Federal Pay Rates Frozen; How High Are They Now?

Yesterday, the Obama administration announced that it wants to freeze wages and salaries earned by federal government employees in calendar years 2011 and 2012. Most federal workers might otherwise have received a cost-of-living raise at the start of the new year. There has been some controversy about whether these workers are overpaid. In this post, I report some information that I have gleaned from the web about the pay scale for most white-collar positions in the federal government, which is known as the “general schedule” (GS).

The government’s Office of Personnel Management (OPM) states that “the General Schedule (GS) classification and pay system covers the majority of civilian white-collar Federal employees (about 1.3 million worldwide) in professional, technical, administrative, and clerical positions…”

For 2010, the pay scale for federal GS employees is shown in the table below. This is the table for employees who work in geographic areas where the cost of living is not unusually high. An explanation of the table follows.

Each row in the table shows the annual salary in dollars for a particular pay “grade.” The OPM explains GS pay grades as follows: “The General Schedule has 15 grades–GS-1 (lowest) to GS-15 (highest). Agencies establish (classify) the grade of each job based on the level of difficulty, responsibility, and qualifications required. Individuals with a high school diploma and no additional experience typically qualify for GS-2 positions; those with a Bachelor’s degree for GS-5 positions; and those with a Master’s degree for GS-9 positions.”

Each column of the table corresponds to a “step” within each pay grade. Employees who do not qualify for a promotion to a higher grade can sometimes move a step to the right along the row corresponding to their pay grade. According to the OPM, “Each grade has 10 step rates (steps 1-10) that are each worth approximately 3 percent of the employee’s salary. Within-grade step increases are based on an acceptable level of performance and longevity (waiting periods of 1 year at steps 1-3, 2 years at steps 4-6, and 3 years at steps 7-9). It normally takes 18 years to advance from step 1 to step 10 within a single GS grade if an employee remains in that single grade. However, employees with outstanding (or equivalent) performance ratings may be considered for additional, quality step increases (maximum of one per year).”

The usual annual pay raises for federal employees in this compensation system are explained next:

“The GS base pay schedule is usually adjusted annually each January with an across-the-board pay increase based on nationwide changes in the cost of wages and salaries of private industry workers.”

Also, “most GS employees are also entitled to locality pay, which is a geographic-based percentage rate that reflects pay levels for non-Federal workers in certain geographic areas…”

As an example of the locality pay earned by workers in many areas with high costs of living, here is the 2010 schedule for GS employees in the “New York-Newark-Bridgeport, NY-NJ-CT-PA” metropolitan area, one of the most expensive places to live in the United States:

As a macroeconomist, I must note that freezing the pay of federal employees will be somewhat detrimental to the effort by the Federal Reserve and the Administration to prevent deflation and/or a double-dip recession, because this action will reduce consumer demand. Also, freezes of federal pay unfortunately could allow private sector employers to cut pay or at least avoid raising pay for some workers who are in the same occupations as the affected government employees. Similar problems can be expected in Europe, where some governments have recently cut wages and benefits for their employees.

The quotations in this post are from this page in the OPM website More details on the GS pay scale are available there. Links to a complete set of GS pay tables like the ones shown above can be found here.

Comments and responses below: