Recovery and Raises

When President Obama wrote to congressional leaders in late November 2009 to explain why he was standing firm on a 2 percent pay raise in 2010 for civilian federal employees, he invoked the larger U.S. financial crisis to justify his position.

"Our country continues to face serious economic conditions affecting the general welfare and most Americans would not understand or accept that federal employees should receive an average pay increase of 18.9 percent [the raise, including locality pay, that would be mandated in the absence of Obama's action] while many of their fellow citizens are facing employment cutbacks or unemployment," he wrote.

So will improvements in the overall economy mean that federal employees will see larger raises in 2011? Unemployment levels might still be high, but some data suggests that Americans who have jobs outside government could have a better 2010 than they did in 2009.

President Obama's justification for the pay raise suggests his administration is keeping an eye on what private sector employers are doing. But a closer look at federal pay raises during the last 10 years suggests that what presidents ask for and what federal employees actually get has little to do with trends in overall private sector raises.

For more than 20 years, Mercer, a human resources consulting firm, has conducted an annual survey of private sector companies that collectively employ about 12 million workers. Among the questions asked in the survey is whether companies plan to freeze salaries, and if not, what their average raises will be in the upcoming year. While 30 percent of employers told Mercer they froze worker salaries in 2009, only 14 percent plan to do so in 2010. The companies that plan to give raises in 2010 said they expect the average increase to be 2.7 percent this year, as compared to 3.2 percent last year.

Those raises, of course, cover a variety of occupations, ranging from low-level employees to high-level executives. But the 2.7 percent projected increase is 0.7 percent higher than the 2 percent average pay increase federal employees are slated to receive in 2010. And since 2002, federal employees have received raises lower than what private sector employers planned to provide in every year except one: in 2009, companies told Mercer they planned to give workers an average increase of 3.7 percent, and ended up awarding an average of 3.2 percent as the economy worsened. Federal employees received 3.9 percent raises in 2009.

President Obama said in his February 2009 budget request that "in this budget, federal employees also will be asked to do their part ... bringing federal pay and benefit practices more in line with the private sector." There are several possible ways to interpret Obama's argument. He could have been embracing the idea that federal salaries have become bloated over time, and smaller raises are a way to bring them under control. Or he simply could have been saying that in a year with widespread layoffs and private sector pay freezes, large raises for civil servants would look insensitive.

But according to Mercer's data, private sector pay freezes haven't mattered much when it comes to government workers' raises. In 2002, when federal employees received their largest pay boost in the past 10 years of 4.6 percent, 17 percent of private companies included in the survey froze salaries. And in 2004, when just 5 percent of private companies kept wages flat, federal employees got one of their lowest raises of the decade, 2 percent.

It's hard to know what 2011 will bring for federal employees' paychecks. While presidents can cite ongoing economic emergencies as a justification for the figures they choose, federal raises are the product of political maneuvering as much, if not more, than market forces.