Monday, February 7, 2011

Federal Wages (data on)

Some snippets:
The specific econometric procedure is called "fixed effects," because it focuses on wage changes for individual workers, who have many characteristics that are fixed from year to year. One of the first economists to apply fixed effects analysis to the federal pay issue was Princeton's Alan Krueger in 1988. Using a dataset called the Displaced Workers Survey, Krueger found that workers who lost jobs in the private sector and then joined the federal government earned about 12 percent more than displaced workers who found another private sector job. (Somewhat ironically, Krueger would go on to become President Obama's chief economist at the Treasury Department.)  
A similar approach confined to postal workers reached a similar conclusion. In the late 1990s, the Postal Service surveyed all new hires, asking them how much they were paid in their previous job. Overall, new postal hires received salaries over 28 percent higher than what they had been paid in the private sector, which University of Pennsylvania law professor Michael Wachter and his co-authors called "enormous wage increases over their previous wages in full-time private sector jobs." 
A number of studies of fiscal consolidations in OECD countries over the past several decades have shown that reductions in the government wage bill—that is, the size and pay of the public sector work force—are an important part of larger efforts to balance the budget. A recent study published by the American Enterprise Institute showed that countries that succeeded in reducing their fiscal gaps placed a lot of weight on reducing public sector pay. 

Just as few federal employees quit their jobs, many private sector workers seek federal employment, seeing it as both well compensated and secure in a time when many private sector jobs are not. While data on the number of applicants per federal or private sector job are scant, research in the late 1980s indicated that federal jobs on average received 25 percent to 38 percent more applicants than private sector positions. A 1985 study by economist Steven Venti concluded that from 18 percent to 29 percent of workers would accept federal employment if offered. Roughly three times as many men would be willing to accept federal employment as are actually offered federal jobs; for women, the ratio is six times, implying that federal jobs provide a significantly more attractive overall package than private sector options. 

These results, Venti concluded, suggest "the government could continue to attract a workforce of current size with substantially lower wages." Moreover, even significantly lower wages would only slightly reduce the quality of federal job applicants. We will have the opportunity to test this view as the administration's pay freeze takes effect. Will federal quit rates rise as pay is frozen? We doubt it.

The devil is in the details. Cutting or freezing federal pay across the board would be an improvement over the status quo, but more fundamental reform is needed. Without a change in the basic system of setting pay, salaries could easily creep upward again with little fanfare. In addition, we do not want to cut the wages and benefits of certain federal workers—research scientists, engineers, and senior lawyers, for example—who are not currently overpaid.

Be pretty if you are,
Be witty if you can,
But be cheerful if it kills you.
If you're so evil, eat this kitten!

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