Grade Inflation: Does It Matter?

The issue of “grade creep” in the federal workforce arises on a regular basis. As the average grade (and the average salary) of the typical federal employee continues to go up, this trend is cited as yet another example of a bloated bureaucracy of highly paid workers. The overall average grade is now higher than GS-12, and the average federal salary is approaching $80,000, according to the Office of Personnel Management. Some find it easy to conclude that government is growing aimlessly, and federal workers are earning more money for performing functions that haven’t changed. But is an increase in average grade really a management “fail” that needs to be fixed?

CAUSES

A couple causes of grade creep are well-known and make sense, given the evolving nature of the federal workforce:

More knowledge workers. This is the most common cause. The nature of government work has changed, and continues to change. There is a continuing increase in analytical, program management and technical work at all agencies, and corresponding higher General Schedule grades. At the same time, lower-graded administrative, clerical and support work continues to disappear, due to technology and the elimination of certain functions. Jobs such as file clerk, messenger, and duplicating equipment operator, which were plentiful and populated the lower end of the GS scale, no longer exist.

Contracting out. Continuing cuts in full-time equivalents has forced agencies to contract out basic functions. These functions are usually routine, operational lower-graded work because it can be easily quantified and many private sector firms can provide those services. What usually doesn’t get contracted out is the higher-level project management, policymaking, program analysis work that is concentrated in Washington. These are inherently governmental functions that by law have to remain in-house. As a result, this higher-level work continues to grow, and the routine work that would balance out GS grade distribution disappears.

There are several other factors contributing to grade creep that are not necessarily related to technology or contracting out. Instead, these factors are symptomatic of an outdated personnel system that is unable to deal with contemporary management challenges and with the current political climate.  

Pressure to upgrade positions. Three years of pay freezes, increased oversight of awards programs and elimination of promotion opportunities due to senior people who have delayed retirement, means that the only avenue for getting a raise (other than a periodic step increase) is to get your position reclassified to a higher grade, regardless of whether the job has changed and thus deserves a higher grade. This pressure comes not only from employees but from management as well. Supervisors use constant upgrades as a retention strategy, especially for employees in technical and hard-to-fill positions.

Fewer entry-level jobs. Because access to government jobs for college graduates is not always easy, there are fewer and fewer interns and junior employees in the government. Agencies find that it’s quicker to hire an experienced person (especially with the pressure to hire more veterans) and hire them at higher grade levels commensurate with their experience, than to invest in a GS-5 or GS-7 intern that might one day grow into a full-performance employee. There are no easy pathways for recent college graduates to get into government. Even when junior employees are hired, there less attention is paid to their development and career growth because training programs are the first to face the budget ax. So, more first-time government employees are entering at the GS-13 through GS-15 levels, further tipping the scales toward the higher end of the GS range.

Disregard for the position classification system. It’s fashionable these days to say that “the system is broken” in reference to the General Schedule and the government’s method of classifying jobs. It’s repeated so often that it becomes a self-fulfilling prophecy. The result is that an increasing number of supervisors and employees disregard the basic concept of classifying positions at the proper grade level, even though it’s the law. Often, supervisors yield to employee pressures to push for higher graded positions, even though they know—both ethically and legally—that a reclassification to a higher grade might not be warranted.

EFFECTS

Regardless of the causes of grade creep, the various factors all lead to the same negative effects on the federal workforce.

Salary compression. Government has a wide variety of work situations and vast differences in the complexity and difficulty of work that needs to be performed. But with grade creep, large numbers of employees in different work situations with a wide range of difficulty are all bunched up in the same high grade levels. There are no longer distinctions among occupations or lines of work. Everybody gets paid generally in the same salary range, no matter what they do.

Lower morale. Grade creep and grade compression contribute to low morale, which is evident in declining Federal Employee Viewpoint Survey scores across government. The increase in improperly classified positions at high grade levels, regardless of the reason, is especially hurtful to employees doing difficult and complex work, who earn the same amount of money as someone else in a position that has gradually “creeped” up the GS scale and might not be doing the same level of difficult or important work. The fading concept of “equal pay for equal work” envisioned by the current classification and pay systems is an additional disincentive for federal workers.

Perpetuating the notion of a broken system. The more positions creep up to higher GS grades without valid reason, and the more average grade and average salaries continue to increase, the more critics can point to a “broken system.” This, in turn, gives ammunition to critics of the federal workforce, and further alienates taxpayers who believe that government workers are overpaid.

SOLUTIONS

Fixing the problems of grade creep will not be easy. Some of the proposed solutions have been well-documented in recent months.

Reform the pay and classification system. A clear solution, proposed in many studies from many sources, is to change the GS system of 15 fixed grades. Instead, a system of broad bands could provide opportunities to give warranted salary increases to deserving employees without going through the machinations of manipulating grade levels. Also, employees could get performance-based salary adjustments without having to push for a promotion to a higher grade.

Overhaul the civil service system. Moving to a broadband system is not sufficient. Even broadband systems can be misused. The same problems could continue with pressure to place positions in higher pay bands to reward employees, and employees in broadband systems could still be overpaid in terms of the difficulty of the work being performed. What is needed is a complete set of interrelated human resources functions, including:

• A clear compensation philosophy for the government.
• A recognition and rewards system, including nonfinancial rewards, that can motivate employees to do good work, even in the absence of promotions.
• Easy access to entry-level jobs with more attention to career paths and developmental opportunities to earn more responsible positions.
• An oversight system that will ensure equity and adherence to merit principles.

Grade creep is sure to continue, and the spotlight will continue to shine on this very visible and often misinterpreted metric. Conversion to broadband systems might temporarily lower the volume on the issue of higher grades. But fixing the broader issues—(1) a logical distribution of employees among grades or bands, (2) a fair and balanced recognition and reward system and (3) easily understood policies for career paths and advancement (especially by outside critics)—will not happen until there is comprehensive civil service reform.

Henry Romero is a former compensation executive for the Office of Personnel Management. He is now a senior advisor with Federal Management Partners.

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