Comparing Compensation: Private Sector Vs. Federal Employee

Working Paper 2012-03: Comparing Wages in the Federal Government and the Private SectorJanuary 30, 2012 pdfblog postJustin Falk

Working Paper 2012-04: Comparing Benefits and Total Compensation in the Federal Government and the Private SectorJanuary 30, 2012 pdfblog postJustin Falk

Analysis of Federal Civilian and Military CompensationJanuary 20, 2011 pdfblog postLetter to the Honorable Steny H. Hoyer

Using a Different Measure of Inflation for Indexing Federal Programs and the Tax CodeFebruary 24, 2010pdfadditional infoblog postEconomic and Budget Issue Brief

Employees of the federal government and the private sector differ in ways that can affect compensation. Federal workers tend to be older, more educated, and more concentrated in professional occupations than private-sector workers.

CBO's study compares federal civilian employees and private-sector employees with certain similar observable characteristics (described below). Even among workers with similar observable characteristics, however, employees of the federal government and the private sector may differ in other attributes, such as motivation or effort, that are not easy to measure but that can matter a great deal for individuals' compensation. This analysis focuses on wages, benefits, and total compensation between 2005 and 2010.

Differences in wages between federal employees and similar private-sector employees in the 2005-2010 period varied widely depending on the employees' level of education.

Overall, the federal government paid 2 percent more in total wages than it would have if average wages had been comparable with those in the private sector, after accounting for certain observable characteristics of workers.

The cost of providing benefits—including health insurance, retirement benefits, and paid vacation—differed more for federal and private-sector employees than wages did, but measuring benefits was also more uncertain.

On average, the benefits earned by federal civilian employees cost 48 percent more than the benefits earned by private-sector employees with certain similar observable characteristics.

Differences in total compensation—the sum of wages and benefits—between federal and private-sector employees also varied according to workers' education level.

Overall, the federal government paid 16 percent more in total compensation than it would have if average compensation had been comparable with that in the private sector, after accounting for certain observable characteristics of workers.

CBO's analysis compared federal civilian employees with private-sector employees who resembled them in the following observable characteristics:

This study presents an overview of CBO's findings. More-technical explanations of CBO's methodology, including a discussion of the ways in which CBO's methods differ from those of other major studies, are presented in CBO working papers on wages and on benefits.

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