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Federal employee pay raise: Living today but yearning for the past

Comparing Federal Employee Pay Raise to Social Security COLA
Comparing Federal Employee Pay Raise to Social Security COLA
FedSmith.com

On March 11, FedSmith published two charts displaying federal employee pay raises going back for several decades. The reason the charts resonate with federal workers is easy to understand: Pay raises have been nonexistent for several years in a row followed by an increase of just 1 percent in 2014. The prospects of a significant pay raise in 2015 are not very promising either.

In a recent survey, federal employees thought they should get a raise of 4 percent instead of the 1 percent proposed by President Obama in his budget request for 2015.

In other words, some federal workers may be yearning for the "good old days" when raises of 4 percent were common and raises of more than 10 percent in a year were not unheard of going back into the 1970's when inflation was high and the national debt was comparatively low.

But, while there are understandable reasons why many federal employees think a raise of at least 4 percent makes sense, that is not likely to happen in the current economic environment. Back in the 1970's, double-digit inflation created a nightmare for many people in developed countries, including the United States. Retirees on a fixed income saw their purchasing power eroding, buying a house with a mortgage was very expensive, and food costs were rising.

Federal employee pay went up 9.1 percent in 1969, 6 percent in 1971 and 10.9 percent in 1972. Raises of more than 5 percent continued throughout the 1970's for the federal workforce. Raises actually exceeded the rate of inflation in some years.

On the other hand, the national debt was much lower. The $398 billion dollar debt under President Nixon seemed huge at the time. But, compared to the $17 trillion dollar debt that the United States is now facing is hard to comprehend and hard to understand how it will ever be paid back.

The massive federal deficit spending incurred by the government that is increasing by hundreds of billions each year, the growing interest on the debt, and the low rate of inflation all goes into the political process of determining the federal employee pay raise in a given year.

Moreover, the federal government is not very popular. One of the central concepts in the American Declaration of Independence is that “governments derive their only just powers from the consent of the governed.”

A poll taken in October of 2012 revealed that 60 percent of Americans do not think the federal is functioning with this consent. Only 25 percent of likely U.S. voters think the federal government is using power with the consent of American citizens (15% were "not sure"). Even with a margin of error, there is no doubt that the federal government today is very unpopular.

And, as an added kicker, we are theoretically emerging from a significant recession. It is hard to tell that in many parts of the country though. While the economy is booming in the Washington, DC metropolitan area which now has the country's richest counties, the economy is not moving forward significantly in much of the United States. While the unofficial unemployment rate was 6.7 percent in February 2014, a more accurate indicator unemployment indicates an unemployment rate of about 12 percent. The real unemployment rate does not sound as good to those who may suffer politically from its use so it is not often cited in the media. This rate is referred to by the Bureau of Labor Statistics (BLS) as "U-6." This unemployment rate is defined by BLS as "total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers."

An unpopular government, high unemployment, a low rate of inflation, a huge national debt that is growing rapidly each year and it is not hard to see why a significant federal pay raise will not be forthcoming in the near future.

Politicians do not want to face voters and explain why giving federal employees a significant pay raise in the current economic climate is a good idea. Political opponents will cite statistics showing that the average federal salary is already twice that of the average American and the benefits for federal employees are better than what most Americans receive, including not being subject to the intricacies and expense of the Affordable Care Act (Obamacare) as federal employees have their own health insurance system. While there are good reasons for a higher salary rate for many federal employees, those arguments will be lost in the media chatter and political ads.

The result: Federal employees can probably look forward to low annual salary increases for the next couple of years.