The GS System Cannot Be Fixed

The General Schedule salary system has become an impediment to good government. The annual analysis to compare federal and nonfederal salaries has lost credibility. No president has accepted and approved the increases to close the pay gap since the Federal Employee Pay Comparability Act was enacted in 1990. Salaries for high-demand, critical occupations are not competitive. And in light of the budget battles, there is no reason to believe government will ever fund the classification system at the level to administer it as expected when the Classification Act of 1949 was enacted.

No component of the GS system is functioning today as originally intended. Bureau of Labor Statistics pay surveys do not make it possible to state that a job is paid at market, above market, or below market. Nor can the Office of Personnel Management assure employees they are paid fairly relative to others working in the same office (that is to say, each job is in the correct grade). The funding is not adequate to study these issues. The anecdotal evidence makes it clear the components of the system deter applicants and impede agency operations.

When FEPCA was enacted, the expectation was that the gaps across the country would be closed, but it never happened. Originally the analysis was based on pay for similar jobs (e.g., federal engineer salaries were compared with private sector engineer salaries). That’s no longer true. The BLS surveys no longer show whether computer engineers or any specific jobs are competitively paid.

What is clear, however, is that federal salaries for high-demand, high-pay jobs along with the inflexible, tenure-based administration of the GS system make it difficult to recruit and retain highly qualified specialists. Agencies need to be able to employ critical specialists. Perhaps future cybersecurity threats could be avoided or mitigated by adding qualified experts.

The system should be scrapped and replaced. There is no realistic reason to think those issues will ever be resolved and the system will again defensible. If anything, the problems will continue and are likely to get worse.

The 1 percent increase this year is not competitive for large companies and the proposed 1.3 percent increase for next year is below anticipated increases. Budgeted increases by other employers in the Washington area and across the country have been 3 percent or so for several years.

Yes, the 1.3 percent means the pay gap will increase. Even the BLS surveys show higher increases. The Employment Cost Index for the quarter that ended in March shows the annualized increase in wages and salaries for nonfederal workers was 2.6 percent. Let’s have a show of hands for those who think Congress will approve the increase authorized by FEPCA.

Alternatives to the GS system are very limited, and every model involves breaking up the one-size-fits-all schedule of salary grades. Years ago the decision was made to pay medical care specialists under a separate system. The financial regulatory agencies have a separate pay authority for essentially the same reason -- to be competitive. In 1991, the CIO Council asked the National Academy of Public Administration to develop recommendations for a separate IT system. It no doubt would have been approved, but the idea was forgotten after the 9/11 terrorist attacks. Companies always have separate systems for office support jobs and for nonexempt technicians. No one argues the separate Federal Wage System is a bad idea. Government would survive the breaking up of the GS system.

A practical idea would be to adopt the corporate model and create separate local salary systems for office support and other nonexempt jobs. These workers live and are hired locally. As with FWS jobs, market pay rates are determined by local supply and demand. The advantage is that it would take the pay increases out of the national spotlight.

The biggest hurdle for a new salary system for professionals and managers would be the transition to pay for performance. Its unlikely Congress would approve a new program that perpetuates step increases. It’s universal for professionals in other sectors. Millennials expect it. Even the critics in the academic world are rewarded for their performance. A starting point would be to adopt the philosophy for managers. The president of the Federal Managers Association, Patricia Neuhaus, has stated her support for the policy change. But it would require an investment in adequate training to prepare managers. The key is the performance management process and procedures to assure ratings are fair. There are success stories.

Nothing can happen governmentwide until Congress agrees to replace the GS system. There are success stories about pay programs that started as demonstration projects, but they are no longer discussed. Perhaps the next step should be new demos to reconfirm agencies can manage pay. Building a qualified workforce is essential for good government, and pay is a central issue.

As a tongue-in-cheek suggestion, perhaps the most acceptable plan would be to outsource all federal work, and contract with private employers. The pay gaps could then be closed. Contractors maintain competitive salary systems and their pay practices are rarely ever questioned.

Final note: The reported 3.6 percent increase in federal pay is dangerously misleading. It reflects the starting salaries of new hires, the subtraction of salaries of employees who left government, along with all promotional increases. It also includes the step increases plus the 1 percent adjustment. Yes, an average salary of $103,238 is higher than the private sector average, but it does not suggest federal employees are overpaid.

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