Federal Workers Overpaid, and CBO Agrees

article top
Photo: Emily Metcalf

Here’s some news that federal bureaucrats in Washington — and indeed around the country — don’t want to hear: According to a Congressional Budget Office (CBO) report released this week, federal workers are paid higher than their private-sector counterparts.

The “alarming news” hit the national media yesterday, but there’s a funny thing about the report. None of it is really “news” — in fact, The Heritage Foundation long ago uncovered the truth about federal pay. The CBO’s report this week was spurred in part by two years of work on federal compensation conducted by Heritage the American Enterprise Institute.


In July 2010, Heritage’s James Sherk explained that Americans are overtaxed to pay the civil service. Salaries and benefits–for identical jobs–are 30 percent to 40 percent higher in the federal government than in the private sector. And in June 2011, Heritage’s Jason Richwine authored a study showing that workers who change jobs receive a substantially larger raise when they switch into federal employment rather than into another private job. In fact, Sherk testified before Congress on this very subject in March 2011, bringing the fact of the pay disparities to the House’s attention:
The federal pay system unnecessarily inflates federal pay. My research shows that, on average, federal employees earn hourly wages 22 percent higher than otherwise comparable private-sector workers. Numerous studies by researchers whose personal views span the political spectrum come to similar conclusions.

Federal employees also receive premium benefits. They receive both a defined-benefit and defined-contribution pension plan, can retire with full benefits at 56, and receive significantly more paid leave than their private-sector counterparts. Accounting for the value of these benefits raises the federal compensation premium to between 30 percent and 40 percent above similar private-sector workers. All told, the federal compensation premium will cost taxpayers $47 billion this year.

Their analysis drew significant and at times vicious criticism. Office of Personnel Management Director John Berry described their work as “a misinformation campaign.” The public-sector employee unions weighed in, of course, with the National Federation of Federal Employees calling our work “lies;” the International Federation of Professional and Technical Engineers labeling it “scapegoating;” and Colleen Kelley of the National Treasury Employees Union smearing the work as “self-serving, self-created data.” Their attempt to deny reality and attack the messenger isn’t surprising. After all, those unions exist to inflate the wages of those they represent, and the taxpayers are the ones left footing the bill.

But the unions weren’t the only ones on the attack. The liberal ThinkProgress blog asserted that Heritage’s work was “riddled with errors” and that the “claims are baseless.” Meanwhile, Economic Policy Institute President Lawrence Mishel said that the idea that federal workers are overpaid is “a conservative myth.”

Despite the criticism from the left, Heritage continued making its argument, explaining its methodology, and carrying the message that, based on the research, federal workers are in fact overpaid and that action is warranted. Specifically, Congress should implement a pay-for-performance system, expand the contracting of federal work to private companies, reduce the generosity of federal benefits, and end the near-absolute job security for underperforming federal workers. Now it’s time for the critics on the left to recognize this truth and get on board with reality.