Do Federal Workers Get Paid More Than Private Ones?

Yes, according to a new report by the Congressional Budget Office. As always in such comparisons, however, there are some caveats.

CBO summarizes its main results in this handy chart:

Report author Justin Faulk summarizes the findings as follows:

Differences in total compensation—the sum of wages and benefits—between federal and private-sector employees also varied according to workers’ education level.

Federal civilian employees with no more than a high school education averaged 36 percent higher total compensation than similar private-sector employees.

Federal workers whose education culminated in a bachelor’s degree averaged 15 percent higher total compensation than their private-sector counterparts.

Federal employees with a professional degree or doctorate received 18 percent lower total compensation than their private-sector counterparts, on average.

Overall, the federal government paid 16 percent more in total compensation than it would have if average compensation had been comparable with that in the private sector, after accounting for certain observable characteristics of workers.

Of course, a lot is riding on the phrase “certain observable characteristics.” CBO did an extremely careful job of measuring total compensation and of controlling for observable factors such as education, age, and occupation. But many other factors are impossible to measure. CBO’s summary mentions effort and motivation. There are also issues such as job security and developing valuable skills and knowledge.

5 thoughts on “Do Federal Workers Get Paid More Than Private Ones?”

  1. I believe this analysis can be greatly simplified: the metric that best indicates if total compensation is too low or high is attrition. High attrition indicates that workers have found better oppotunities in the job market. Conversely, low attrition indicates that better opportunities are not luring workers away. Attrition, I believe, also accounts for how indiduals value things differently. E.g., if I place a higer value on a 40 hour work week than I do on a higher salary, I may appear “under paid”, but my decision to not leave belies the fact that I am paid, at least, a clearing salary.

    Unfortunately, we live in a time where many people think they are underpaid while simultaneously understanding that if they lost their job tomorrow, they likely couldn’t find a new job with equal, let alone higher, total compensation.

    High or low can only be judged against the opportunity cost.

    That’s my mental model, anyway. Which, by the way, implies that most people are actually overpaid.

  2. CBO’s criteria for comparability included “Demographic characteristics (age, sex, race, ethnicity, marital status, immigration status, and citizenship).” Why are these relevant? Isn’t it possible that the private sector discriminates (pays lower compensation) along some of these dimensions and the government doesn’t? Is CBO implying that the federal government should underpay women or minorities or the elderly just because the private sector does?

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