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Posted at 2:20 PM ET, 11/30/2010

'These people are living in a dream world'

By Ezra Klein

A disgruntled private-sector worker writes in:

Your disgruntled federal worker states “though the employees with advanced degrees are paid well, they could be paid a lot more working in Corporate America.” Oh yeah? Have they had a look at Corporate America lately? I live in a state with 12 percent unemployment where corporate workers would kill for just a two-year pay freeze in lieu of getting laid off or “furloughed” into poverty. I worked in private industry my whole life and never had a guaranteed annual pay increase. These people are living in a dream world.

To get a sense of where this anger comes from, consider these two graphs. The first tracks private-sector employment between 2007 and 2010:

CES0500000001_146381_1291143264417.gif

The second looks at federal workers over the same time period:

CES9091000001_146381_1291143264874.gif

The big bump you see are the temporary jobs from the Census. What you don't see is any dramatic evidence that the country suffered a massive financial crisis and recession over this time period. Federal workers are insulated from those ups and downs, and during the downs, that generates resentment among private-sector workers.

But it misses that federal workers are insulated from the ups, too. That goes double for higher-skilled workers. There are very few talented financial regulators who couldn't make more money by walking over to their nearest Goldman Sachs headquarters. That was particularly true during the bubble. And it makes talking about "federal workers" a bit unwise. There are lots of people, in lots of industries, doing lots of things, under the rubric of "federal workers." For some of those sectors, a pay freeze may be unnecessary, but it's not likely to do much damage to the talent on offer. For others, a pay freeze may make other opportunities far more appealing, which will mean that current employees leave their jobs and prospective employees choose not to join the federal workforce.

Note that "civil servants still will be eligible for bonuses and promotions to higher pay grades." I'd expect to see a lot more of both in the next few years, as managers desperately try to keep their best employees from leaving. That will blunt the money the freeze saves, but then, the freeze isn't about saving money. It's about recognizing the resentment private-sector workers have toward the federal workforce.

By Ezra Klein  | November 30, 2010; 2:20 PM ET
 
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Comments

You see how one dumb decision has cascading effects. Freezing or paring down the Fed work force may be a terrific idea, but Obama has pushed them to the front and center of the debate on the deficit, where they have almost no impact whatsoever!

Posted by: 54465446 | November 30, 2010 2:29 PM | Report abuse

"talented financial regulators"
let's savor that...
"talented financial regulators"
once more...
"talented financial regulators"

Posted by: happyacres | November 30, 2010 2:31 PM | Report abuse

"There are very few talented financial regulators who couldn't make more money by walking over to their nearest Goldman Sachs headquarters."

Actually, I think that is backwards. A few talented financial regulators could make more money by walking over to their nearest Goldman Sachs headquarters. But it's not like the other side of the coin could absorb all qualified federal employees.

Posted by: amiller5 | November 30, 2010 2:36 PM | Report abuse

It would be interesting to see the numbers for state & local gov't workers through 2010 plotted and compared to the federal and private sector employee graphs.

Posted by: tuber | November 30, 2010 2:49 PM | Report abuse

"There are very few talented financial regulators who couldn't make more money by walking over to their nearest Goldman Sachs headquarters."

Either this is wrong or those talented financial regulators are insane. There are people like Bernanke, whose pay is limited by law, who could make much more in the private sector. But then the emphasis should be on "few" because that is not the mass majority. Now do we need those "few"? Yes, absolutely! But that is almost a separate issue that could be solved in different ways (did Matt Yglesias suggest a "Race to the Top" for federal agencies, or we could maybe have a "Teach for America" for talented workers).

As a liberal I would like to argue that tax breaks have a small stimulus multiplier and that ARRA was too small. How can I do this and simultaneously talk about the economic consequences of a $6B (USD) cost of living pay freeze like some have be doing!

Posted by: chrisgaun | November 30, 2010 3:01 PM | Report abuse

Tiny bit off topic, but what I'm curious about in this discussion: How do federal and state workforces compare to the private sector as far as educational attainment, training, etc.? It seems that government workforces would be comprised of considerably different types of workers. Setting aside financial regulators, what about those scientist types at National Oceanic and Atmospheric Administration and US Geological Survey and engineers at DOT and biologists in the Park Service?

