A Federal Employee Pay Freeze Isn’t The Answer To Any Problem

When I read about the freeze in pay for non-military federal employees earlier this week, I was initially a bit surprised. Plesantly surprised I might add.

At least from what it looked like, it seemed like a token gesture to show that federal employees were going to feel the pain the private sector and other government employees have been feeling for the last several years.

Case closed, right?

When I started to think about the impact that this could have on people I know who are working for the federal government, or who have to recruit for or do HR for the federal government, I imagine that their concerns weren’t lackadaisical like mine were though. In reality, any action the federal government takes with their workforce is going to have broad implications for the rest of us simply because they are so big. And in reality, a pay freeze isn’t going to do much to answer any long term fiscal issues.

Too far or not enough?

On the surface, the two-year pay freeze amounts to peanuts as far as the federal government budget goes. According to the Bureau of Labor Statistics, government employment stands at about 2 million people, the freeze would only save $2 billion (or about $1,000) per employee in the 2011 fiscal year, and about $60 billion over 10 years. That’s a small number and doesn’t go nearly far enough to fix all of the U.S.’s budget woes, but proponents believe it is a step in the right direction. Leaders of government unions have an obviously different point of view and are vowing to fight the legislation during the lame duck session of Congress.

Some say it isn’t enough and point to other problems as covered by Anne Lowrey on Slate. She proposes that the government not just freeze wages, but cut them and send the surplus back to state and local government to spur hiring:

Over the course of the last few years, wages have proved particularly “sticky” for federal workers, who have fared far better than their counterparts in the private sector, state government, and local government. Private companies have shed 7.3 million employees since the recession started in December 2007. States and local governments have also fired hundreds of thousands of workers in the last two years. But federal employment, even discounting employees picked up for the 2010 Census this summer, has grown.

While I agree that the impact of the wage freezes won’t be huge, I don’t know how distributing that money back to state and local governments is going to significantly help. After all, with just the pay freezes, each state would only be given an average of about $40 million. Those are welcome dollars for sure, but not a significant amount of money to spur anything more than a few jobs (and more than likely, some would be lost in the mix and not create any significant growth).

Recruitment and retention

Of course, there is another issue too. If you’re in charge of recruiting for the federal government, wouldn’t it be fun to tell employees that they won’t be getting a raise for two years? Sure, there is still the ability to move up pay grades and get promotions, but not that knowledge that it will be there like before.

While I think it is only going to turn off a handful of people looking at public servant jobs, it isn’t like things are better in the private sector. Sure, they could say that they are projecting pay increases this year but that doesn’t mean you’ll get it. Things are less assured out in the private side. What it means for federal recruiters is education and a bit of sales. Business as usual if you will.

The bigger issue still isn’t with COLA increases

Even with the concerns of the pay increases being too much or too little, or how it will impact recruiting, there are bigger issues that would be on my plate if I were looking more objectively at compensation in federal employment. Instead of cute political plays that are clean (like across the board pay freezes), I would be looking at out of whack pay grades, employees who need to be re-purposed or laid off, performance issues, and looking at serious cuts in overall payroll (i.e. reducing employees, not simply pay).

Of course, these are unpopular and unfeasible given the current economic and political climate. If the country wants to make real progress towards long term economic health though, token gestures like pay freezes are simply going to be ineffective at best or sending the wrong message at worst.