Pay Gap Explored

Could you be making more money if you were working in the private sector?

It's a question that nags at most government executives.

Studies by the Bureau of Labor Statistics, which are used to calculate pay adjustments under the Federal Employee Pay Comparability Act, suggest that federal salaries lag well behind those in the non-federal sector. Other studies, though, have concluded that federal employees are actually overpaid.

A new Congressional Budget Office report concludes there is no significant difference in federal and private-sector salaries for employees who have similar characteristics, such as job tenure, aptitude and education. But CBO also found that comparisons involving similar jobs, not similar people, show that federal employees are underpaid in relation to workers in the private sector by as much as 25 percent.

CBO's explanation is that government and the private sector utilize workers in different ways.

For example, an entry-level accountant might earn $35,000 a year in a private-sector firm. If the federal government hires the same person at the same salary to do senior-level accounting, a comparison of jobs would show that the government underpays. But a comparison of people with the same experience and other job-related characteristics would show that the government pays about the same as the private sector; the accountant would earn $35,000 in government or in private industry.

Of course, under this scenario, the government would be using an employee for senior-level work that the private sector would consider qualified only for a junior-level position. The report concludes that "the relatively low pay that the federal government offers for some jobs may be leading federal managers to accept less experience, education and other human-capital characteristics for those jobs than do private-sector managers."

In future reports, the CBO plans to examine how federal employee benefits, such as health insurance and annual leave, compare with those of non-government employees.