News >> Browse Articles >> Pay & Benefits


Pay and Benefits Watch - Pay Primer

Pay and Benefits Watch - Pay Primer

Alyssa Rosenberg | Government Executive

September 07, 2009

The rules governing federal employee compensation are complicated enough when they’re reported accurately. Mischaracterizations in the general media only muddy the waters further in discussions over how civil servants’ salaries are set and how they stack up against private sector pay. If the Obama administration wants to start an informed debate outside the Beltway over federal compensation, it must correct repeated factual errors.

Take coverage earlier this week of President Obama’s latest missive on the 2010 pay raise, in which he invoked a national emergency and high unemployment rates to justify a lower-than-mandated 2 percent across-the-board pay hike for civilians.

The first sentence of a USA Today story on the letter to House Speaker Nancy Pelosi, D-Calif., described Obama’s target as “cost-of-living pay raises,” a characterization that was repeated on one of the blogs at Government Executive’s sister publication, The Atlantic.

The problem: Federal employees’ annual pay raises have nothing to do with cost of living. Rather, they are calculated through a formula based on the Employment Cost Index, which measures the price tag of compensation for civilian workers in public and private industry on a quarterly basis. According to Title 5 of the United States Code, the body of law that governs federal employment and compensation, federal employee raises are calculated by taking the difference between the Employment Cost Index in two consecutive years and subtracting 0.5 percent.

The reason the Employment Cost Index is the basis for pay raise calculations is the annual boost is designed less to insulate federal employees from rising prices than to close the gap between federal and private sector salaries for workers in similar occupations. That intention is enshrined in the 1990 Federal Employees Pay Comparability Act, which established the locality pay system. In addition to the across-the-board raise, federal employees receive annual locality adjustments on the basis of labor costs in the areas where they live.

The president does not have to stick to the formula in Title 5 when proposing an annual raise for civil servants; he is allowed to invoke a “national emergency or serious economic conditions affecting the general welfare” to suggest a lower figure. And Congress can override the president’s request. In fact, this is what has happened in recent years.

But for the debate to stay on track, it’s important that the basis for setting the raise is not forgotten while the process plays out.

Govcentral School Finder

Save time in your search for a degree program. Use Govcentral's School Finder to locate schools online and in your area.

* In the event that we cannot find a program from one of our partner schools that matches your specific area of interest, we may show schools with similar or unrelated programs.