HOW PAY REFORM SCREWED SES EMPLOYEES
As we have said before, it looks like all the usual suspects (also known as the private profit-obsessed beltway consulting firms—or beltway bandits if you prefer the regional slang) are actively trying to drum up business at the cost of federal employees. They are publicly condemning the current GS salary system as an unworkable antique that they allege keeps federal employee productivity from surging to unprecedented heights. If they could link it to causing bird flu and blocking the cure for global warming they would. Aside from a vast amount of facts strongly suggesting they are wrong, it is instructive to look at how badly the SES leaders got damaged in their 1978 salary reform effort.
Prior to the 1978 statute all federal employees, including those now working in SES positions, were on the GS pay scale. At that time, the GS scale had 18 grades, not 15, and the today’s typical SES employee would have been paid at one of those top three grades. Upon election, President Jimmy Carter whipped Washington into a frenzy alleging that America needed a new compensation system to reward and further motivate federal government executives. His demand was that the feds abolish the top three GS grades in favor of a salary system for executives that offered them the potential to earn large raises and bonuses.
Well, like most bait dangled in front of eager and ego-stroked beings, it turned out to be something very different than it was and it has cost the prey dearly. Today, SES pay ranges from about $119,000 to $180,000 before bonuses. For a very small number, bonuses can add another 20% to 35% a year’s earnings. However, most SES folks get a bonus around $14,000 per year and at times a permanent base salary increase. Our best guess is that on average they get paid around $175,000 a year. The top paid non-supervisory GS employee can earn $155,000 a year without the demands of being an executive and few rights to push back when the salary decisions do not go as expected.
Let’s look at what would have happened if these executives had stayed on the GS system. Assume that the salary at the GS-16 through 18 levels would have been set at the same percentage increase over the next lower grade rate—about 18%, as is the rule for all other GS grades. GS-16 pay would have started at approximately $145,000 and GS-18, Step 10 salary topped out at around $260,000. Today’s SES executives would have been far better off if kept on the GS system, especially when you consider that they would have still been eligible for annual bonuses.
On top of the advantage to executives, the political leaders of government would have had a much wider range of salaries available, giving them more flexibility to fit pay to performance, responsibility, and the market. When you also consider that the 1978 law gave the President and cabinet officials virtually total freedom to set the performance measures and goals for all executives, there was no reason that the political leaders of the country could not have demanded ever higher returns on their salary dollars.
Speaking objectively, the only benefit the government gained from replacing the GS with the SES pay reform plan was the opportunity to save millions that otherwise would have been paid to its federal executives. Consequently, whenever someone mentions “pay reform” federal employees should hear it as a plan to cut their pay.
If you are wondering whether federal executive should be compensated at those levels, we offer these facts. Private contractors with the government often charge the feds $70.00 an hour for each building guard they provide the government. That amounts to about $145,000 a year to hire a guard. On the other end of the spectrum, private contractors have successfully insisted that they be allowed to charge an hourly rate equal to $700,000 a year for each of its top five employee executives working a federal government contract.
Stated in more vivid terms, the IRS executive charged with processing over 100 million tax returns every spring and getting refunds back into the economy within 45 days will typically only earn about $30,000 more a year than she pays for the guards who patrol the office parking lot and only about one-quarter the salary paid for the executive who runs the guard company. The same can be said for the executive who gets Social Security payments out timely, or who directs those patrolling our borders for terrorists and drugs, or who drops into disaster zones to help people survive after hurricane, or who dispenses loans that keep thousands of small business’ afloat, or who guards against nuclear power plant meltdowns, or who maintains the beauty of all national parks, or who prosecutes the most dangerous federal criminals, or who ensures the security of our prisons, or who patrol our sea coasts, or who land material on other planets, and on and on.
The federal salary system does not need a multi-million dollar reform or redesign; it needs more money. Consultants are not pushing that option because that solution will not pay them tens of millions to design. Nor are the SES members hoping to shortly become private consultants upon retirement pushing that solution out of a blatant conflict of interest.
Sadly, the Congress and political leaders already know this as proved by the fact that they have given many agencies the power to pay their executives salaries far in excess of the SES scale.
So, every time you hear about the need for reform of the GS salary scale, remind yourself that you are listening to either a grossly misinformed person or someone looking to take money from you in the very near future.