The debate over federal pay should restart again soon. In April, the House Committee on Oversight and Government Reform asked the GAO to identify the attributes of a modern pay system and determine if the General Schedule system is consistent with those attributes. In the current climate, the fact that it was a bipartisan request suggests agreement on the need for change.
The pay freeze and sequester have already done a great deal of damage. Careers were shortened; new graduates chose other careers; employee morale has tanked. Based on studies in other sectors, that had to trigger a deterioration of employee performance. That cost is significant but impossible to measure in monetary terms.
Compensation levels in other sectors are not frozen. Fortune Magazine recently reported white collar salaries are increasing 2.9 percent this year. Next year surveys show budgets will add 3.1 percent. High-demand occupations command the largest share of the budgets. Pay policies now call for increased differentiation based on performance. Government needs to compete in that marketplace.
The report is unlikely to deviate from the basic model discussed in at least three National Academy of Public Administration reports and reflected in ‘demo’ projects dating back three decades. The model is simple, but there are endless t’s to cross. The hurdle is that it is based on a very different pay philosophy.
Would stakeholders be able to reach agreement if:
White collar salaries are aligned with market levels? Would they agree if transparent, credible salary survey data are developed? Should government revert to the use of benchmark job surveys similar to those commonly used by other employers and by OPM for years? The think tanks have stated they prefer a market-aligned salary system – but they argue salaries are above market. The differences of opinion make the ‘facts’ essential. There is a wealth of market survey data available across the US.
■ Salaries for science, technology, engineering and mathematics specialists are allowed to float and remain competitive in those increasingly tight markets? What if federal agencies rely strictly on market data for these jobs? That argument was voiced when the government’s financial institutions were authorized to develop separate pay systems — although there is still a political ceiling. It’s also the basis for administering law enforcement pay.
■ The Office of Personnel Management delegates control of certain salary management functions to agencies? Is pay comparability essential across government? Are agencies ready to manage salaries? Are managers ready? Federal financial agencies have separate pay systems and it’s never quesioned. There are countries, most notably Sweden, where pay is delegated and unions play a collaborative role.
■ Pay increases are linked to performance? What if performance ratings were more credible? There is solid research that people want to be recognized and rewarded for their contribution. Recent surveys show that is not happening in federal agencies. Despite the recent failed systems, World Bank studies confirm pay for performance can be successful in government. The number of state and local public employers adopting the policy grew steadily prior to the recession. The UK government announced a plan to adopt the policy for that country’s civil service.
■ Federal benefits are aligned with those provided – not by mom-and-pop employers – but by larger companies competing with federal agencies for talent? The pension problems the states and cities are experiencing are not relevant here but federal benefits are more generous than those commonly provided. When the 1990 Federal Employees Pay Comparability Act was enacted, a simple answer was adopted — salary ranges were set 5 percent below market to reflect the value of benefits. That was based on Congressional Budget Office studies in that era.
■ Increased employee engagement is adopted as a core agency goal? Repeated studies show engaged employees perform at higher levels. Gallup’s research over more than a decade shows the way performance is managed is the key. On a related point, there have been reports of high turnover among recent graduates. With the pay freeze, budget sequestration, and more recently the proposed limits on bonuses, it’s a bad situation. The GS system is part of the problem.
One issue that is not subject to debate is the need to focus on policies and systems that can be effectively managed and generate reliable decisions with available funds. Employees need to be confident they will be treated fairly and that no one can gain an unjustified advantage.
Federal agencies, far more than state and local government, need well educated, talented people. The recent leaks of classified information makes it glaringly obvious that world class expertise in technology is essential. That is true in a number of professional fields.
There will be skeptics and naysayers – the mistakes of the Bush Administration make that certain – but replacing the GS system along with the associated changes in the management of work could revitalize agencies.
Howard Risher is a consultant and writer on federal pay and performance issues. He was the managing consultant for the studies leading to the 1990 Federal Employees Pay Comparability Act and is author of "Planning Wage and Salary Programs."