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Salary Statistics from the OMB Director

Peter R. Orszag, Director | Office of Management & Budget

March 10, 2010

At a Government Executive breakfast meeting yesterday, I was asked about salaries for federal employees – an issue that has received some attention lately in the popular press.

Especially in these difficult economic times, everyone is understandably concerned about the performance and salaries of our federal workers (which is one reason why the President is freezing salaries and bonuses for all political appointees). And if, as some media reports claim, federal workers were earning roughly $8,000 more than private-sector workers in occupations that exist both in the government and private sector for no reason at all, that would be troubling. But the truth is that a comparison of federal and private-sector pay, even by occupation, is misleading because the employees hired by the federal government often have higher levels of education than their counterparts in the private sector – even within the same occupations. When you factor in the education and experience of the federal workforce, there is no statistically significant difference in average pay levels.

Take registered nurses working at the Veterans Administration. They care for the complex injuries and illnesses of our wounded warriors and veterans. Partly reflecting the complexity of the care they deliver, nurses working for the federal government are more than twice as likely to have a college degree as those employed by the private sector (24 percent relative to 11 percent). As another example, database administrators are twice as likely to have a post-collegiate degree in the federal government as those working in the private sector (31 percent versus 16 percent).

Overall, roughly half the federal workforce has a college degree, compared to about a third in the private sector. Most of the difference (82 percent) in average pay between the federal government and the private sector is explained by these differences in education. Holding education constant, federal workers earn $1,604 more than their private-sector counterparts on average. That is where the experience of the federal workforce comes into play. More experienced workers tend to earn more, and the federal workforce, by and large, is older on average than the private workforce. If you hold education and age constant – and thus have an apples to apples comparison – federal employees earn slightly less than those in the private sector on average, although the difference is not statistically significant.

So the bottom line is: when education and age are held constant, the entire difference in average pay between the federal and private sectors disappears.

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