Andrew G. Biggs and Jason Richwine write,
the average federal worker shifting to a private job actually accepts a small salary reduction of around 3 percent. Similarly, private sector workers who move to federal jobs don’t take a pay cut. They get a first-year raise averaging 9 percent, well above the raise other workers get when they switch jobs within the private sector.
The authors suggest that this is evidence that public sector workers are not underpaid. Can we interpret it any other way? Perhaps public sector work has an unobserved “pain factor” that requires a compensating differential?
Other data that would be interesting would be data on job applications. Is there a flood of applications for private sector jobs coming from the public sector? How does it compare with the amount of applications going the other way?
Having worked in the federal sector – as I know you have – I would say the “pain factor” depends on your personality. If you dislike red tape and banal restraints on what you can say and do in an official capacity, then the pain factor is probably high. However, if you don’t mind those things, the pain is far outweighed by the higher pay, better benefits, and job security. Come to think of it, selection bias may explain the similar personalities to be found in government bureaucrat types.
Anecdotally, from every current or former government employee I’ve ever spoken to or heard from, there is indeed a pain factor. It seems to hit the ambitious and energetic the worst, so they quit, and leave behind the slothful.
Key word is “average.” I have no doubt that admin assistants or data entry clerks (like the kind you find at one of the huge DFAS offices) are paid higher in gov’t than they would in the private sector, but many career fields are underpaid. This is especially true the higher up the scale you go. Directors of branch offices that oversee hundreds of workers that make 110k? Plus, the work a gov’t worker does tends to be agency specific and often doesn’t translate into private work very well. He or she can be incredibly knowledgable about a subject that has no private sector analogue. It’s just tough to make direct comparisons, IMO.
I know several highly-qualified professional who had extreme difficulty to getting hired at the Departments of HHS, Justice, and State. This is at the graduate degree level, so the anecdotes represent a small subset of all federal employees.
Nonetheless, at that level, if it’s that difficult for extremely well-qualified candidates to get hired on, then federal employee pay (again, at that level) is too high. The market will clear at a lower level of pay.
A related problem is that there seems to be little incentive for federal workers to hire the best candidates for the job. Managerial promotion is typically based on seniority as much as merit. The typical incentive of hiring subordinates who can do great work and make the manager look good is less important than in the private sector.
These sector shifts are not random, so their finding should be interpreted with care. What is the nature of the ”non-random sampling bias” and its effect?
I agree with the above posters about needing to think about (a) the entire distribution, not just the mean effect, and (b) the evolution of wages and opportunities in each sector.
The true effect is not the change in pay, but the change in your lifetime discounted earnings, something like NPV, adjusted for uncertainty in wages and for compensating differentials. A tall order.