Federal Pay Still Lags Private Sector at the Top

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Written by John Schmitt   
Wednesday, 10 November 2010 15:42

USA Today has a big, front-page story today reporting that the "number of federal workers earning $150,000 or more a year has soared tenfold in the past five years and doubled since President Obama took office."

The piece provides a lot of useful numbers, but is short on context. As written, headlined, and positioned in the paper (the biggest story in the paper today), I'm concerned that the story will be used primarily as ammunition to argue that federal workers are overpaid.

First, some of the key numbers in the piece are not adjusted for inflation. The chart accompanying the text shows the share of workers who made more than $150,000 per year in 2005 --in 2005 dollars-- and then shows the share who made more that $150,000 per year in 2010 --in 2010 dollars. Even if federal salaries had not increased at all in inflation-adjusted terms over those years, salaries would have been about 12 percent higher in 2010 than they were in 2005 (that was how much inflation there was between 2005 and 2010). This would have pushed workers who were as much as 12 percent below each of the various salary cutoffs above those cutoffs, even if there had been no increase in their after-inflation pay. This effect may or may not be important here, but it is impossible to tell from these data. At the very least, USA Today should have noted that the figure did not adjust for inflation.

Second, the piece does not provide any comparison with the private sector. Federal workers make up a small share of the total US workforce --about 2.1 million workers out of a total civilian workforce of about 139 million in 2010. As USA Today reports, currently about 3.9 percent of federal workers earn more than $150,000 per year. The report does not mention, however, that this is very close to the figure for the economy as a whole. According to Social Security records, in 2009 (the most recent year available), 3.2 percent of workers earned more than $150,000. The small difference here is particularly remarkable given that federal workers are both substantially better educated (more college degree holders, more advanced degree holders) and older than the average private-sector worker.

Third, even the numbers that do make comparisons with the private sector (and appropriately adjust for inflation) place more emphasis on the higher pay increases for federal workers than on their relatively low starting point. As the story mentions, only 0.4 percent of federal workers in 2005 earned more than $150,000 per year. In that same year, according to Social Security records, 1.7 percent of all workers were in that range . On its face, it seems plausible that first the Bush administration and then the Obama administration have only acted to close the gap between federal pay and the rest of the economy. This is almost certainly the case, for example, with medical doctors. As USA Today notes: "Medical doctors at veterans hospitals, prisons and elsewhere earn an average of $179,500, up from $111,000 in 2005." In 2005, $111,000 was a very unattractive salary for a medical doctor; $179,500 today is much more competitive with private-sector doctors, but still low for experienced doctors, especially those in higher-paying specialties.

Finally, the piece does not mention that the data on federal pay tops out at $400,000 (the President's salary) and only a tiny fraction of federal workers are much above the $180,000 mark. By comparison, in 2009, Social Security records show that almost half a million people (about 0.25 percent of all workers) earned $400,000 or more, and about 1.9 million (0.8 percent of all workers) earned $200,000 or more. These ultra-high-earners, who are almost exclusively in the private sector (the President and a few other very senior officials are the only exceptions) are an important reference point for the top tier of federal workers --upper-level managers, physicians, lawyers, and other highly skilled workers-- that are the focus of this piece. For example, over half of the 16,912 federal workers that earn more than $180,000 (up from only 805 in 2005) are medical doctors.