It just seems that governments may employ a greater percentage of people who have advanced degrees in hard sciences—people who serve a huge function in our society but whose core competencies' leverageability lacks impactfulness, or however it is the corporati dismisses such résumés. (I for one am glad vulcanologists have a place to go during the day. Bobby Jindal may snicker but it seems that trying to understand and prepare for catastrophe is a noble human endeavor.)

Making the private vs. public discussion come down to Goldman Masters of the Universe vs. Treasury Toadies of the Universe or Target clerks vs. DMV clerks is an exceedingly narrow and awfully strange place to start making comparisons between public and private sectors.

Posted by: mjgf | November 30, 2010 3:08 PM | Report abuse

I am unemployed. I don't resent federal employees; I wish I could be one. This isn't about the private sector resenting the public sector; it's about people who have seen their pay go *down*, their hours decreased and their jobs disappear, who have trouble feeling sympathy for workers who have solid jobs and benefits but who aren't getting their raise this year.

That this pits the middle class against the middle (and lower) classes is sad. I don't mean to let that happen. But while I do hope the federal workers get the raises they feel they are due, I am not nearly as worried about them as I am about the crumbling financial situation of the nation's workers as a whole. And yes, I resent it when people with jobs, whether public or private sector, whine to me about not getting a pay raise.

Let's focus this discussion where it belongs - on corporations and uber-wealthy individuals who are whining about paying their share of taxes under the farcical guise of trickle-down economics.

Jobless in Maryland

Posted by: susanB23 | November 30, 2010 3:11 PM | Report abuse

"I'd expect to see a lot more of both in the next few years, as managers desperately try to keep their best employees from leaving."

I doubt that will be necessary.

http://www.cato-at-liberty.org/federal-employees-continue-to-prosper/

Wages for federal workers grew at a 5.2% pace from 2000-2009 vs. 2.9% in the private sector, and total compensation grew by 5.5% and 3.3% for each respectively.

The average federal worker earns double in total compensation compared to the average private industry worker, has greater job security and we can see that results in a low quit rate (the quit rate for federal workers during the 2006-2007 boom was still barely more than half of the quit rate for private sector workers during the bust of 2009).

Posted by: justin84 | November 30, 2010 3:12 PM | Report abuse

I think the problem is that the Fed side sees a stupid policy (a wage freeze is a stupid policy, period), and takes it personally. That results in unsustainably arrogant whining, which arrogance the non-Fed side then takes personally. Et voila, a flame war, perhaps the worst innovation of the online age and a guarantee that all thinking stops.

On topic, I think the reality shapes up something like this: a blanket freeze is always bad policy, but would have been nice optics at the height of the crisis in Fall 2008. Now, however, a blanket freeze is terrible politics as well. Some Federal employees, it turns out, do not realize that they are taking their compensation primarily in terms of a satisfying life in public service, with good benefits and low career risk rather than maximum expected cash value with attendant mercenary focus on profit and self.

If government compensation were really out of line with the private sector, the public sector would have trouble filling positions in a sustained, global and damaging fashion. It does not. The market tells us in no uncertain terms that government compensation is perfectly fair.

Posted by: wcwhiner | November 30, 2010 3:19 PM | Report abuse

Speaking as one of those Federal workers, I think it's a challenging comparison, and it depends on what you value.

In most years, there's a lot more money in the private sector. But a private employer is also likely to ask you to work evenings and weekends. And then there's the job security when the 'free market' has a grand mal seizure.

At any rate, if you think it's worth getting less pay in order to have evenings and weekends be your own, then Federal employment is a good deal. If you'd rather have the money than the time, you're better off in the private sector, assuming the economy is more or less functional.

Posted by: rt42 | November 30, 2010 3:27 PM | Report abuse

If one looks at the average lifetime expected 80th percentile earnings of comparably educated professionals my expectation is that federal workers would show considerably greater earnings. It hasn't always been that way but it changed in 80s. Of course, across any cohort there's higher upside potential in private sector than federal sector but that upside is likely offset by higher potential for layoff, for substantial periods of unemployment, for salary compression (which probably increase in private sector with age) and for retirement losses than in federal sector. Of course, some numbers might change my expectations.

Posted by: burtonentp | November 30, 2010 3:30 PM | Report abuse

I'd like to add that many federal workers are experiencing increased work loads because it is in times of recession that citizens turn to government counter cyclical programs for help.

