage Foundation.

But Democrats and union officials argued that CBO’s methodology was flawed, in part because educational attainment captures too many different types of occupations, and instead prefer analyses by the Bureau of Labor Statistics, the Office of Personnel Management and the Federal Salary Council. Jacque Simon, policy director for the American Federation of Government Employees, said these methodologies better account for the many different jobs in the federal government, as well as location and gender and racial demographics.

“[CBO’s approach] is basically a capital asset pricing model that applies the logic of finance to human beings,” Simon said. “Wages, salaries and benefits are the price, and the workers are the asset. The asset’s attributes are the race, sex location and industry . . . When you compare the compensation the government provides to averages in the private sector through a human capital lens, you find the government both overpays and underpays, depending on demographics.”

Toward the end of a discussion that touched on other hot-button issues—including the health care debate, union employees’ official time and the investigation into Russian influence in the 2016 presidential campaign—Rep. Mark Meadows, R-N.C., who chaired the hearing, asked the conservative witnesses to refute Simon’s critique.

“I need some facts,” Meadows said. “Why is [Simon’s preferred methodology] wrong in terms of the comparison? I need data points.”

“One reason it is wrong is over-grading in the federal government, which CBO and the [Government Accountability Office] have documented,” said Andrew Biggs, a resident scholar at the American Enterprise Institute. “A job may have the skill demands of a GS-8, but it is assigned a GS-9 or a GS-10 . . . The BLS doesn’t look at the jobs or do its own assessment. It assumes that the pay scale is correct.”

Meadows then turned to Joseph Kile, assistant director for microeconomic studies for CBO, for his take on the competing methods for comparing federal and private sector workers.

“I want you to look at your study as it relates to the charges Ms. Simon made, and see what you did or didn’t consider, and I want you to see if you can address that,” Meadows said.

Kile said he would discuss the issue with his colleagues and come back to the committee at a later date.