Pay Gap: A Different Take

The pay gap between private and public sector employees seems to be a given. Just this week, 10 congressmen made their case for a higher 2007 civilian pay raise than President Bush has requested by citing a 30 percent private-public gap reported by the Bureau of Labor Statistics.

"The federal government may never be able to compete with the private sector, dollar for dollar, but we must ensure that we do not fall further behind in the battle for talent," Reps. Tom Davis, R-Va.; Jon Porter, R-Nev.; Steny Hoyer, D-Md.; Chris Van Hollen, D-Md., and others said in a letter to fellow members.

But a new paper from the libertarian Washington-based think tank the Cato Institute argues that the pay gap actually travels in the other direction. Pointedly titled "Federal Pay Outpaces Private-Sector Pay," the paper by Chris Edwards, the institute's director of tax policy studies, makes the case for freezing government salaries.

By bundling federal benefits -- including defined pensions, the Thrift Savings Plan and health care subsidies -- together with wages, Edwards calculated that the average federal worker earned $100,178 in 2004, compared to $51,876 in salary and benefits for the average private-sector worker. Those numbers were based on statistics from the Bureau of Economic Analysis.

"The federal civilian workforce has become an elite island of secure and high-paid workers, separated from the ocean of private-sector American workers who must compete in today's dynamic economy," Edwards wrote.

In an interview, Edwards said he is trying to stir the pot on an issue that has no real adversaries. Federal employee unions are so vocal on pay issues, and Washington-area congressmen, including Republicans like Davis, who chairs the Government Reform Committee, are loyal to the many federally employed voters in their districts, Edwards said.

He said he suspects the BLS studies that find such a marked pay gap, and which do not take benefits into account, are flawed.

"There are questions about how these comparisons are done," Edwards said. "If you, say, look at a government lawyer versus a private lawyer, or accountants, the responsibilities and the hours worked per week can be quite radically different."

Most compelling, he argued, is the quit rate for federal employees, which is quite low and suggests that workers are satisfied with their pay.

Edwards said in his paper that some academic studies have found government workers to be overpaid, but his citation is a 1985 study by Steven Venti at the National Bureau of Economic Research.

Why did he pull from a 20-year-old study? Because, he said, there has been so much agreement in recent years on the pay gap that no one has bothered to complete an updated independent analysis.