President Obama has announced that he is proposing that Federal Salaries should be frozen for the next two years in order to save about $20 billion. I don’t think it will, for several reasons.
In the first place, most Federal employees do not earn a spectacularly large salary for the work they do. The really high salaries are paid to presidential appointees who are heads of departments (i.e. the Departments of Defense, Interior, Treasury, etc.), or who are heads of bureaus or agencies (i.e., the Department of the Army, Interior’s Bureau of Land Management, etc.), or who are their top assistants. Then there are political patronage appointees: people who helped out in the election campaigns, or who contributed campaign money, or to whom some political favor is owed. Man of these appointees are questionably qualified for the GS-13 grade or above salaries they receive. The most outrageous abuse of this political patronage that I saw was what we called “the brat squad.” These young people were only recently out of college with little or no experience, they were hired as GS-13s, and most did little or no real work.
I suggest that while political appointees are necessary at the highest levels to accomplish the agenda of the political party in office, an elimination of all but the essential minimum of such appointments would serve as a more effective way to cut Federal spending.
A GS-13 is generally a senior, supervisory, or managerial position. This year, the base rate for this grade will pay, at the highest level of the grade, over $93,000 per annum. A GS-14 will top out at $110,000, while a GS-15 can earn up to $119,000. The pay schedule for members of the Senior Executive Service (the highest managerial levels) provides a pay range of between $119,554 and $179,700 per annum. The question is whether these executive levels are reasonably comparative to what they could be earning in the private sector. If they are not, shouldn’t their salaries be adjusted up or down as appropriate?
The lowest Government pay level starts at around $17,000 and goes up to about $22,000 per year. A college graduate will start at either the GS-5 level or the GS-7 level. The GS-5 level pays about $30,000 to start and could rise, if the employee is never promoted, to about $39,000 per year. The GS-7 range is about $33,000 to about $44,000. Employees can advance, if they are sufficiently competent, up to the GS-12 or GS-13 level at agency offices and to the GS-13 or GS-14 level as senior employees at the departmental offices. Supervisory or managerial employees can advance one or more additional levels. Regional and area offices have correspondingly lower pay levels. These are the basic rates. Some cities with high cost of living indexes, such as Washington, D.C., New York City, and Boston, have locality adjustments to the base rates. A basic question is whether grade levels approximate the pay, difficulty, and responsibilities, of positions with similar difficulty, duties, and responsibilities, in private industry. Allegedly, they do. If this is the case, then is it reasonable to freeze the pay?
It is my belief that, at a minimum, the lower graded positions should not be penalized by a salary freeze in the current economic conditions. In addition, I believe there is merit to the higher levels of pay, since these positions should be paid sufficiently well in order to attract and retain highly qualified people who can earn similar or higher pay working for private industry. If the President and Congress are not willing to authorize appropriate pay, then the press and the public must direct their criticism for lower levels of service more appropriately.
Second, I believe that a salary freeze will adversely impact or even eliminate the alleged savings to be obtained. I think that many employees will decide to retire rather than accept the impact that such a freeze will have on their annuities. I am a retired Federal personnel specialist and handled retirements in the various departments and agencies where I worked for a large part of of my 30 years of service. The reason I believe that these retirements will significantly reduce the alleged savings is that, no matter what the pay grade of the retirees, the vacancies they create will be filled if employees are needed to do the work. This will usually be accomplished by promotions from below, with the same domino effect all the way down to the entry level. If all of the retirees are replaced , the amount of salaries actually paid during the freeze will be somewhat lowered, This is because people who are promoted usually will be at a lower level in the pay spread for their new grade level.
However, a large exodus of employees due to the salary freeze will significantly increase the costs of the Federal retirement systems and of the Social Security benefits to which many or perhaps most of the retirees are entitled. Retirees under the old Civil Service retirement system who have 30 years of service will receive an annuity of about 56% of the average of their highest three years of pay. The newer retirement system provides for a less generous base annuity amount. Were estimates of these costs considered in the announced cost of the freeze savings?
Third, I suggest that if hiring (including promotions) is frozen or if the vacated jobs are abolished to compensate for the increase in annuities and benefits, and assuming that someone is needed to do the work, Government agencies are authorized to hire contractors to do it. In fact, such contracting has been going on for over a decade on the theory that this is less expensive than paying an employee. The Government has alleged that savings in the Government’s portion of the costs of health benefits, life insurance coverage, its contribution to the employees’ retirement fund, and the matching of up to 5% of an employee’s pay that is put in the Thrift Savings Plan, warrant the use of contractors. The latter is a retirement supplement to the Federal Employees’ Retirement System, a less generous retirement annuity than that paid under the old Civil Service Retirement System and is optional for the employee. These benefit payments cost an additional amount over and above an employee’s gross pay, or an amount equal to about 19% of the gross pay.
Contracting out does not appear to me to be cheaper than the cost of having an employee do the work. I worked for a contract company that placed me in a Goveryment agency area office for a little over a year shortly after I retired. I was paid about the same hourly amount as I earned while working. I worked 20 hours a week. I performed work that could have been assigned to an employee who was three or four grade levels lower than I was when I retired. Obviously, my employer, the contracting company, had to pay its staff (including both office staff and its sub-contractors), office expenses, health and life insurance, and Social Security and Medicare taxes. These costs are included in their charges to the Government.
Since I was assigned to work in a Government agency’s personnel office, I was able to learn that the contracting company was charging the agency more than double what they were paying me, which was an amount larger than what the agency would have paid an employee at my grade level to work full time. It seems to me that is twice the price for half of the work.
I submit that the practice of contracting out while telling the public that the number of Federal employees has been cut should be closely examined by an outside body to determine whether there are significant savings in this practice. I also suggest that this pretense of having fewer Government employees is tantamount to a lie, and the total number of employees and contract employees should be included when such numbers are announced.
It seems to me that every time budget cuts are considered, Federal employees are at the top of the list. We were truly a whipping boy the year President Carter decided to save money by turning off the hot water in Federal buildings. I had chapped hands all winter. I’ve lived through several lay-offs where bonuses of up to $25,000.00 were paid for employees to take early retirements to avoid firing employees with fewer years of service (and many of those were replaced with contractors).
There were several years when the cost of living increases mandated by Congress were lower than the actual increase in the cost of living. When Federal salaries reached the point where they were really bad, the first President Bush mandated an incredibly large cost of living raise.
I remember the year that all but the most essential employees were furloughed for about two weeks without pay because Congress didn’t get around to passing the budget for the department I worked in. I was a single parent and not a very high-graded employee. I couldn’t pay my mortgage. I was terrified, but my mortgage holder waived the payment for that month. Congress later decided to pay us for the two weeks of its inaction, which was gratefully received, but its inaction caused a huge, avoidable waste of money. Morale drops when rumors of such events begin to spread and when they actually occur.
It seems to me that an efficient work force should be a priority for the Government. I suspect that, if politics were not involved, there are many kinds of extravagant spending that could be eliminated. The legendary several hundred dollar airplane toilet seats come to mind as an example. What about some of the Government-funded globetrotting that many highly-placed officials (and their entourages) do, or the eternal pork-barrel projects that some Congressmen and women dream up? Or do we really need to engage in or continue unwarranted wars?
President Obama, Congress, if you must consider freezing Federal salaries, first look at whether the salaries are fair. If they are too high, sure, reduce them. If they are not, find pockets of real financial waste and eliminate that. Actually, I think you should do the latter, anyway.