Sunday, December 24, 2017

Are Federal Employees Overpaid?

The Trump Administration wants to put a freeze on Federal pay raises - or at least cut them back.  Are Federal employees overpaid?

In an earlier posting, I noted that:
Almost 30 years ago (28 years, to be exact, as of June 22) I drove down from Syracuse, New York to Washington, DC, to interview at the Patent Office.   They had already offered me the job, but I wanted to check them out and see what it was all about.  They were offering me a GS-7 position at the stunning sum of about $21,000 a year.   Not a lot of money to live in the DC area.
Bear in mind that this was a special pay rate that the Patent Office had to negotiate - GS-7-1225 because the base rate for a GS-7 was even lower.  Not only that, we had a special deal to upgrade us to GS-9 within six months, and GS-11 a year after that.  When I left the Patent Office, I was making about $32,000 a year, but my salary at my first firm was $53,000.   I had no choice - I had to leave.  We wanted to buy a house, and that just wasn't happening on my government salary.

Of course, most Examiners earned more than that by working overtime.  There is a huge backlog of work at the Patent Office, and since the agency is self-funding through application fees, they encourage you to work overtime to chip away at this mountain of work.

Now depending on which inflation calculator you use, determining what $21,000 a year would be worth today is difficult.   As I have noted before, things change over time, and with electronics in particular, prices have gone down, not up.  My first "car phone" from 1990 cost $600 to install in my car.  Today, you can buy a cell phone with more features that that, for well under $100 - and be totally portable.  For $600, well, you can buy pretty much a state-of-the-art smart phone.

But if we assume that $21,000 from 1987 is worth about $45,600 today (based on the calculator above) are Patent Examiners making more or less than I did back then?  Well, as it turns out, the salaries are comparable, according to this USPTO circular, which shows a GS-7 Examiner making about.... $45,000 to start.

And according to this website, salaries for "entry level" Patent Attorneys have gone up correspondingly as well.  So it would appear that wages in this field, at least, have kept up with inflation, but are not really more generous than they were in the past.   And the USPTO has to compete with the law firms to attract talent - and with tech firms to get the electrical and computer science talent.   In that regard, wages are low, if anything.

So why does the Trump administration want to freeze hiring, freeze salaries (or at least cut pay raises), and shrink government?  Well, it is part-and-parcel of this "small government" philosophy, which in the abstract, does have some merit.  Moving from "big government" New York to "small government" Georgia has been illuminating.   It is interesting how governments manage to get things done on smaller budgets when they have to.   When push comes to shove, organizations cut back on frills and excess and still achieve their goals.

As I noted regarding boat registrations, I was appalled how lax Georgia was in this regard.  You fill out a form, send in a check and keep a stub from the form you filled out as your temporary registration, leaving the old boat numbers (maybe from another State!) on the boat until, months later, your new registration arrives in the mail.   Coming from New York, this seemed appalling, until I realized that registering boats is the most useless thing in the world, and really just government make-work anyway.   But being brainwashed by living in New York, I thought that somehow a boat couldn't float, if it didn't have government numbers on the side of it.

So you can cut taxes and cut expenses and still have effective government.   And as a former government and defense contractor, I do have to question the value of some of the projects I worked on over the years.   Patenting weapons of destruction, for example, seems kind of an odd thing for the DoD to do, but they do it - and spend a lot of money every year.   Of course, since they were spending money on me, I didn't question this too harshly.   But it made me realize that there is a lot of fat in government that could be cut.

Of course, the fat the Trump administration wants to cut is not in the defense department.   Rather, they want to cut other government agencies that serve the public more directly.   And of course, they want to cut medicare and social security - by telling us these programs are "bankrupt" and we'll never see any money from them, anyway, so why not abolish them?   Sadly, this is a message that resonates with young people (it did with me, when I was 20) who are seeing 9% of their paycheck evaporating every week, for a program that seems to pay benefits a very long time in the future.

But outside of the Patent Office, a lot has changed in the employment field.   While salaries for government employees appear to have kept pace with inflation and are not any more "bloated" today than in the past, salaries in the private sector have dropped.   Blue-collar and clerical workers in particular, have seen salaries drop, as their jobs are increasingly replaced by automation, thus decreasing the demand for such workers, while at the same time, the supply has grown.

Back in the day, a "government job" was viewed as maybe easy work, with lots of vacation days and perks, but much lower pay than in the private sector.  Plus, you were nearly impossible to fire.  A union job would pay more and have better benefits.   A clerical job for a big corporation would pay far more than the same job with Uncle Sam.  Going to work for the government had an aura of shame about it back then - as if to say you couldn't get a job anywhere else.

Today, things have changed.   A government job is coveted.  The pay is reasonable by the standards of yesteryear but much higher than the national average and median by today's standards.   Moreover, in an era where corporations have slashed benefits for employees and many more employees are forced to work multiple part-time jobs with no benefits whatsoever, the government sector jobs look pretty cushy in comparison.

So, in other words, government employees aren't overpaid, but the rest of us are seeing our pay go down in comparison.  So today, getting a job with the government isn't seen as some shameful thing for folks who can't get a job elsewhere, but instead a highly coveted opportunity to earn a steady living and have great benefits and a great retirement.

And in many States, government employee wages have not only kept pace with inflation but have skyrocketed.   In California, friends of the government employee unions have managed to stuff the local city councils and then pushed through pay raises for government employees, using the tired old canard that all government employees are scandalously underpaid.  This has literally bankrupted some cities and turned others in to high-tax, low-service ghettos.   The very people pledged to "serve and protect" their towns have destroyed them, all in the name of personal gain.

And in that regard, the new tax law may give impetus for people to more closely monitor their property tax bills.  The new tax law will basically eliminate itemizing deductions for the majority of middle-class Americans by increasing the standard deduction.  A cap on deducting property taxes will mean higher income individuals won't see much of an advantage from itemizing as well.,  High local property and State income tax bills will now have to be borne by the taxpayers in full, penalizing those who live in high-tax States.  Whether this will lead to a property tax revolt remains to be seen, of course.   People in New York and New Jersey don't seem to mind paying thousands of dollars a month in property taxes - provided they have the income to do so.  Maybe they can all get government jobs.   Just kidding.

It will be interesting to see how this plays out.   For the most part, from what I can see, Federal government employees are not "overpaid" by the standards of yesteryear, but since the rest of us are making less money, they may be overpaid by current market standards.   But that's not saying much, is it?

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