Hearing on Public Sector Compensation

Andrew Biggs of AEI presented testimony on his recent research with Jason Richwine on public sector compensation. They estimate federal workers receive a 14 percent salary premium and a 23 percent benefits premium compared with workers in the private sector, for an overall premium of 39 percent, or $60 billion annually. Their analysis controls for skills and experience by comparing federal workers with their counterparts in the private sector. As they authors state, federal compensation is neither “obscenely generous nor does it leave federal workers substantially underpaid.” By paying federal workers the same as their private sector counterparts, there are are some savings to be found. But as Andrew notes, finding the premium is easier than fixing it. Market flexibility would permit adjustments – raising salaries when demand for the position is low, and lowering salaries when the demand for the job is high.