James MacDougald, President of The Free Enterprise Nation, comments on President Obama's federal pay freeze announcement
We were heartened when we saw
that President Obama announced a "pay freeze" for federal workers.
The Free Enterprise Nation has spent more than a year educating Americans about
the pay and benefits imbalance that exists between the private sector and the public
sector. Federal employee total compensation and benefits had risen from 60%
above private sector averages to 103% higher in the last decade, reaching
$103,000 in 2009. Perhaps our trips to Capitol Hill, dozens of radio and TV
appearances, and the book, "Unsustainable", had finally found an
audience with Presidential advisors? We were anxious to look at the details of
this latest effort to become fiscally conservative and to “rein in” government
spending. To us at FEN, a “pay freeze” would mean that no one’s pay could go
up. But we found that, as usual, the government does things differently, and in
their line of work, a "freeze" isn't really a "freeze" at
The “pay freeze” that was
recommended by President Obama only affects the annual “cost of living”
increase that federal workers usually receive each year. It had already been
decided that Social Security recipients wouldn’t receive a cost-of-living raise
on January 1 of next year. But federal workers were slated to get an increase
of 1.4%. Imagine the furor that would ensue once that happened? The solution
was for the president to recommend that federal workers not receive the planned
raise, allowing him to announce that he was calling for a “pay freeze”. But of
course nothing is really frozen. Federal workers will still continue to enjoy
their annual “time in service” raises, promotions, and bonuses.
Base salaries for most federal
employees are based on 15 different pay grades. Within each pay grade, there
are 10 "steps," and moving up between the steps is referred to as
step increases, or "within-grade increases (WGIs)." In order to be
eligible for a step increase, which averages 3%, an employee's performance must
be at a level 3 out of 5, which is defined as "fully successful."
Within the private sector, a 3 out of 5 would most likely be defined as
"adequate," or for those of you who are still in school, a C. The
amount of time after which an employee is eligible for a step increase varies.
For the first three steps within a pay grade, an employee is eligible every
year. The next three increases are available every other year, and the final
three increases are available after three years. However, managers can give
employees a "QSI," or quality step increase, without making the
employee wait the obligatory time frame simply by giving the employee the top
performance rating. And if the employee is not eligible for a regular step
increase or a QSI, there is always the opportunity for a bonus.
The Office of Personnel
Management has an eight-page document outlining the multitude of ways an
employee can be eligible for a bonus. These include performance-based bonuses,
referral bonuses, recruitment bonuses, retention bonuses, separation bonuses…
The list goes on and on. In fact, there is a bonus available if a person has
reached the maximum amount allowed by the general schedule pay grade and is
therefore not eligible for a raise. The Asbury Park Press reviewed records
through a freedom of information act request, and found that the federal
government awarded bonuses totaling $408 million to 1.3 million employees in
2009. While $408 million is a shocking amount to hand out in bonuses during a
time when the private sector was suffering through the worst recession in
decades, the amount only covers 65% of the federal workforce. The Asbury Park
Press review did not include information on the Department of Defense, the
Treasury, the White House, and various other federal agencies and departments.
Based simply on percentages, the federal government likely handed out over half
of a billion dollars in bonuses that year.
So even if Congress approves the
President's proposed “pay freeze”, it is not really a pay freeze at all. Federal
workers will still enjoy receiving their average 3% step increases each year,
the half a billion in annual bonuses, and the average raise of nearly 15% for
employees who are promoted to higher pay grades. They are actually not
“freezing” anyone’s pay at all.
Imagine how many Americans read
the newspaper headlines and were delighted to see that the President had taken
the bold step of leading the way to rein in government spending by freezing
federal worker pay? It will take more than press hoopla and misleading
presidential announcements for us to dig our way out of the $100 trillion hole
we’re in. If we are to accomplish that, we need to know the facts, not the
Contact: Kathleen Mott
The Free Enterprise Nation
The Free Enterprise Nation is a non-partisan member based organization representing American employees and businesses in the private sector. Its President, James MacDougald is author of the newly released best selling title, UNSUSTAINABLE: How Big Government, Taxes and Debt are Wrecking America. Mr. MacDougald is a regular guest on many national news networks including CNBC, FOX News, CNN and MSNBC and was recently prominently featured in the John Stossel special, The Battle for the Future.