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As this memorandum was being completed, the Congress was considering various cuts in discretionary spending for fiscal year 2000. How those cuts would affect planned increases in federal salaries is not yet clear. |
This memorandum is the third in a series of Congressional Budget Office (CBO) reports comparing the federal government's compensation practices with those in the private sector. The analysis compares the pay and benefits that apply to most of the government's 18,700 executives and other top employees with those of executives in private industry and nonprofit organizations.
R. Mark Musell of CBO's Special Studies Division wrote the report under the supervision of Arlene Holen. Barry B. Anderson, David M. Delquadro, Robert A. Dennis, Richard L. Fernandez, Christopher Jehn, David Torregrosa, Paul N. Van de Water, and Thomas G. Woodward, all of CBO, provided helpful comments, as did Sharon S. Gressle of the Congressional Research Service.
Chris Spoor edited the memorandum, and Sherry Snyder proofread it. Judith
Cromwell typed the early drafts of the manuscript, Kathryn Quattrone prepared
it for publication, and Laurie Brown prepared the electronic versions for
CBO's World Wide Web site (www.cbo.gov).
BENEFITS FOR FEDERAL EXECUTIVES
COMPARING PAY AND BENEFITS FOR FEDERAL AND PRIVATE-SECTOR EXECUTIVES
COMPARING PAY AND BENEFITS FOR FEDERAL EXECUTIVES AND EXECUTIVES IN NONPROFIT ORGANIZATIONS
APPENDIXES
A - Method of Analysis
B - Comparing Pay for Federal
and State Executives
TABLES | |
S-1. | Comparison of Average Federal and Nonfederal Compensation for Executives |
1. | Number of Federal Executives, 1998 |
2. | Pay Raises for Federal Employees Since 1980 Compared with Changes in the Cost of Living |
3. | Pay and Benefits for Federal Executives Compared with Those for Executives of Large Private Firms |
4. | Pay and Benefits for Federal Executives Compared with Those for Executives of Medium-Large Private Firms |
5. | Pay and Benefits for Federal Executives Compared with Those for Executives of Medium-Size Private Firms |
6. | Pay and Benefits for Federal Executives Compared with Those for Executives of Large Nonprofit Organizations |
A-1. | Characteristics of the Hypothetical Workforce Used to Estimate the Dollar Value of Benefits |
A-2. | Characteristics of Firms in the Hay Group's Databases |
A-3. | Number of Executives in Private-Sector Positions Used in CBO's Analysis, by Size of Firm |
B-1. | Salaries for Selected Officials of the Federal Government and Large States |
BOXES | |
1. | Pay and Benefits for Members of Congress |
2. | Pay and Benefits for the President |
3. | Private-Sector Executive Occupations Included in CBO's Comparisons |
In determining what salaries and benefits to offer their employees, private firms generally consider the practices of other companies. Similarly, the federal government sometimes uses comparisons of federal and private-sector practices as a guide in setting salaries for its workers. However, it has been many years since the government undertook a comparison that covers federal executives.
This report is intended to begin filling that gap. It compares the pay and benefits of federal executives with those of executives in selected occupations in private companies and nonprofit organizations. Such analyses provide a critical part--although only a part--of the information needed to fully evaluate current compensation for federal executives. They may also help in the development of major personnel reforms under way at the Office of Personnel Management.
