It’s No Secret: Fed Pay Still Lags—But Union Leaders Have A Fix

From 2010 to 2019, base pay for federal employees increased by just 1% for four of those years, between 1% and 1.5% for 3 years, and for the other three years? Nothing, nada, zip, 0%. 

Not a great look for federal agencies struggling to lure and hang on to the best people. Especially when compared to average pay increases across the private sector, where not a single year of the same decade saw less than a 1.7% average boost—and often far more. 

Those figures all come from the Bureau of Labor Statistics. An important if obvious caveat here: the comparative private-sector average over the period varied widely across regions, industries and employers. But still private-sector pay growth outpaced feds’ pay—and, remember, feds started out way behind. 

It wasn’t supposed to be this way for feds. Congress took a serious stab at fixing this problem more than 30 years ago. Since then, federal employers by law have been meant to be enabled to pay competitively as compared to the private sector. So, feds under the General Schedule should have seen their pay track upward in tune with something called the Employment Cost Index (ECI). The ECI is a kind of lesser-known measure of inflation, one linked not to consumer prices but rather the price of labor—and especially in certain markets, for locality pay. The legislation behind these reforms was passed in 1990—the Federal Employees Comparability Act of 1990 (FEPCA)—bringing formulas aimed at accomplishing the goal of making agency salaries competitive

Having said all that, even with the reforms in FEPCA and protections for feds elsewhere in federal law, as every fed knows unlike COLAs for retirees pay increases for feds are in no way either automatic or guaranteed. 

For FY 2023, the president recommended a 4.6% increase including locality pay—and that’s what feds got. Not bad, historically speaking. 

Now, for this coming year—FY 2024—the White House has recommended a 5.2% pay increase, a proposal Congress will consider—along with ideas from some of its own—likely getting into this much later in the year. 

In the meantime, federal employee unions and advocates are pressing for an 8.7% raise. To get deeper insight on these proposals, Government Executive interviewed Jacque Simon, longtime director of public policy for the American Federation of Government Employees, which has more than 280,000 members across many agencies. 

Q&A with Jacque Simon 

Government Executive: Federal employee unions—including AFGE—are aiming for a 8.7% pay increase for FY 2024. President Biden wants a 5.2% bump. While AFGE praised the White House proposal—the biggest since the Carter years—AFGE thinks agencies must go higher—right? 

Simon: That’s correct. Pay is the central issue. Look, in recent years agency after agency is coming to the Office of Personnel Management for special pay rates—exceptions. They want recruitment and retention bonuses and direct hire authority, among other things. They want these exceptions because so many agencies are having all kinds of trouble with recruitment and retention. Why? The elephant in the room is that, simply put, federal pay is too low. 

Government Executive: On that issue, unions and experts spotlight Federal Salary Council (FSC) estimates showing a persistent pay gap of about 24% vs. the private sector—right?  

Simon: So, you know there is more to it than that—more dimensions to the pay gap. We've got data now measuring more than 30 years of the federal pay gap—very, very careful scientific measurements of the shortfall. Studies that carefully compare pay on a job-by-job basis, When the Federal Salary Council’s work on these comparisons started—after FEPCA was enacted in 1990—the average pay gap was about 25%. And today it’s almost the same. 

Government Executive: So, you’re saying an apples-to-apples comparison shows little progress? 

Simon: Right. Actually it’s worse. First, some studies show the shortfall to be sharper than the FSC’s numbers. Second, beyond base pay increases, the government paid only a half-percent more for locality pay—or some other small, nominal and usually inadequate increase. Third—as every fed remembers—several years saw pay freezes, and with those no increase for locality pay either. Not surprisingly, all this means the pay gap hasn’t really budged in the right direction. 

Government Executive: But the gap has narrowed for some years, right? 

Simon: The gap was a little bigger some years, a little smaller in others. But throughout it’s been a low- to mid-20s percent gap. Now, think about recruiting. We have this decades-long persistent pay gap, but in recent years agencies are really struggling to hire new people. And now we’ve got higher inflation simultaneously, worrying people even more. So, this is a time when government should be saying, “Let's stop playing around. Let's cut it out with inadequate inflation measures and fixes. Whatever we’re doing, we’re not getting pay right.” Right? In the federal government, we are very far from hitting average pay levels seen across the broader labor market. That fact alone also means that the government—in the outcomes of its annual pay deliberations—is not fulfilling the promise of federal law, FEPCA. All this adds up to we think the government should be saying, “Let’s make substantial progress on the pay gap over this next year, finally!” That's where our proposal for a higher increase comes from.

