After Decades of Stasis, Federal Pay Policy Is a Shambles

Two months ago, James Perry made the case in this space for the primacy of pay reform in any effort to overhaul the civil service. He’s right: federal pay policy remains in the Dark Ages, after decades of stasis.

However, I believe he’s wrong when he argues that Title V employees should have bargaining power over compensation. That contradicts the wisdom of President Franklin Roosevelt, who supported limiting the collective bargaining rights of government employees by virtue of their responsibility to the American public, and it ignores the extent to which public employee bargaining over pay and benefits has contributed to the financial woes of the Postal Service and of many states and municipalities where generous pension deals have exacerbated huge budget shortfalls.

Nonetheless, the Biden administration could garner broad support by pursuing Perry’s recommendations on pay modernization—putting greater emphasis on total compensation; developing occupation-specific, market-sensitive pay schemes; and improving the government's analytic capacity to set smarter pay rates.

In administrations of both parties, the President’s Pay Agent (the heads of the Office of Management and Budget, Office of Personnel Management and the Labor Department) routinely dismisses the pay recommendations of the Federal Salary Council since it is structurally straight-jacketed from producing useful compensation comparisons between feds and non-feds. First, its statutory charge is to compare salaries only, and not benefits, even though federal compensation consists disproportionately of the latter. Second, it determines a single “pay gap” for all jobs within a locality, even though pay differentials between federal and non-federal jobs are highly occupation-specific. Third, the pay survey data it relies on is weak. The Trump administration Pay Agent consistently highlighted these flaws. Trump-appointed Salary Council Chair Ron Sanders lamented them as well, and sought to expand the Council’s charge and capacities. 

Reputable studies comparing total compensation of feds and non-feds exist—the last administration weighed heavily the reports of the non-partisan Congressional Budget Office—but there is room for methodological debate on this front, and certainly the “higher standard of comparability” of total compensation Perry calls for is worth pursuing, considering the $300 billion annual investment made in federal employee compensation and the criticality of the workforce to a well-functioning government.

Studies aside, the relative pull of federal work is best revealed by how individuals vote with their feet in the labor market. The vast majority of federal jobs attract large queues of applicants and experience low quit rates. Among the exceptions are specific fields, such as cybersecurity, transportation security and border patrol, where recruitment and retention challenges could be linked to pay gaps, job location or other issues.  

The Trump administration agreed with the National Academy of Public Administration and the Partnership for Public Service that more occupation-specific pay is needed. We dusted off a Title V authority that sat on the shelf for decades that allows the Pay Agent to create occupation-specific pay systems. Alas, the tight statutory constraints circumscribing that authority slowed and ultimately stymied our roll out of new pay systems. But that ball could be picked up and moved down the field. We also sought to better address short-term hiring needs and attract younger employees via a budget proposal to increase Thrift Savings Plan contributions for term hires who pay in to the Federal Employees Retirement System but get nothing out unless they serve the 5 years required to vest. 

Other large employers with whom the government competes for labor collect and sift through data to see how their compensation practices impact recruitment and retention. The trove of workforce data maintained by OPM could similarly shed light on occupation and agency-specific relationships between pay, retention and other variables. The Trump administration initiated an effort to collect agency recruitment and hiring data from USA Jobs and other sources that can ultimately lend insight into how tweaks like increasing the advertised pay for specific jobs affect the quality of the applicant pool. 

In some areas, more data is needed. How do you find an appropriate private sector comparator for a given General Schedule position when the actual responsibilities of an identically classified position can vary widely across agencies and even within an agency? Federal workforce audits comparing job classifications to actual duties are needed.

It would also be helpful to have more research interest in such topics from universities and think tanks. Considering the sizable stakes, there is a relative dearth of work studying and modeling federal management practices, including pay practices. The gap prompted the Trump administration to propose a public-private research apparatus (GEAR Center) to help stimulate the sort of further study that could facilitate more enlightened and efficient federal pay systems.

In sum, pay modernization efforts generated over the past four years are a firm foundation for the Biden Administration to build upon.

Peter Warren served as a Senior Advisor and as Associate Director for Personnel and Performance Management at the Office of Management and Budget between 2017 and 2021.