Also, pay grade increases do not apply if you are a highly educated worker who is already at the highest pay grade.

Posted by: ideallydc | November 30, 2010 3:32 PM | Report abuse

All these people complaining about how sucky their private sector jobs are compared to Federal jobs that pay twice as much (as is claimed) should just go get Federal job and make twice as much.

Here, I'll even provide a link:
http://www.usajobs.opm.gov/

Posted by: Nylund154 | November 30, 2010 3:34 PM | Report abuse

With so much consternation about the President's action, people seem to have missed one important reality. If Democrats cannot assume a leadership role in proposing realistic budget cuts and sensible tax increases, their entire agenda is put at risk as they will be on the fast track to permanent minority status.

The American people want us to put our fiscal house in order and they want us to do it now.

Cuts do not need to occur prior to, say, 2012 when we (hopefully) experience solid economic growth. However we as a party and a nation need to prove that there is a politically realistic plan to get rid of deficit spending within a finite length of time.

Posted by: bouvier7 | November 30, 2010 3:41 PM | Report abuse

Ezra,

"But it misses that federal workers are insulated from the ups, too."

And so are 95% of private sector workers. At least, they are 90% insulated from the ups. During the dot-com boom, I was a private sector worker. I enjoyed a brief period of a tripled net worth (of the kind a Wallstreet CEO might scrape off the bottom of their shoe, but still, good for me). but what the boomlet giveth, the boomlet taketh away. For most folks in the private sector, what, if anything, they gain from an economic boom immediately vanishes, often leaving a ton of debt in its wake.

I spent almost 20 years working in the private sector. I now work for a local school system--and I can tell you that there is more security and advantage to working for even local government (which is rarely as generous as the federal government) than in 20 years of working at 5 different companies, many of whom did experiencing serious income booms (and then busts) during the times I worked for them.

Scheduled raises? A long and length process for almost any kind of dismissal (save a complete dissolution of a department). Decent health and retirement benefits. And I was hired for an amount comparable to the best I ever got in the private sector--no better, but, then, it's not a federal position. :)

The insulation from the very real downs is well worth, for most people (especially those of us with families, and lacking a trust fund) the additional insulation from the illusory, and usually destructive, so-called "ups".

Ezra: "For others, a pay freeze may make other opportunities far more appealing, which will mean that current employees leave their jobs and prospective employees choose not to join the federal workforce."

A lack of two years of scheduled pay raises (which will likely resume afterwards) for already fairly generous compensation packages is not likely to discourage many who wouldn't already be discouraged. And what they might gain in a temporary pay gain they give up in security, even so. But . . . up to them. There will still be plenty of advantages to the public sector to attract numerous qualified people.

Posted by: Kevin_Willis | November 30, 2010 3:42 PM | Report abuse

It seems to me the private sector has spent years getting rid of collective bargaining, pensions, pay steps, Holidays and reasonable time off.

Are you telling me it now sucks in the private sector? Didn't see that coming...

Posted by: JkR- | November 30, 2010 3:44 PM | Report abuse

Ezra. Your comments recently on this topic and also on the need for excessive secrecy unfortunately demonstrate a lack of understanding of the frustrations of average Americans outside the beltway.

I fear that you have in your short tenure coompletely absorbed the inside the Beltway WaPo editorial thinking. I fear that you're becoming the David Broder of your generation.

Posted by: jdevo | November 30, 2010 3:51 PM | Report abuse

This whole debate illustrates the stupid and unnecessary divisions that the administration is fostering. Instead of going after the financial elites who trashed the world economy and/or supporting the rest of us who are struggling, the administration's response is to spread the pain around some more. Obama can't do anything constructive to help any of us, but what he can do is make more people feel the pain and generate schadenfreude about how they had it coming, we have it worse, etc. Brilliant! Meanwhile, corporate profits set records, executive compensation skyrockets, and the debate is about how we can't afford Social Security, federal pay raises, unemployment insurance, Medicare, Medicaid, or any kind of social safety net. The elites have decided that we can all go to the devil, and we're arguing over who gets the better seats in hell. Hi-larious.

Posted by: redscott1904 | November 30, 2010 3:57 PM | Report abuse

Also, pay grade increases do not apply if you are a highly educated worker who is already at the highest pay grade.

