OMB director defends proposed pay freeze as a strategic decision

On Behalf of | Apr 23, 2018 | Employee Law

President Trump’s 2019 budget proposal included a pay freeze for federal workers during the federal fiscal year and slow the pace of step increases. It also documented the administration’s intention to rely on “pay for performance” to determine federal workers’ salaries rather than the current tenure-based step increase system. At a recent House Appropriations Committee hearing, Office of Management and Budget Director Mick Mulvaney defended the proposed changes.

“I hope that we can all agree with 2 million non-defense federal workers, that some of them might be really good at their jobs, and some of them might not be, yet we come close to paying them pretty much the same,” Mulvaney said.

He added that the federal government pays entry level personnel “more than we probably should” while underpaying higher-level employees.

An April 2017 report by the CBO indicated that federal workers with no more than a high school diploma averaged 34 percent more in hourly wages than similar workers in the private sector. Meanwhile, employees with master’s degrees or higher make less than their private-sector counterparts. However, a recent report by the Federal Salary Council Locality Pay Working Group says that, on the whole, federal workers make more than 30 percent less, on average, than their private-sector peers.

The CBO also concluded that about 3 percent could be saved on wages if federal pay were adjusted to match the private sector. However, it also noted that federal jobs attract more highly educated people overall. Also, federal employees are less likely than private-sector workers to experience extreme lows or extreme highs in pay.

The idea behind the administration’s pay freeze and slowed step increases is to allow the government to reevaluate how raises are determined. According to Mulvaney, the government essentially lacks the ability to reward strong performers more than poor ones. Any changes to the current system, he added, would have to comply with union and other third-party agreements.

At least one representative at the committee meeting did not seem supportive. Rep. Sanford Bishop (R-Utah) said that freezing pay and changing the step increase system would remove incentives for highly skilled people to work for the federal government. Agencies are already struggling to fill cyber, IT and other in-demand areas with top talent, considering that these fields are often paid far more in the private sector.

President Trump’s 2019 budget proposal is merely a proposal, of course, and there is no way to know whether the proposed changes to the federal employee remuneration system will make it into law. Do you think that a “pay for performance” system would be an improvement?