Tuesday, December 7, 2010

A thought or two on the proposed federal pay freeze

As a federal civil servant I generally support the pay freeze President Obama intends to seek and that he will undoubtedly get from the Republican Congress. Assuming that we won't have a budget until the new Congress begins after the first of the year, the pay freeze, which basically results in federal employees not getting cost-of-living adjustments for the next two years, the likely result is that the proposed 1.4% COA proposed for this year will not go into effect. Of course, the proposed 2% reduction in Social Security withholding set forth today by President Obama will off-set this loss and even result in a net .6% gain. On the one hand, this relief is good because it applies to all workers, not just federal employees. Nonetheless, it seems bizarre to me to reduce the amount of money going into Social Security given its rapidly approaching insolvency.

My only trouble with the proposed freeze on federal wages is that it is a political reaction to the apparent fact that, compared to the average worker, federal employees make significantly more money. No doubt, in many cases this is true. I am on the end of federal employment that should have no difficulty dealing with the proposed freeze. So, I am perfectly willing to forgo COAs for the next few years, even until the economy turns around. However, averages are deceptive. For example if one worker makes $100,000 and another worker makes $30,000 the average salary of the two workers is $65,000. Now, say using the $65,000 average as your baseline, you propose a 2% across-the-board decrease in pay. This means $600 for the person making $30,000 and $2,000 for the person making $100,000, which is a significant bump for both, but who does it hurt more? Stated positively, who is in a better position to help, or what best serves the common good? This simply highlights my problem with the Republicans' insistence that everyone be treated "equally" when making these kinds of difficult decisions.

My point is that not all federal workers are highly paid, many make quite modest wages. So, it seems that there should be a cut-off. I would suggest that the cut-off be the computed average salary of a non-federal worker. Any federal employee making that or less should be exempt from the proposed cut. Let's also remember that federal employees will also absorb a 7.2% increase in health care premiums as a result of the ill-advised health care reform. Fighting for equity seems a golden opportunity for congressional Democrats to stand up for lower paid federal employees. As is appropriate, none of this affects members of the U.S. military. On the whole, there are 2.1 million federal workers, which is a large work force, no doubt. When you stop to consider 2.1 million civil servants, serving a country of some 360 million people, you are talking about less than 1% of total population. Of course, 2.1 million constitutes a higher percentage of the work force.

Such a move is like cutting government spending by implementing, say, a 10% across-the-board cut, which is ham-fisted, short-sighted, and inequitable. For instance, in Utah public education is already underfunded. Hence, you do not want to cut 10% from the education budget! By the same token, programs that benefit the disabled, children, and those who have serious material needs must be considered in a different light than cuts in some other areas.



  1. Do all federal employees get a pension?

    the only government employees i am familiar with is with the city of Chicago, with whom sedveral of my family members in the older generation used to be employed.

    the pay for these people used to be less, but there were more job protections from being laid off, plus there was a guaranteed pension plan that one had.

    in the 90's, as a new adminstration came in, salaried employees pay increased on the level as that of the private sector and also kept other benefits as good health coverage and a guaranteed pension.

    Now, as the private sector shifted to 401k's (seeing the problems of having to finance such a long term liability such as pensions), and have steadily increased employee premiums of health care benefits, city employees enjoyed a much reduced rate of health benefit premiums than the private sector, and their guaranteed pension plans (based on their increased salaries) were also protected. This has caused an increase in all sorts of fees and taxes in order to pay for these liabilities and high salaries.

    So, while i'm not sure about federal benefits, salaries, and all that, in the city, employees have guarantees and price protections (along with comparable salaries as private sector), and also have job protections because they are civil service.

    Clearly, there has been a great disparity between those whom government employees and those who have seen their 401k's evaporate, their health premiums double, and their health care benefits decline.

  2. Federal Employees have Federal Employees Retirement Systems (i.e. FERs). A full pension comes after 30 years of service and reaching a certain age, or twenty years of service if you began civil service later. To retire earlier, you take a huge penalty, which basically results in this portion of your pension disappearing. So, a full pension is 30% of the average of your high three years of earning, or 20% for others. This is funded largely by contributions federal employees have withheld from our paychecks.

    Additionally, we have Thrift Savings Plan, which is our version of a 401K. This comes with matching up to 5%. So, if you put 5% or more of your paycheck into this you are matched percent for percent up to 5%

  3. The city of chicago has a sweet deal, because their full pension percentage is about two-thirds average of their last 3 years.
    maybe i'm just jealous because the prospects of my retirement before the age of 70 looks extremely grim right now, especially after the difficulty of the past few years.
    But alas, my story is no different from countless others. we're all in this mess together, i suppose.

  4. I certainly hope you are not obligated to work until 70. Once the economy gets turned around, hopefully on firmer footing, things will change, especially regarding to everyone's long term welfare- retirement and housing.


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