Comparing the Compensation of Federal and Private-Sector Employees

Report
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.

Wages

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.

Benefits

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.

Total Compensation

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.

Methodology

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,
  • Occupation,
  • 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).
Further Reading

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.