Government Executive: You mentioned the “ECI” as an index used to set pay—what is it? 

Simon: Sure. ECI stands for the Employment Cost Index. It is like the BLS’s Consumer Price Index, only instead of measuring the change in market prices for consumers on a basket of goods and services, it covers the cost of labor for employers, at different jobs across the economy. 

Government Executive: How did the White House arrive at the figure 5.2%, for its proposed pay increase? 

Simon: Under the law—that’s the Federal Employees Comparability Act of 1990—the ECI is used in the formula for employee pay increases. But the government didn’t want its formula to be equal to the ECI—that is, equal to the market cost for labor. They wanted to come in at half a percentage point below that. So that’s how the formula works. The most recent ECI was calculated at around 5.2%. So, you subtract 0.5%, and you get to 4.7%. But then President Biden proposed that, for this coming year, the government should take the 4.7% and add back in a half-percentage point, arriving at a proposed 5.2% increase. 

Government Executive: So, you’ve explained the math behind the White House’s proposed 5.2% pay increase. What’s the math behind AFGE’s 8.7% increase? 

Simon: Well, to get to our number we started with the government’s usual formula—you know, 5.2% minus 0.5%—getting you to a 4.7% increase. We and other unions and organizations we worked with did further calculations and came up with a need for another 4% on top of that—arriving at our proposed 8.7% boost. This would take a reasonable bite out of the ongoing pay gap—an actual bite, not just a half-percent or something, but a real bite. It would start to make up for years of far too little. 

Government Executive: Do you expect to get 8.7%—or beyond the White House-proposed 5.2%? 

Simon: I don't generally speculate on legislative outcomes. I'm not a lobbyist—I have tremendous respect for our lobbyists and others who do that. They do what they can.  

Government Executive: AFGE and its allies criticize piecemeal reforms—like higher pay for healthcare jobs at VA—saying these can worsen matters, so Congress should raise pay broadly? 

Simon: About the situation you’ve just described, specifically—yes, you’re right. Where Congress has allowed only certain departments to pay much more and only for certain jobs, outside of the GS system, while not addressing the broader issue of inadequate pay, that’s no solution. And we at AFGE want people to know the GS system is a superb system—specifically because it assigns salaries to jobs, not individuals. Whether you are male or female, young or old, abled or disabled—whatever you are—if you do the same job you can get the same pay. Few pay systems can honestly make that claim—generally, just systems negotiated by unions.

Government Executive: Why do you think special pay authorities are bad for the GS system, and why should feds and their advocates want to be very careful in protecting it? 

Simon: We have seen what happens when you go around or tear into the GS system—as happened with the short-lived NSPS [National Security Personnel System] years ago. I mean, in it, if you were a white male at the Pentagon you did fine, but often enough if you were not you didn’t do as fine. It let discrimination creep in. We don’t want that kind of pay discrimination. 

Government Executive: Right now, what one pay reform is needed most?  

Simon: Fixing the pay gap. FEPCA was supposed to have made sure federal pay was being funded properly—to bring it up to the market, to close the pay gap to within 5%. That law was passed more than 30 years ago! Look, you don’t choose to work for the federal government to get rich. But you also don’t choose public service so you’re forced to see your standard of living fall over time. That’s what has happened. For decades we have had periods of higher inflation, higher health insurance premium rates, and other higher costs to feds—and the pay gap still hasn’t been addressed. So now, pay is issue number one, number two, and number three.  

Government Executive: Are there other pay-related concerns in play here, for you and AFGE? 

Simon: Yes. Again, we’re also very, very concerned about agencies trying to expand excepted service authority. That’s where agencies can get around the GS system. We want to retain and strengthen the competitive service, the Civil Service. For so long, our country has had a tremendously high-quality federal workforce, which the GS helps us to do. We want to keep it that way. We also think Congress should repeal the retirement contribution increases it imposed over a decade ago. They take over 3% more, deducted from pay for feds who fall under it—and that is a straight up salary cut. The change was billed as paying for a temporary program—extended unemployment insurance—but it became permanent. It needs to be repealed.