As the president and Congress continue to seek ways of paring the deficit, the efficiency of federal civilian employees deserves stern review.
The president's now-defunct plan to cut government salaries by 5 percent would have touched only the tip of the iceberg, providing only minimal savings and not addressing the real issue: the shortcomings of federal employee compensation.
Both the Carter and Reagan administrations have analyzed factors affecting public-sector efficiency and motivation. The recent Grace Commission Report cited literally thousands of areas where government efficiency may be improved. A commission I chaired for President Carter in 1978 studied potential improvements in compensation for the military. These studies and other examinations have produced similar alarming conclusions on the personnel practices of the federal government. Among these:
* Civil Service retirement programs are weighted too heavily on deferred compensation, to the detriment of current salaries.
* The proportion of middle-and upper-level managers in the federal government is nearly three times that of the private sector.
* Ironically, almost half of the highest federal executives are underpaid by 50 percent in comparison with peers in private industry. This is a leading cause of "brain drain" among senior federal employees.
The emphasis on retirement benefits over current compensation is supported by the fact that the cost of Civil Service retirement is 29 percent of the cost of payroll, as compared with 14 percent in the private sector. If the Civil Service retirement program were funded as are private sector retirement plans, the federal retirement cost would rise to 85 percent of payroll. Further, Civil Service retirement benefits are treble that of the private sector.
Does this matter?
It matters at three levels. First, at the entry level, the government has trouble attracting and retaining the most promising young technical and other specialized employees. I learned, for example, that at one point not too long ago one vital department had 675 entry-level engineering jobs unfilled -- half its recruiting complement.
Young employees incur expenses that must be paid on a current basis. As a banker, I'll attest that creditors generally won't wait patiently for 20 years before they are paid. Young people need a boost in income today. Often they find it by opting for jobs in the private sector.
Second, at the mid-career level, many federal employees feel "locked in" to a position, more or less "serving time" until theycan collect retirement benefits. From a federal employee's viewpoint, the option to leave government service is financially imprudent after around 10 years of service because of the extensive retirement benefits that would be lost. When an employee makes that career decision, his morale and productivity can nose dive. This worker's poor morale often has an equally harmful effect on co-workers.
Third, among seasoned employees, there is a tendency to retire young. Average retirement age in the Civil Service is 55, versus 63 in the private sector. Only 10 percent of Civil Service personnel eligible to retire before 60 remain at work. With pay below the private-sector level and generous retirement benefits indexed to inflation accrued, the current federal compensation structure encourages early retirement. The result is knowledgeable career employees' retiring early to capture attractive retirement benefits over the maximum number or years. An additional "brain-drain."
The problems with federal compensation structure are compounded by a topheavy management. I was surprised to learn that a full 72 percent of the government's management personnel are graded at GS11 or above. Only 28 percent of the managers are graded GS5 through GS10.
The fault for all of these compounding problems does not lie on the shoulders of any particular agency or administration. Rather, the overall governmental decision-making process encourages glossing over difficult issues in lieu of addressing them directly.
This flaw has resulted in a series of "quick fixes" in place of a permanent, long-term solution. I propose that we need to:
* Improve current pay relative to retirement benefits.
* Make pay and benefits competitive with private-sector markets.
* Pare the number of Civil Service managers.
* Appraise the cost/benefit at all levels of the service.
These items will alleviate the loss of talented executives to private industry, restore a pyramid managerial structure, raise morale among all levels of federal employees and bring a greater efficiency to the Civil Service.