Federal Worker Pay: How Much is Too Much?

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Via Greg Mankiw, I see that the CBO is saying that yes indeed, most federal workers make more than their counterparts:


Differences in wages between federal employees and similar private-sector employees in the 2005-2010 period varied widely depending on the employees' level of education.

  • Federal civilian workers with no more than a high school education earned about 21 percent more, on average, than similar workers in the private sector. 
  • Workers whose highest level of education was a bachelor's degree earned roughly the same hourly wages, on average, in both the federal government and the private sector. 
  • Federal workers with a professional degree or doctorate earned about 23 percent less, on average, than their private-sector counterparts. 
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

The disparity in benefits is even larger; the CBO estimates it at 48% higher than comparable civilian employment.


As someone who has many family members who work--or have worked--at various levels of government1, this seems pretty unsurprising.  There's a reason that low-skilled workers are eager to get taken on at the Post Office.  As my father pointed out when we heard that Warren Buffett's secretary was making $60,000 a year, high-level secretaries in the City of New York were making more than that in the 1970s.2

I think we argue about this because people in the punditariat identify with the relatively small portion of the workforce that has professional degrees--not least because that is the portion of the federal workforce with whom reporters and various flavors of analyst generally interact.  Lawyers at Justice, and doctors at CDC, in fact make much less than their counterparts in private practice.

However, it's worth noting that lawyers at Justice, and doctors at CDC, have a much better quality of life, including close to 100% job security and excellent retirement benefits, than people in private practice.  That is very valuable.

In fact, we can quantify how much it's worth, at least to the folks who take those jobs: at least as much as the salary differential between their current job, and comparable opportunities in the private sector.

Which of course points out the irony of trying to ascertain whether federal workers are overpaid or underpaid.  The right question is not "Would these people make less in the private sector?"  It is "Are we getting a high enough quality workforce?"  And also "Could we get the workforce we need for less?"  At any rate, that's the right question if you view government programs as a means to provide services.  If you primarily view them as existing for the benefit of the people they employ, then of course, the right question is "how can we employ even more people at ever higher wages?"

My answer to that last question is a resounding "basta!".  My answer to the first is, "I don't know".  On the middle issue, however, I think the CBO's data suggest that we could probably get workers with a bachelor's or lower for less money than we are now paying, and not suffer much decline in quality.


No, the irony of my becoming a libertarian writer has not escaped any of us.
I assume he meant adjusted for inflation.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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