Pay freeze?

Posted at 11:45 AM on November 29, 2010 by Bob Collins (9 Comments)
Filed under: Economy, Politics

President Obama today proposed a pay freeze for federal employees for the next two years. It's a pre-emptive strike in advance of Republicans taking control of Congress. Many in the GOP have vowed to reduce the federal workforce by 10 percent.

Obama says his move will save $5 billion over the next two years. The pay freeze will not apply to the military.

There are about 2.1 million federal employees (including the military). The number has grown in recent years. Nextgov.com analyzed why:

There were fewer federal workers in 2009 than in 1990, 1980 and 1970. Now take a closer look at the OPM table. Much of the growth, understandably, occurred in Homeland Security agencies, increasing from 70,000 to 180,000 - a jump of 110,000. Justice Department jobs went from 98,000 to 113,000 -- more than 15,000 new jobs added. (Again, crime and more Homeland Security related.) Jobs at the Veterans Department increased from 220,000 to 297,000 -- that's 77,000 more federal workers. Again, a result of Homeland Security, or rather staffing up to take care of thousands of veterans coming home from two wars. And there's a lot of information technology jobs in there.

Almost all of the new jobs created were as a result of 9/11, the analysis said. Compared to the 1980s, federal jobs in agriculture, education, and the Treasury have all declined.

But back to the freeze. Will it work? Here's some napkin math:

There are (and this is debatable) 1.43 million federal workers.

A savings of $5 billion per year is the goal.

The average amount being forfeited by a federal worker is $3,496.

The current deficit is about $1 trillion.

On a per-dollar basis, the president's move cuts one-half cent for every dollar of the federal deficit. That doesn't quite reach the level of a drop in the bucket. It also assumes that the cost of benefits doesn't rise.

Would the Republican plan do much more? The average federal salary is about $68,000. Annual benefits, reportedly, cost $40,785 (this may include benefits under the GI Bill). The total saving from cutting 10 percent of the civilian workforce would be $15.5 billion or a penny and a half per dollar of the deficit. That, however, doesn't factor in the cost of lost income taxes and the cost of firing employees.

What else needs to be cut?

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Comments (9)

Does that include Senetors and Congresspeople too? If not it should.

Posted by Bill A | November 29, 2010 12:12 PM

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It doesn't, it only includes federal employees via the "executive branch."

According to FedBlog:

But I do feel compelled to note for the record that Congress has in fact already voted to freeze its pay next year -- for the second year in a row. The last time lawmakers got an increase, in 2009, their base pay went up to $174,000.

By law, members of Congress get automatic cost-of-living increases unless they vote to turn them down. Since 1990, they've taken raises 13 times and voted not to accept them on seven occasions.

Posted by Bob Collins | November 29, 2010 12:42 PM

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Of course we can't cut the military. It's the last area in which we're still "Number 1!" Then what would everybody do with their big foam fingers?!?

Posted by Jim Shapiro | November 29, 2010 1:05 PM

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State wages have been frozen the last two years. This year did allow for step increases. But now that Obama has frozen Fed wages, I'm guessing we State Employees are going to get another two years of zero pay increases. Which, combined with a divorce, higher property taxes and a couple other things may actually force me into foreclosure. Great.

Posted by Kassie | November 29, 2010 1:17 PM

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I want to make sure I've got my term correct (and maybe some other people are wondering this too); when they say 'pay freeze' it means that federal employees will still get paid, it just means they will not increase their pay, correct?

Posted by Shane | November 29, 2010 1:19 PM

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"What else needs to be cut?"

tax cuts need to be cut

Posted by bsimon | November 29, 2010 1:55 PM

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Yes, Shane, they will still get paid.

Posted by Bob Collins | November 29, 2010 2:21 PM

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And will the cost of benefits be frozen as well? Although inflation probably won't be much of a factor for the next two years, a significant increase in the cost of health care or other benefits would translate into a significant decrease in net pay.

Posted by AmosFiveAndDime | November 29, 2010 5:48 PM

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Posted by Jacinta Jove | August 25, 2011 12:28 AM

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