Correction:

An earlier version of this article misstated the methodology used in certain comparisons between federal and non-federal pay. Reports by the Heritage Foundation, The American Enterprise Institute and the Congressional Budget Office used a “human capital” approach, not a job-to-job approach. Reports by the governments and the Project on Government Oversight used a job-to-job approach, not a human capital approach. This version has been corrected.

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.

“As far as I’m concerned, the way it’s done now [by the Office of Personnel Management] is a big black box,” Edwards said.

A leading public employees union, however, said the GAO report confirms that neither approach to measuring pay — level of education or job description — gives enough meaningful information for a good comparison.

“It is clear from the report that neither the human capital nor the pay trends approach provides sufficient meaningful information to make a comparison,” Collen M. Kelley, president of the National Treasury Employees Union, said in a statement.

Federal pay rates were frozen in 2011 and 2012 at 2010 levels. No decision has been made regarding a potential raise in 2013. President Obama has recommended a 0.5 percent increase.

The House has voted several times to freeze federal pay rates for at least one more year, while the Senate this year rejected a continued pay freeze. Both the House and Senate versions of the key annual appropriations bill that traditionally determines the raise are silent on the issue, but several other House-passed spending bills assume there will be no raise.

Despite the pay freeze, employees remain eligible for various increases. For example, a step increase or within-grade increase is worth about a 3 percent boost and is paid every one, two or three years unless denied for poor performance. The GAO said that more than 99 percent of white-collar federal employees were rated above the threshold of “fully successful” in 2011, and 39 percent of employees received such raises, “comprising nearly all the employees who completed their waiting period.” Several percent also advanced a step as a performance reward. Employees also are eligible for ratings-based awards, the GAO noted.

In 2011, among those covered by a five-level rating system, awards averaging nearly $1,800 were given to 65 percent of employees at the top level. Awards averaging nearly $1,300 were given to 58 percent of employees rated the next level down.

The GAO added that while some of the studies further try to compare total compensation, including pay and benefits, others don’t — including the government’s study.

 
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