Trump Administration Again Bashes Salary Council's Federal-Private Sector Pay Gap Calculation

For the second straight year, the President’s Pay Agent in its annual report cited “major methodological concerns” with how the council that makes federal employee compensation recommendations calculates the pay disparity between federal workers and their private sector counterparts.

Last April, the Federal Salary Council found that federal employees on average earn 31.86 percent less than their counterparts in non-federal jobs. And in November, the council weighed a number of potential changes to how that figure is calculated, although objections from members representing labor groups prevented any recommendation from reaching the pay agent.

In a report dated Nov. 30, 2018, but not published by the Office of Personnel Management until recently, the President’s Pay Agent, which is composed of Labor Secretary Alex Acosta, Office of Management and Budget Director Mick Mulvaney and acting OPM Director Margaret Weichert, encouraged the salary council to push forward with proposals to change its methodology, citing a controversial 2017 Congressional Budget Office report that found federal workers make significantly more than equivalent private sector workers.

“A recent report from the Congressional Budget Office issued in April 2017 echoes the findings of many labor economists in identifying a significant overall compensation gap in favor of federal employees relative to the private sector,” the officials wrote. “CBO identified a 17 percent average compensation premium for federal workers—with federal employees receiving on average 47 percent higher benefits and 3 percent higher wages than counterparts in the private sector.”

Detractors of the CBO report, including federal labor groups, have said its methodology does not accurately compare public sector and private industry jobs, in that it only compares employees relative to their educational attainment, rather than similar job duties.

Although the pay agent did not officially endorse any of the five ideas discussed last year, which included developing a survey of benchmark jobs, rather than looking at a region’s labor market as a whole, factoring in agency attrition rates, the report spoke positively of the most controversial of the ideas on the table: incorporating non-salary benefits like the Federal Employees Health Benefits Program and the federal government’s defined benefit retirement program into a comparison of employees’ total compensation.

“The value of employee benefits is completely excluded from the pay comparisons, which take into account only wages and salaries,” the pay agent wrote. “Also, the comparisons of federal vs. non-federal wages and salaries fail to reflect the reality of labor market shortages and excesses. They also require the calculation of a single average pay gap in each locality area, without regard to, for example, the differing labor markets for major occupational groups.”

Changing how the Bureau of Labor Statistics calculates the pay disparity between federal and private sector workers would require Congress to pass legislation, an unlikely prospect with Democrats in control of the House. But the pay agent suggested it would continue to advocate for such a change, in addition to finding ways to shift the federal government toward a performance-based pay model.

“Ultimately, we believe in the need for fundamental reforms of the white-collar federal pay system,” the officials wrote. “We believe it is imperative to develop performance-sensitive compensation systems that will contribute to a government that is more citizen-centered, results-oriented and market-based.”