Posted by: ideallydc | November 30, 2010 3:32 PM | Report abuse

sorry, as much sympathy for those at the highest pay grade as for the CEO's of billion dollar companies.

NONE.

Posted by: visionbrkr | November 30, 2010 4:01 PM | Report abuse

"I'd expect to see a lot more of both in the next few years, as managers desperately try to keep their best employees from leaving."

Leaving to where, exactly? I'm sorry, but out of curiosity, have you tried applying for a job in the Private sector in the last year?

You do realize the "there are no jobs out there" is a statement in reaction to the fact that there are no jobs out there, right? And that if you do find one, you'll be 1 in likely several 100s of applications for that one position?

I'd LOVE to see a "disgruntled" federal employee looking for a job in the private sector. Just so I can laugh at his naivete.

Posted by: JERiv | November 30, 2010 4:18 PM | Report abuse

Point 1: SusanB23 is right.
No one is shedding any tears for the federal employees on this issue. Personally, I've had no raise in the last two years and am delighted to have a job.

Point 2: Justin84 makes his point weakly.
His link shows is an article discussing the average gov't salary (2M people) vs average private sector salary (200M people) over the last 10 years. It is clearly a sample size issue. The private sector has tons of low wage jobs, but there are relatively few low wage jobs in the federal workforce. The article dismisses this in two sentences: "Defenders of generous federal employee compensation point to the higher levels of education in the federal workforce. However, it’s doubtful that education accounts for the growing disparity between federal and private compensation."
Really? It's not doubtful to me.

The source data referenced by that Cato Institute article is here: http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=N#S6
If you compare the financial sector over the same years of 2000 - 2009, you'll find their salaries grew by an average of about 5% over the same period -- same as the gov't employees. It was up some years and down other years but averaged about the same over time. Proof of higher variability in private vs public sector salaries! WOW! Who cares!

http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=201&Freq=Year&FirstYear=2008&LastYear=2009

Posted by: BHeffernan1 | November 30, 2010 4:21 PM | Report abuse

Missing in this discussion is that there are also federal workers who earn very little money in an absolute sense, not just in a relative sense. As the AFGE press release stated, the $28,000/yr VA nursing assistant and the $34,000/yr border agent. Also there are seasonal workers who come back and do important work year after year for the Park Service, the Forest Service, and the IRS, and are only paid a half-year's salary, get step increases only once every 2-3 years as is, and sometimes do not even have FEHB eligibility. These workers need the GS schedule increase and bear the brunt of the President's across the board pay freeze.

Posted by: jfung79 | November 30, 2010 4:28 PM | Report abuse

Repubs love these kinds of debates. Because that party represents the rich bankers, big business, etc., they love to see inter-lower class squabbling, rather than the pitchforks aimed at them. It splinters the opposition.

Fellow middle class people upset at union workers still getting their pension? Perfect! Other middle class folks pissed off that their fellow middle class folks still get benefits because they work at the federal government? Wonderful! Fight amongst yourselves everyone; we'll just continue effing you over.

It's also the perfect distraction from the huge inequality between the top 10% and everyone else - especially when many of those at the top 10% are the true culprits for the financial collapse. It's their dream to see everyone making exponentially less than them squabble over miniscule variations in pay or benefits (especially without discussion of educational differences between groups), rather than focusing on CEO pay or bank regulations. Like Obama said, we gotta have shared sacrifice, or something.

Posted by: Chris_ | November 30, 2010 4:29 PM | Report abuse

I am sorry but I am growing more and more disappointed with Obama and the rest of the Democrats weak-kneed, total lack of b***s and general collapse in the face of any opposition. This pay freeze is simply a sop to throw at the Republicans, in hopes they will stop beating on the Dems. Instead, the Dems should point out we get more bang for the buck with unemployment extensions and deficits for as far as the eye can see with tax breaks. We get nothing for the tax cuts....NOTHING !! Why can't that idea be defended? Why can't people be defended?

Posted by: Darsan54 | November 30, 2010 4:41 PM | Report abuse

"It is clearly a sample size issue. The private sector has tons of low wage jobs, but there are relatively few low wage jobs in the federal workforce."

BHeffernan1,

Let me clarify.

