Federal vs. private-sector pay: No comparison is definitive, auditors say

Various studies have used different methods and data in reaching opposing conclusions about how federal and non-federal pay compare, but no one approach is definitive, according to a Government Accountability Office report released Monday.

“Simply put, the differences among the selected studies are such that comparing their results to help inform pay decisions is potentially problematic,” the report said. “Given the different approaches of the selected studies, their findings should not be taken in isolation as the answer to how federal pay and total compensation compares with other sectors.”

The GAO examined six recent comparisons of federal and
private-sector pay, including one performed annually by the Bureau of Labor Statistics that is used to set the official estimate of the “pay gap”; the 2011 report found federal workers behind by 24 percent, on average.

However, reports by conservative or libertarian think tanks, including the Heritage Foundation, the American Enterprise Institute (AEI) and the Cato Institute, as well as the budget watchdog group Project on Government Oversight (POGO), have found that the shortfall runs in the other direction by that much or more. This year, the Congressional Budget Office (CBO) essentially split the difference with a report finding federal employees ahead by 2 percent on average.

The GAO said the government’s study and POGO’s use a “job-to-job” approach to try to compare pay for similar jobs based on job-related attributes such as occupation and level of work. The Heritage, AEI and CBO reports try to compare pay for individuals taking into account personal attributes such as education and job experience, as well as other attributes such as occupation, locality and size of employer. The Cato report focused on trends in pay over time without controlling for attributes of the workers or jobs, it said.

“The studies’ differing conclusions on the overall pay disparity between federal and private or nonfederal workers were affected by their basic approaches. . . . Within each approach, conclusions differed due to studies’ specific methodologies,” the GAO said.

Experts in compensation issues also had different views of which method of comparison is best, further proof that who makes more is largely in the eye of the beholder.

The debate over public-sector vs. private-sector pay has existed for years, and its political implications have intensified in recent years as new outside studies have challenged the government’s findings that federal employees are substantially underpaid, on average.

Chris Edwards, director of tax policy studies at the Cato Institute, a conservative think thank, and author of several papers concluding that federal workers are overpaid, acknowledged Monday that “it’s hard to make an overall sweeping assessment” of whether private- or public-sector employees make more.

He said the fairest way to resolve the debate is for the government to hire an outside consultant to develop a new comparison methodology.