January 31, 2012
Employment and Labor Markets
Comparing the Compensation of Federal and Private-Sector Employees
January 30, 2012
How does the compensation of federal civilian employees compare with that of employees in the private sector?
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.
- Federal civilian workers with no more than a high school education earned about 21 percent more, on average, than similar workers in the private sector.
- Workers whose highest level of education was a bachelor's degree earned roughly the same hourly wages, on average, in both the federal government and the private sector.
- Federal workers with a professional degree or doctorate earned about 23 percent less, on average, than their private-sector counterparts.
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.
- Average benefits for federal workers with no more than a high school diploma were 72 percent higher than for their private-sector counterparts.
- Average benefits for federal workers whose education ended in a bachelor's degree were 46 percent higher than for similar workers in the private sector.
- Workers with a professional degree or doctorate received roughly the same level of average benefits in both sectors.
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.
- Federal civilian employees with no more than a high school education averaged 36 percent higher total compensation than similar private-sector employees.
- Federal workers whose education culminated in a bachelor's degree averaged 15 percent higher total compensation than their private-sector counterparts.
- Federal employees with a professional degree or doctorate received 18 percent lower total compensation than their private-sector counterparts, on average.
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:
- Level of education,
- Years of work experience,
- Employer's size,
- Geographic location (region of the country and urban or rural location), and
- Demographic characteristics (age, sex, race, ethnicity, marital status, immigration status, and citizenship).
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.
Comparing Wages in the Federal Government and the Private Sector
January 30, 2012
This analysis used Current Population Survey data from 2005 through 2010 to compare the hourly wages of federal employees and workers in the private sector who have certain similar observable characteristics. In that comparison, we found that the arithmetic average of wages was about 21 percent higher for federal employees than for their private-sector counterparts among workers with no more than a high school education, was about the same in both sectors among workers with a bachelor’s degree, and was 23 percent lower in the federal sector among workers with a professional degree or Ph.D. Overall, federal wages were about 2 percent higher, on average, than wages of similar private-sector workers.
We found that the wages of federal employees were much less dispersed than those of employees with similar characteristics in the private sector—particularly among workers with more education. That aspect of the data causes semilog regressions to generate inconsistent estimates of percentage differences in arithmetic means. Consistent estimates of differences in arithmetic means—obtained using a quasi-maximum likelihood estimator that is robust to distributional misspecification—are substantially smaller than differences in geometric means estimated by semilog regressions. The differences in arithmetic means are more relevant for answering questions about how federal spending would change if federal workers were paid wages equal to those of measurably similar workers in the private sector.
The estimates do not show precisely what federal workers would earn if they were employed in the private sector. The difference between what federal employees earn and what they would earn in the private sector could be larger or smaller depending on characteristics that were not included in this analysis because such traits are not easy to measure. The results apply to the cost of employing full-time full-year workers. The analysis focused on those workers—who accounted for about 93 percent of the total hours worked by federal employees from 2005 through 2010—because higher-quality data were available for them than for other workers.
Nov 2012 - Between 2007 and 2010, unemployment benefits expanded nearly five-fold owing to high unemployment due to the weak economy, and decisions by policymakers to increase the number of weeks for which eligible unemployed workers could receive benefits.
A Description of the Immigrant Population: An Update
June 2, 2011
This document is the latest in CBO's series on immigration. It updates A Description of the Immigrant Population (November 2004), providing an overview of the nation's foreign-born population, with a particular focus on the years 2000 to 2009. It discusses changes in the numbers and countries of origin foreign-born people and their U.S. residency and citizenship status, and it compares demographic and labor market characteristics of foreign-born and native-born people in the United States.