While I agree there are few low wage federal jobs, you overlook the fact that the private sector has quite a few people (bankers, attorneys, executives) who are very well compensated.

15 workers making $15,000/yr and 1 worker making $500,000/yr have an average salary of $45,313/yr. While those making $500,000 are not 1/16 of the total workforce, there might be one for every fifteen very low wage workers.

I think that helps to mitigate the lack of low wage jobs at the federal level, at least somewhat.

*"Defenders of generous federal employee compensation point to the higher levels of education in the federal workforce. However, it’s doubtful that education accounts for the growing disparity between federal and private compensation."
Really? It's not doubtful to me.*

It's not? Was there a surge in federal worker educational attainment over the past 9 years relative to the private sector? As the article says, it's not the spread, but the *growing disparity* that we are concerned with here.

"The source data referenced by that Cato Institute article is here: http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=N#S6
If you compare the financial sector over the same years of 2000 - 2009, you'll find their salaries grew by an average of about 5% over the same period -- same as the gov't employees. It was up some years and down other years but averaged about the same over time. Proof of higher variability in private vs public sector salaries! WOW! Who cares!

http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=201&Freq=Year&FirstYear=2008&LastYear=2009"

Um, I did a compound annual growth rate caluculation for the finance and insurance salaries using your link for 2000-2009. It was 3.0%/yr. From peak to peak, finance grew 4.5%/yr (2000-2007) vs. 5.9%/yr for civilian federal employees.

What about other educated sectors, 2000-2009? Do they compare to the 5.2% annual growth in pay for civilian federal workers?

Management of companies and enterprises? 3.0%/yr. Professional, scientific and technical services? 2.8%/yr. Information? 2.4%/yr. Computer manufacturing? 2.5%/yr.

The only occupations which beat out federal workers were farmers (5.8%/yr, but from a low base) and the military (7.2%/yr) and soldiers (also federal employees).

At any rate, my point was the lack of a 1%-2% (or 5%) annual raise isn't going to send that many federal workers to the private sector. Overall compensation isn't bad, the growth rate is traditionally good, the benefits are good, the job security is high, and as a result we see very low quit rates relative to the private sector. The freeze is unlikely to change that.

Posted by: justin84 | November 30, 2010 5:24 PM | Report abuse

"There are very few talented financial regulators who couldn't make more money by walking over to their nearest Goldman Sachs headquarters."

That's what the less talented always tell themselves. But truth be told, the truly talented are already working for Goldman. The less talented who work as financial regulators are hoping to get aboard the revolving door and get a job with Goldman based, not on their talent, but on their inside knowledge.

Posted by: bgmma50 | November 30, 2010 8:33 PM | Report abuse

Ezra: "the freeze isn't about saving money. It's about recognizing the resentment private-sector workers have toward the federal workforce."

Do you have the $19 billion dollars to fix the small business healthcare paperwork screwup in your juicebox? $60B over ten years is real money. Your rhetorical flourishes are increasingly not based in reality.

You are great on policy. Remember that and stick to the facts. You're wrong all the time on punditry because punditry is a fool's game. You don't get to be a fool and a policy expert and increasingly you pick 'Fool'.

Posted by: jamusco | November 30, 2010 11:46 PM | Report abuse

The suggestion that federal government employees bothered by a pay freeze will decide to take a better offer in the private sector is very funny.
First of all, how many jobs do you think are out there?
Secondly, if there is a concern that no talented workers will apply for federal jobs, that is absolutely ludicrous considering the jobless numbers. Any work is welcome -- and the fact that the economy is sinking and federal workers are still being hired is a big part of the problem.
The tax cuts need to be extended so businesses know their status and can start hiring. This administration can't figure that out? Major incompetence.

Most people work for the government for the many benefits and stability as opposed to the daily, on-going, higher expectations and demands of private sector employment.

This is a pay freeze for pete's sake, not a pay cut, which would have been the better decision.

Posted by: pjcafe | December 1, 2010 9:03 AM | Report abuse

"I think that helps to mitigate the lack of low wage jobs at the federal level, at least somewhat."

Where, by "somewhat" (plus another thousand words to muddy his initial apples/oranges comparison), justin-eighty-bore actually means "not at all".

Posted by: pseudonymousinnc | December 1, 2010 9:42 PM | Report abuse

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