The comparisons in this report yield two main findings:
Summary Table 1. Comparison of Average Federal and Nonfederal Compensation for Executives (In thousands of dollars) |
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Private Sector
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Federal
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Chief Executive Officer |
Chief Operating Officer |
Chief Financial Officer |
Chief Administrative Officer |
Head of Law |
Head of Personnel |
Head of Public Affairs |
Controller | Deputy Head of Law |
Senior Executive Service |
Executive Schedule |
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Large Private Firms Versus Federal Government | |||||||||||||||||||||
Basic Salary | 1,024 | 695 | 459 | n.a. | 367 | 315 | 225 | 230 | 193 | 120 | 123 | ||||||||||
Total Compensationa | 5,864 | 2,657 | 1,789 | n.a. | 1,206 | 1,048 | 784 | 642 | 516 | 169 | 172 | ||||||||||
Medium-Large Private Firms Versus Federal Government | |||||||||||||||||||||
Basic Salary | 597 | 376 | 253 | 261 | 206 | 182 | 137 | 145 | 137 | 120 | 123 | ||||||||||
Total Compensationa | 1,844 | 1,266 | 692 | 727 | 462 | 406 | 273 | 305 | 258 | 169 | 172 | ||||||||||
Medium-Size Private Firms Versus Federal Government | |||||||||||||||||||||
Basic Salary | 302 | 183 | 155 | 115 | 143 | 89 | 112 | 96 | 89 | 120 | 123 | ||||||||||
Total Compensationa | 735 | 357 | 317 | 198 | 254 | 182 | 188 | 176 | 135 | 169 | 172 | ||||||||||
Large Nonprofit Organizations Versus Federal Government | |||||||||||||||||||||
Basic Salary | 160 | 122 | 102 | 90 | n.a. | 65 | n.a. | 74 | n.a. | 120 | 123 | ||||||||||
Total Compensationb | 212 | 163 | 138 | 123 | n.a. | 91 | n.a. | 103 | n.a. | 168 | 172 | ||||||||||
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SOURCE: Congressional Budget Office based on data from the Hay Group. | |||||||||||||||||||||
NOTES: Large private firms are those with annual gross revenues of more than $10 billion; medium-large firms are those with revenues of $1 billion to $2.5 billion; and medium-size firms are those with revenues of less than $300 million. Large nonprofit organizations are those with annual budgets of $50 million or more. | |||||||||||||||||||||
n.a. = not available. | |||||||||||||||||||||
a. Includes pay, bonuses, and benefits. | |||||||||||||||||||||
b. Includes pay and benefits but not bonuses. | |||||||||||||||||||||
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Those comparisons complement ones in earlier Congressional Budget Office
(CBO) analyses that examined the pay and benefits of rank-and-file white-collar
federal employees.(1)
Method of Analysis
This report compares the dollar value of the pay and benefits that federal executives earn in a year with the pay and benefits earned by nonfederal executives in different occupations, such as chief executive officer, head of personnel, and controller. In addition to salary, the comparisons cover most major benefits, such as retirement and health insurance (focusing on the portion that employers pay, not the amounts that employees contribute). The comparisons with private firms also include bonuses.
Data about salaries at private companies come from the Hay Group, a
consulting firm that researches pay and benefits. The Hay Group also computed
the dollar values for private-sector and federal benefits, in consultation
with CBO. Data about salaries at nonprofit organizations were provided
by Abbott, Langer & Associates, a consulting firm specializing in nonprofits.
Salary data for federal executives was computed by CBO on the basis of
information from the Office of Personnel Management.
Limitations of the Analysis
Readers should be cautious about drawing broad conclusions from this report about the adequacy of federal pay and benefits or the effectiveness of the compensation system for federal executives. Caution is merited for several reasons. First, relative pay is only one factor that determines the effectiveness of a compensation system. Other factors not covered here include the existence and management of award systems and rates of promotion. Second, some people question the importance of relative levels of pay and benefits since the federal government recruits for some top jobs from within its own ranks.
Third, even if relative differences in pay are important, the comparisons
in this report have some limitations. The results for private companies
reflect the predominance of large firms in the Hay Group's database. Large
firms generally offer more generous benefits than smaller ones. (Unfortunately,
detailed data on smaller firms were not readily available.) Also, the results
for federal executives may not apply to all such executives. The comparisons
cover practices for two major groups of federal executives: the Cabinet
secretaries, agency heads, and other top employees covered by the Executive
Schedule; and the executives and managers who rank just below those top
officials and who are members of the Senior Executive Service (SES). The
pay and benefits of those groups are typical of most federal executives,
but not all. In addition, although CBO examined the private and nonprofit
positions most likely to have federal counterparts, those positions may
not provide an appropriate basis of comparison for all federal executive
positions. Duties and responsibilities may vary between sectors despite
similar job titles. Also, many of the nonfederal positions in the comparisons
have higher ranks than many positions in the SES. Taken together, those
limitations suggest caution in generalizing the results of the comparisons
to all federal executives, especially ones in lower-ranking positions.
1. Congressional Budget Office, Comparing Federal Salaries with Those in the Private Sector, CBO Memorandum (July 1997), and Comparing Federal Employee Benefits with Those in the Private Sector, CBO Memorandum (August 1998).