Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Tuesday, November 30, 2010

Federal Employee Pay Freeze

What do you think about the federal employee pay freeze? I'm surprised to find myself for it. State employees in my state have faced pay freezes for years now along with furloughs and layoffs. I don't see why federal employees should be let completely off the hook.

That said, I'd rather the federal employee pay freeze happen sooner rather than later because we do face the potential of future inflation because of the high debt levels. I'd rather see federal employees have their pay frozen during a period of flat prices than rising prices.


USwest said...

I want to respond to RBR’s post in a systematic way. I have both a political/economic attitude and a practical attitude about the proposed pay freeze.

We have talked a lot on this blog about Federal Employee Pay. I am sanguine about the proposed freeze. On one hand, I understand that the government is broke. And I also know that we could very well face a situation like Greece or Ireland, or Argentina in the 1990s. As Senator Simpson said on NPR today, when this happens, it won't be gradual. It will happen fast. Once China refuses to lend to us, or we have to go to the IMF with hat in hand, it's over. Bottom line, everyone is hurting. And federal employees are no different. You don't become a civil servant without a sense of sacrifice. That said, the proposed raise for this year was a mere 1.4%. Nothing to laugh at considering how the rest of the working and middle class is doing right now.

Again, I do not mind sacrificing if I see others, such as bankers, congress people, and the like also sacrifice. But I haven’t seen that, yet. So I want to see what other proposals they have for these types.

The pay freeze proposal is not a surprise and it is, in my view, a sop to the Republicans with whom the President is meeting this week. Other proposals that are on the table for the federal workforce are much more serious; these include recalculating retirement based on the high 5 rather than the high three, reducing benefits, increasing health care premiums (which happens every year anyway), increasing co-pays (also happens every year), cutting 200K jobs from the federal workforce, etc. Because so much is linked to pay, any freeze has a long-term effect. Our contributions to retirement are affected as well as the final numbers.

My boyfriend has been in civil service for 28 years and is planning his retirement in 2012. Since his retirement is based on his high three years of earning, he is being hit at a particularly sensitive time. In effect, if this proposal goes through, my boyfriend will see an immediate effect. Assuming that he is earning $100K currently, he will be frozen and will lose about $3000 a year in potential retirement funds assuming that the raises for the next 3 years would have been about 1.5%. And he won’t get full social security benefits because Civil servants of his era did not. They got a pension instead. If you figure in inflation, and there will be some since we are printing money, that loss is compounded.

For me, the long term effect is greater since I have 22 years to go. That said, four things will happen if this change goes into effect. 1) Those approaching retirement will stay longer to wait out the freeze. This will result in an even grayer, less efficient government workforce and fewer openings for young workers. 2) at some point in the future, like maybe 2015, they will grant “make up raises” of say 10% to federal workers. 3) Slashing the federal workforce will result in more overtime pay being granted. Currently, we are short staffed, our timelines are getting shorter. The result is more OT to complete the projects. 4) Greater reliance on contractors. Obama has said he wants to reduce our reliance on contractors. His pay freeze won’t help in this effort. The work still has to get done .

Anonymous said...

I'm not thrilled, obviously, but I am worried that it could be/get a lot worse (e.g., furlough days and further pay cuts). And I wouldn't mind seeing some sacrifice from those obviously struggling bankers and the poor benighted hedge fund directors. Just think - sending their kids to PUBLIC SCHOOL in their fancy suburbs!* The horror.

On a practical level, the proposal apparently leaves step increases and grade increases intact. I'm not in line for a grade increase (what folks out in the "real world" might call a promotion), but I do get a step increase every year that is usually in line with the health care premium increase I also get every year (so my salary has been flat for quite some time). The cost of living increase has been pretty anemic during my tenure, so I doubt I will miss it absent some kind of catastrophe.

There is going to be a big leadership gap once the boomers start retiring en masse. Pay freezes and the like won't attract good employees, or at least good employees who will stay for longer than a few years. And having an older workforce is not uniformly helpful/good - you wouldn't believe the number of people in my office with decades of experience who can barely use a computer.

Despite what the fools at think tanks will tell you, there is also problem with retention at the lowest levels due to the pay scale. I've noticed that many of the younger people with more marketable skills (e.g., IT analysts) tend to get better offers from the private sector and then take those offers.

I'm OK with the pay freeze, but I'm not hopeful that this will be the end of it.

-Seventh Sister

*We live in a pretty high-rent residential area, but our local public elementary school actually gets Title I money. And it's urban as opposed to suburban.

Raised By Republicans said...

I think this is certainly not the end of it. And I think an expectation of large make up raises in a few years may be overly optimistic.

I know that state employees in California have faced repeated cuts in wages not just freezes (these cuts have been on the order of 8% of pre tax wages). The governor elect in my state is talking about similar pay cuts for state employees here. Granted, states have a harder time borrowing than the feds. And states can't print money like the feds can. But still, I think federal employee wages are going to drop at least in terms of their purchasing power and perhaps in absolute terms as well.

The Law Talking Guy said...

If it's just a no-COLA rule, well, seniors are having the same problem with social security. That doesn't bug me. What bugs me is the President pre-emptively giving stuff away to the GOP without a fight. How about saying that he won't cut salaries to ordinary working people unless the GOP gives up on its drive to give new tax cuts ("extend" existing ones) to millionaires? How about saying that he's not going to make scapegoats of federal employees to sate crazy tea partiers.

USwest said...

Problem is, in my job, All I get is COLA, we don't get step increases and the like.

That said, the whole thing will be offset by the new payroll tax holiday. The payroll holiday will roll right into paying for increased health care premiums, so I dont' see why they think this will stimulate consumer spending. It's our generation that is going to loose the SSI benefit later. It's like robbing Peter to pay Paul. Then again, there are not good options when we fold to Republican stonewalling.

Now the military is complaining that the 1.4% they will get in pay raises is the lowest since the 1960s and they don't think it's fair. Well, they get housing subsidies and the like, so I don't think they are loosing out too much. But as they say in DC, "The optics" are bad.