Key players driving President Trump’s management agenda championed plans to freeze federal pay and cut retirement benefits, while raising as many questions as answers at a civil service forum Wednesday.
Office of Personnel Management Director Jeff T.H. Pon and Office of Management and Budget (OMB) Deputy Director Margaret Weichert discussed the need to attract the young and talented, with no acknowledgment that freezing pay and cutting benefits might do just the opposite.
How a pay freeze and retirement cuts could help recruitment is one question that remained unanswered during the Public Service Recognition Week session sponsored by the Partnership for Public Service and the Volcker Alliance.
The administration sent Congress plans to slash retirement programs by $143.5 billion over 10 years last Friday. It was a strange way to demonstrate appreciation for federal employees on the eve of events honoring them. Trump had earlier called for a federal pay freeze in 2019.
Pon seemed to disagree with the concept of a general pay freeze when he indicated his distaste for across-the-board approaches to pay.
“When people say freeze, it means freeze across the government,” he said. “I’m not one for a peanut butter approach of how to compensate people. I’m looking more towards, ‘Hey, are we overpaying and underpaying different types of occupations’ and using those funds to actually … adjust some of the underpaid jobs and the overpaid jobs. It’ll take care of itself with attrition.”
“Peanut butter approach” describes the administration’s planned pay freeze. It would be spread widely, without regard to occupation. In fact, Weichert’s boss, OMB Director Mick Mulvaney, has said that highly educated federal professionals are underpaid compared to their private-sector counterparts, even as he advocated freezing pay for all.
Weichert explained that “the issue of the pay freeze was to get the data to more narrowly look at total compensation.” How freezing pay aids data collection was not explained.
“The one thing we know for sure is to attract the talent, particularly the younger talent, retirement as a piece of that broader puzzle needs to be more flexible,” she added. “It needs to be much more aligned to the way the younger people are being compensated with portable retirement programs.”
Toward that end, the administration promotes defined-contribution 401(k)-type plans that individuals could take with them as they move among employers. But who wants retirement programs, no matter how portable, that would be worth $143.5 billion less than those available today?
The proposed retirement cuts include eliminating supplements for Federal Employees Retirement System (FERS) annuitants who retire before Social Security eligibility, reducing federal pensions by basing them on workers’ basic pay five-year averages instead of three years, increasing most individual retirement contributions from 0.8 percent of basic pay by 1 percentage point each year until reaching 7.25 percent, and reducing or eliminating retirement cost-of-living adjustments for current and future retirees.
Calling these “modest proposals” compared to the $8.1 billion the government spends every month on retirement, Pon said. “I want to make sure that the federal employee can actually own their investment and can take it with them. … And that’s a key component for updating the workforce. I don’t believe that we should look at a federal job for 30 years and then retire and then have, you know, lifetime retirement anymore.”
Rather than pretending less is more, administration officials might consider a more candid approach, as Weichert did when she called the retirement program “a huge expense.”
Weichart also promoted the administration’s proposed “billion dollar workforce fund,” which she said would provide “incentives for recruiting and retaining the highest and best talent.”
“The goal is not to punish,” she added, though feds who would be whipped by the freeze and cuts probably feel little comfort from her assurance. “The goal is obviously not to be out of alignment with the market.”
The market argument is a mantra of Republicans who have long argued that federal benefits should be more aligned with the private sector.
That raises another unanswered question.
“Why,” asked a reader’s letter, “should federal benefits be brought in line with those in the private sector? The private sector has been progressively impoverishing American employees during the last few decades. Why should our government endorse their baleful example by following it? Why shouldn’t our government, instead, set a good example on pay and benefits? In fact, why shouldn’t both private and public sector rank-and-file employee compensation be increasing?”
That’s a good question, particularly doing a period of decreasing unemployment and increasing competition for talent.
If you like pay freezes and retirement cuts, stay tuned. If you don’t, be warned.
“You should see some other conversations that we will have in the future,” Pon said, “for restructuring the whole compensation for the federal government.”