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The system by which the federal government determines pay raises for federal white-collar employees is complex and controversial. This paper describes that system and examines three issues often raised in connection with it. In addition, it describes the advantages and disadvantages of continuing the practice of limiting pay raises for federal employees below the levels authorized under current law. The Congressional Budget Office (CBO) undertook this analysis in support of work on its annual report to the House and Senate Committees on the Budget.

R. Mark Musell of CBO's Special Studies Division prepared the analysis under the supervision of Robert W. Hartman. Susan Strandberg and Amy Plapp of CBO's Budget Analysis Division prepared the budget estimates that appear in Chapter III. Kathy Ruffing, also of the Budget Analysis Division, prepared the description of the CBO pay model and provided helpful advice and comments. Other current and former CBO analysts provided useful comments, including James L. Blum, Richard Fernandez, Leslie Griffin, James Hearn, and James Horney.

Staff at the Office of Personnel Management provided data and comments, and the author gratefully acknowledges the assistance of Phil Etzel, Allan Hearne, Paul Hershey, Fred Hohlweg, Gordon Klang, Tony Ingrasia, Don Winstead, and James N. Woodruff. Helpful comments were also provided by Jordan Pfuntner at the Bureau of Labor Statistics.

Sherry Snyder edited the manuscript, and L. Rae Roy and Marlies Dunson prepared it for publication.

The author also acknowledges with much gratitude the help and support provided on this and other projects by his long-time friend and assistant, Mary V. Braxton, who passed away before the paper was completed.
 

June E. O'Neill
Director
May 1995
 
 

SUMMARY

I - INTRODUCTION

• Federal Employment and Payroll
• Employment and Payroll Covered by the General Schedule
• Pay Raises Under the General Schedule

II - ISSUES IN MAKING PAY COMPARABLE FOR GENERAL SCHEDULE WORKERS

• Concerns About Pay Surveys
• Concerns About Matching Jobs in Pay Comparisons and the Position Classification System
• Concerns About How the Government Applies Locality Raises

III - THE COST OF FUTURE PAY RAISES UNDER CURRENT LAW AND ALTERNATIVES

• Future Pay Raises Under Current Law
• Option I: Grant No Raises in 1996
• Option II: Grant Only ECI Raises
• Option III: Grant Only Locality Raises
• Option IV: Target Locality Raises Toward the Most Underpaid Workers

APPENDIXES

A - Other White-Collar Pay Plans
B - Pay Banding and Reform of the Classification System
 

Pay for federal civilian employees will total about $90 billion for 1995, representing about 6 percent of all federal expenditures. In his budget for 1996, President Clinton has again proposed limiting pay raises for those employees to a level well below that allowed under the Federal Employees Pay Comparability Act of 1990 (FEPCA). The act provides for annual pay raises that would, over time, move federal salaries for most white-collar employees toward comparability with nonfederal rates that prevail in different localities. Raises under the act in part reflect comparisons with nonfederal salaries. The information on nonfederal salaries used in those comparisons is collected in surveys conducted by the Bureau of Labor Statistics. The first comparability pay raise under the act occurred in 1994.

Like its predecessor, FEPCA has not been without critics. The President has expressed reservations about the methodology adopted under FEPCA for determining pay raises. Three long-standing areas of concern examined in this paper have to do with how the government collects data on nonfederal salaries, how it compares jobs, and how it applies raises.

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