President Carter yesterday approved a 7.05 per cent wage increase to sweeten pay day beginning Oct. 1 for 1.4 million federal white-collar workers and 2 million military personnel around the world.
In the Washington area, more than 360,000 workers will receive the raise, a concentration of employees that will mean a market impact on the local economy. This raise, combined with expected boosts in blue-collar pay and some pension checks, could pump an additional $60 million or more a month through the federal pay pipeline here.
The annunal federal pay raise is designed to keep federal employees' pay on a par with their counterparts in private industry. This year it will increase the average salary of the white-collar worker in the Washington area from $19,430 to $20,800, according to the Civil Service Commission.
In the lower ranks, a typist starting out in grade 3 who made $7.408, for example, will earn $7.930 when the pay raise goes into effect.
At the top levels, the raises will be smaller and in some cases, nonexistent, since, by law, federal career salaries cannot go over $47,500. Thus, for a first-year manager in grade 17, the raise will be from $46,423 to $47,500. Above that, for bureau chiefs, general counsels and other top managers in grades 17 and 18, salaries remain at $47,500.
There is likely to be a noticeable impact" in three aspects of the economy in the Washington area, according to a spokesman for the Washington Board of Trade:
An increase in disposable income, boosting consumer purchases and savings.
An increase in the taxable base, as the salaries go up, for local jurisdictions.
New "benchmarks and examples" for other industries, or in other words, a "ripple effect," with a possible, but unpredictable impact on everything from bread to housing costs.
"I'd expect an increase in business in color TV sets, tape recorders, and other luxury items," ventured Frank Slattery, of Slattery's Television and Appliances, at 4309 Wisconsin Ave, NW, a veteran of 27 years in the trade.
Gloria Thrasher, an agent for Shanon and Luchs real estate, said that when a government person does get some extra funds monthly he usually moves."
It is an axiom around Washington that when federal employees get a raise, prices for everybody immediately take a little jump. However, many businessmen and merchants were reluctant yesterday to speculate or comment on how the raise will affect their decisions on prices or employee salaries.
Nationally, the impact varies from region to region, according to municipal associations around the country. In northern cities, where federal salaries may be lower than those paid in private industry, the competition between the two is not so dramatic.
But in parts of the South where federal salaries are much higher than local pay levels, a federal pay raise can result in intense pressure to increase local pay.
In the Washington area where the federal presence is large and where District government emploees get the same raise as federal workers, the reactions tend to vary form one jurisdiction to the next.
A spokesman for the American Federation of Government Employees, which represents directly some 300,000 federal workers, said that "probably the rents will to up, the impact of the pay raise will ripple through the area," and "everybody will be talking about inflation in a couple of weeks."
While the average federal white-collar salary for the Washington area will go up to $20800, the nationwide average will rise from just $16,510 to $17,674. The reason the Washington average is so much higher than the national average, according to a spokesman for the Civil Service Commission, is the high concentration of "high-priced," top-level civil servants here at the seat of government.
The 7.05 per cent pay increase will cost the government about $3.4 billion, an amount currently provided in the budget.
Representatives of federal employees' unions, whose advice the President is required to consider in deciding a pay raise, had recommended an 8.8 per cent pay raise that would have cost an additional $850 million, the White House noted in a press release.
The President took into account the recommendations of two other advisory panels, in addition to the union panel, one made up of "management" - office of Management and Budget Director Bert Lance, Secretary of Labor Ray Marshall and Civil Service Commission Chairman Alan Campbell. The third advisory panel included expert representatives of the private sector.
The management panel recommended the 7.05 per cent pay raise and the private sector group concurred.
The President could have recommended his own alternative, as have some of his predepressors, to hold down the raise or to postpone it in some way, administration officials said.
"We can't say we're unhappy, overall," said a spokesman for the AFGE, which participated in the advisory panel. Though the unions did not get the 8.8 per cent they had asked for, the spokesman said, the administration made some changes in the process that pleased the unions. In contrast, half the union advisory panel had walked out during proceedings with the previous administration.
This time, the spokesman said, all three members of the administration's management panel (Marshall, Campbell and Lance) had taken an active interest in the decisionmaking process. "Previously, the principals were involved only when it was time to sign on the dotted line."
Previously, also, the Secretary of Labor had not been included in the process, he said.
The unions objected to two other areas of the decisionmaking process: the time lag (seven months) between the time of the survey on which the salary levels are based, and the scope of private sector firms included in the survey.
"The problem with federal pay raises is that they reflect what happened in the economy seven months earliler. They 'took the picture' back in March. They just developed it. So in a sense, we're just catching up."