Why It Is Time to Reform Compensation for Federal Employees
The federal government pays its employees more than they would earn in the private sector. Economic studies consistently find that federal employees enjoy both higher pay and substantially higher benefits than comparable private-sector workers. Federal pay is inflated because market forces do not discipline it. In the private sector, productivity determines workers’ pay. Businesses that pay workers much less than the value they add lose them to competitors who offer more. Businesses that pay workers more than their productivity level tend to go out of business. In general, market forces cause workers in the private sector to earn what their productivity merits. Bringing federal employee compensation and personnel procedures closer in line with private-sector compensation would not only improve government efficiency, it would also generate significant savings. Combined, the reforms in this Heritage Foundation Backgrounder would reduce federal personnel costs by $333 billion between 2017 and 2026.