Federal employee pay comparability.

Federal employee salaries, when compared to similar occupations in the non-federal workforce, are woefully inadequate. The legislation intended to correct the problem of federal employee pay comparability; the Federal Employees Pay Comparability Act (FEPCA) of 1990, has not achieved the results desired by the legislation's supporters. The premise of FEPCA is that, over time, it will achieve some measure of pay comparability between federal government workers and non-federal workers doing similar jobs.

The FEPCA has three basic provisions:

* General pay increase that is based on the Employment Cost Index minus 0.5 percent

* Locality adjustment where non-federal pay exceeds federal pay by more than 5 percent

* Tools to address specific pay problems

During the discussion of each of these three provisions, this paper will briefly address the underlying logic and implementation problems that keep the FEPCA from achieving the intended results.

General Pay Increase Provision Is Flawed 

The intention of the general pay increase provision is to help achieve comparable pay between federal government employees and non-federal employees. However, there are two flaws with the approach. First, the approach assumes there is pay equity between federal and non-federal workers in the first place, so this provision seeks to maintain a status quo relationship. Pay equity did not exist when the FEPCA was enacted; in fact, the inequity of pay was one of the primary motivators behind passage of the law. Consequently, this provision cannot correct the problem of existing pay inequality.

Second, by tying the general pay increase to 1/2 percent less than the Employment Cost Index, the process has a built-in mechanism that continually widens the pay gap between federal government workers and non-federal workers. One indicator of the success (or failure) of this FEPCA provision is the national average pay disparity between federal government workers and their non-federal counterparts. The pay disparity for the 1999 locality payments showed that federal workers made 30.43 percent less than their non-federal counterparts. (1)

What we have observed is that implementation of the general pay increase lacks the political support necessary for funding year after year. Barbara Schwemle wrote in 1998, "FEPCA has never been implemented as originally enacted. In 1994, the annual Employment Cost Index-based pay adjustment was not provided and, in 1995, 1996, and 1998 reduced amounts of the annual adjustment were provided." (2)

Locality Adjustment Doesn't Consider Geographical Costs of Living

The locality adjustment is a mechanism intended to account for the differences in federal government and non-federal pay in individual geographical areas of the country. Two reasonable aspects of locality adjustments provided for in the legislation are to establish a minimum differential between federal and non-federal pay and to phase in the adjustment over time. However, there are two key underlying assumptions, which relate to one another, that must be questioned:

* Federal workers doing the same job should be compensated with the same amount of pay. This assumption underlies all aspects of federal compensation. The issue is that since there is such a wide variation in the cost of living in various parts of the country; the federal governments underlying premise of equal pay for equal work comes into question. Perhaps the government's version of pay equity should provide for an equal standard of living for equal work. Accomplishing this would require unequal compensation for equal work.

* Locality pay is based on the relationship between federal and non-federal pay. Not directly considered for each geographical area of the country is the cost of living in that area. The cost of living is an important discrete factor to consider.

Implementation of the locality adjustment has not had the political support year after year necessary for full funding. In this regard, the federal government disregards the law as follows:

First, all geographical areas in the United States have locality pay. The intention of locality pay was not to solve the problem of a basic lack of comparability between the General Schedule pay scale and non-federal pay across all geographical areas of the country.

Second, the pay gap between federal and non-federal pay in certain high cost of living geographical areas in the country was so wide when the legislation was enacted that locality pay was to be phased in over time. The locality pay recommendations of the President's Pay Agent have never been funded or implemented. The pay gap has not been closed.

Third, over time, locality pay areas have been modified. Some areas that originally met the requirements to be separate locality pay areas now do not. The opposite situation also exists: Some geographical areas that originally did not meet the requirements now do.

The problem is that there has been a reluctance to create new separate locality pay areas. Areas that qualify as discrete locality pay areas are simply added to existing areas. The result is that some locality pay areas are relatively small while others have grown to encompass more than one standard metropolitan statistical area and multiple counties. This has had a tendency to mask the problem and dilute the calculation for some of the areas in the greatest need.

Tools Addressing Pay Problems Fall Short

The FEPCA made available several tools to address specific pay problems. Regarding these tools, Henry Romero, associate director for Workforce Compensation and Performance, Office of Personnel Management, stared at a congressional hearing, "A competitive basic salary is just one part of any employer's strategy for attracting and retaining the workforce it needs. Over the years, recognizing that special recruitment and retention incentives may be needed to attract and retain federal employees in special situations, OPM and Congress have provided a number of flexibilities for agencies to use." (3)

The other FEPCA tools that Mr. Romero was referring to include the following:

* Retention bonus can be offered to key employees. The maximum bonus is a 25 percent increase. Locality pay applies on top of a retention bonus.

* Ten percent group retention bonus. Locality pay still applies.

* Special salary rate can be used in specific geographical areas and/or specific job categories. Maximum bonus is 30 percent above Step 10. Locality pay does not apply.

* Recruitment bonus can be offered to new employees. Maximum bonus is 25 percent; it may be continued at management's discretion.

Mr. Romero's emphasis on these tools presumes that the basic level of pay is equitable. The cited tools, however, were not designed to correct the pay of large numbers of people in multiple skills across the country or, for that matter, in a given geographical area. The implementation problem associated with using these tools is that the approval level to make effective use (as opposed to isolated applications) rests with the Office of Personnel Management and agency heads. Effective use of these tools requires pushing approval authority down the chain of command to where the problems exist.

Conclusion

In summary, the legislation intended to correct the problem of pay comparability; the Federal Employees Pay Comparability Act (FEPCA) of 1990, has not been fully implemented and, consequently, is a farce. As discussed, FEPCA's general pay increase and locality pay provisions are based on faulty premises and laden with questionable assumptions. Perhaps even more egregious to the federal workforce and the American public is the unwillingness of any recent administration to comply with the provisions and intent of this public law. Even so, the tools provided by FEPCA are anemic and not readily usable to overcome the basic limitations and misimplementation of this legislation. The results are that federal workers are deprived of fair compensation for the valuable contributions they make, while the federal government is unable to recruit and retain the "best and brightest" in today's competitive economy;

Bibliography 

(1.) President's Pay Agent. Report on Locality-Based Comparability Payments for the Genera/Schedule. (Washington: 1997), 24p.

(2.) Schwemle, Barbara L. Federal Pay: FY 1999 Salary Adjustments. Government Division, Congressional Research Service, Library of Congress, July 8, 1998.

(3.) Romero, Henry. "The Effectiveness of Federal Employee." Testimony of Henry Romero, before the Subcommittee on Oversight of Government Management, Restructuring and the District of Columbia, Committee on Governmental Affairs, United States Senate (May 2000).