The Fed Boat: A Career on Cruise-Control

On February 5, the Washington Post reported that President Obama and his emissaries – particularly in the federal-employee-intensive enclaves of the D.C. suburbs in Virginia and Maryland – were sounding the alarm of a potential furlough if the dreaded sequester (automatic spending cuts) went into effect.  On Friday, March 1, with no alternative agreement among the White House, the Democratic-controlled Senate, and the Republican-controlled House of Representatives, the sequestration took effect.  As of March 7, no furloughs of federal employees had yet occurred.

To be sure, only the smallest of violins are likely to be played, if federal employees, perceived by many outside the Beltway to be inefficient and overpaid, are furloughed.  This stereotype may be unfair, but, at a time when too many workers in our economy’s private-sector engine of growth remain underutilized or, worse, unemployed, it is worth noting how insulated the federal workforce appears to be.

In Washington circles, it is fairly understood that, after three years of satisfactory performance, federal employees are virtually “un-fireable” – except in the cases of the most blatant workplace transgressions.  USA Today reporter Dennis Cauchon wrote on July 19, 2011 that, “the federal government fired 0.55 percent of its workers in the budget year that ended Sept. 30 [2010] — 11,668 employees in its 2.1 million workforce.  Research shows that the private sector fires about 3 percent of workers annually for poor performance, says John Palguta, former research chief at the federal Merit Systems Protection Board, which handles federal firing disputes.”

The newspaper’s analysis found that 60 percent of the firings occur in the first two years of employment, typically during probationary periods before federal job protections kick in, and that blue collar workers are twice as likely to be pink-slipped than their white collar colleagues.  Those earning $100,000 or more enjoyed a retention rate of 99.82 percent.  According to Cauchon: “Federal employees’ job security is so great that workers in many agencies are more likely to die of natural causes than get laid off or fired…  Only 27 of 35,000 federal attorneys were fired [in 2010].  None was laid off.  Death claimed 33.”

And then there’s the pay.  By 2009, 19 percent (or 383,000) of the 2-million-strong civilian workforce earned six-figure salaries.  FaceTheFactsUSA.org, The George Washington University’s (GWU) website arguably posted to shore up the image of America’s civil service, paints an interesting picture.  In its January 13 post, the website stated that the force is smaller than the previous half-century’s mean: “The federal government today employs fewer people than it has, on average, over the past 50 years.  In fiscal year 2011, 4.36 million civilian and military personnel were employed by the federal government.  That’s about 600,000 below the overall average from 1962-2011.”  While that may seem a positive trend to proponents of smaller government, another fact is also illuminating.

Based on GWU’s statistics, 5.2 million employees earned $210 billion in fiscal year (FY) 1964 (adjusted for inflation to 2011) in total compensation and benefits, as compared to 4.36 million workers earning $432.6 billion in FY 2011.  In other words, the inflation-adjusted compensation has jumped from $40,384.62 per employee in 1964 to $99,220.18 per capita today.  Meanwhile, the average American income, also adjusted for inflation, has remained fairly constant in the $43,000.00 range between 1964 and 2011.  While the workforce is a somewhat slimmer version of its earlier self, even GWU acknowledges that “we [now] pay them better.”

A January 30, 2012 report by the Congressional Budget Office (CBO), entitled “Comparing the Compensation of Federal and Private-Sector Employees,” reveals even more in regard to wages: “Overall, the federal government paid 2 percent more in total wages than it would have if average wages had been comparable with those in the private sector, after accounting for certain observable characteristics of workers.”  More specifically, federal civilian workers with no more than a high school education (20 percent of the workforce) earned 21 percent more than their private sector counterparts; workers with bachelor’s degrees or at least some college (60 percent) earned roughly the same in both the federal and the private sectors; and those with professional degrees or doctorates (while comprising only about 7 percent of the federal workforce) earned about 23 percent less than their private-sector peers.

The CBO report also describes benefits:  “On average, the benefits earned by federal civilian employees cost 48 percent more than the benefits earned by private-sector employees with certain similar observable characteristics.”  Average benefits in the federal sector were 76 percent higher for high school diplomates and 46 percent higher for those with bachelor’s degrees, while professionals and PhDs enjoyed roughly the same level in both sectors.  Finally, with regard to total compensation, after all pay and benefits are considered comprehensively, “the federal government paid 16 percent more in total compensation than it would have if average compensation had been comparable with that in the private sector, after accounting for certain observable characteristics of workers.”

The FaceTheFactsUSA.org report concludes with the following bit of hyperbole, aimed at pooh-poohing any criticism of the federal workforce: “Even if the federal government fired every single employee on its payroll today, it would only cut the $1.3 trillion budget deficit by one third.”   Nothing worth noting there – other than the $433 billion in savings.  Of course, nobody proposes cutting every single employee, thus eliminating the military, federal first responders, or the federal judiciary.  But the GWU gang has (perhaps inadvertently) careened into a harsher truth.  To wit, fully two-thirds of the budget is consumed by the inexorable increases in non-discretionary spending (Social Security and Medicare), along with the growing interest on the national debt.

That said, those in academia, such as the FaceTheFactsUSA.org crowd and their philosophical brethren, tend to dismiss the prospect of trimming the federal workforce.  Setting aside the best intentions and public-mindedness of government workers, Washington needs to have a much more fundamental conversation about whether the feds need to be engaged in all of these activities in the first place.  A lot of unnecessary programs and policies should be eliminated, while devolving others (read, non-federal) to states, where they more appropriately belong.

Otherwise, assuming the inevitable collapse of a top-heavy government that can no longer be sustained from below, even those cruise-control federal employees will find themselves in the same boat as their private-sector counterparts.  Unfortunately, that boat will make the Triumph – that ill-fated Carnival cruise ship with its outdoor tents, indoor plumbing travails, and ignominious towing to Mobile Bay – look, well, triumphant by comparison.