Federal Compensation: Adding transparency to a neglected area

For nearly 200 years the salaries and benefits of federal employees were less than the compensation of workers in the private sector. This differential was deemed appropriate because of the greater job security enjoyed by federal employees, and it was maintained by exempting federal compensation from collective bargaining. It was acknowledged that in the private sector there was a balance of power between company management and a workers’ union which made such bargaining feasible, but a similar balance did not exist between federal managers and their employees.

The system worked well for many years, but in 1960 federal employee unions were granted the right to collective bargaining and the compensation of federal employees began seeing increases that carried it well above those in the private sector. In addition, Congress created a private health care system that is limited to federal employees and is superior to the plans offered to the public.

Today, compared to private-sector workers, federal officials enjoy a pay differential often exceeding 20%, generous pensions, greater job security, and a superior health care system.

When the distribution of personal income across the country is examined, one might expect to see the highest incomes at free enterprise, wealth-producing centers. But recent national census figures show that is not the case, with seven of the top ten counties of the country (ranked by personal income) clustered in the metro Washington DC area. This is an unintended and undesirable consequence of the 1960 policy change.

This inequity demands our attention.

We must separate the setting of compensation policy (by Congress) from the

administration of policy implementation (by a non-partisan professional department).

Requiring Congress to publicly articulate compensation policy will impose transparency on their actions and reduce cronyism. With this reform, federal compensation will be set through rational processes, not by political forces.

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