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67–258 PDF 2011

ARE FEDERAL WORKERS UNDERPAID?

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

U.S. POSTAL SERVICE AND LABOR POLICY

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

MARCH 9, 2011

Serial No. 112–6

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON FEDERAL WORKFORCE, U.S. POSTAL SERVICE AND LABOR

POLICY

DENNIS A. ROSS, Florida, Chairman

JUSTIN AMASH, Michigan, Vice Chairman

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

TREY GOWDY, South Carolina

STEPHEN F. LYNCH, Massachusetts,

Ranking Minority Member

ELEANOR HOLMES NORTON, District of

Columbia

GERALD E. CONNOLLY, Virginia

DANNY K. DAVIS, Illinois

(III)

C O N T E N T S

Page

Hearing held on March 9, 2011 .............................................................................. 1

Statement of:

Berry, John, Director, U.S. Office of Personnel Management ...................... 4

Sherk, James, senior policy analyst in labor economics, the Heritage

Foundation; Andrew Biggs, Ph.D., resident scholar, American Enterprise Institute; Max Stier, president and CEO, Partnership for Public

Service; and Colleen Kelley, national president, National Treasury Employees Union ................................................................................................ 28

Biggs, Andrew ............................................................................................ 39

Kelley, Colleen ........................................................................................... 62

Sherk, James ............................................................................................. 28

Stier, Max .................................................................................................. 48

Letters, statements, etc., submitted for the record by:

Berry, John, Director, U.S. Office of Personnel Management, prepared

statement of ................................................................................................... 6

Biggs, Andrew, Ph.D., resident scholar, American Enterprise Institute,

prepared statement of ................................................................................... 41

Connolly, Hon. Gerald E., a Representative in Congress from the State

of Virginia, prepared statement of .............................................................. 26

Kelley, Colleen, national president, National Treasury Employees Union,

prepared statement of ................................................................................... 64

Sherk, James, senior policy analyst in labor economics, the Heritage

Foundation, prepared statement of ............................................................. 31

Stier, Max, president and CEO, Partnership for Public Service, prepared

statement of ................................................................................................... 51

(1)

ARE FEDERAL WORKERS UNDERPAID?

WEDNESDAY, MARCH 9, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON FEDERAL WORKFORCE, U.S. POSTAL

SERVICE AND LABOR POLICY,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 1:35 p.m., in room

2154, Rayburn House Office Building, Hon. Dennis Ross (chairman

of the subcommittee) presiding.

Present: Representatives Ross, Amash, Jordan, Chaffetz, Mack,

Walberg, Lynch, Norton, Connolly, and Davis.

Staff present: Ali Ahmad, deputy press secretary; Michael R.

Bebeau, assistant clerk; Molly Boyl, parliamentarian; Benjamin

Stroud Cole, policy advisor and investigative analyst; Howard A.

Denis, senior counsel; Adam P. Fromm, director of Member liaison

and floor operations; Jennifer Hemingway, senior professional staff

member; Christopher Hixon, deputy chief counsel, oversight; Ryan

Little, manager of floor operations; Justin LoFranco, press assistant; James Robertson, professional staff member; Kevin Corbin,

minority staff assistant; Jill Crissman, minority professional staff

member; Carla Hultberg, minority chief clerk; and Mark Stephenson, minority senior policy advisor/legislative director.

Mr. ROSS. Good afternoon and welcome to the Subcommittee on

Federal Workforce, U.S. Postal Service and Labor Policy.

Today, we have two panels that will be testifying before us. I do

want to note, though, that we probably will have to take a break

in between 2 and 3 for two votes. So we’ll have to take a temporary

recess for about 30 minutes at that time and then reconvene for

the specific purpose of continuing our testimony. Hopefully, we will

be able to get through the first panel before we have to go do our

votes.

With that, I will call the committee to order; and, as is custom

with the full committee and the subcommittees, I will read the mission statement of the Oversight Committee.

We exist to secure two fundamental principles: First, Americans

have a right to know that the money Washington takes from them

is well spent; and, second, Americans deserve an efficient, effective

government that works for them.

Our duty on the Oversight and Government Reform Committee

is to protect those rights. Our solemn responsibility is to hold the

government accountable to taxpayers, because taxpayers have a

right to know what they get from their government. We will work

tirelessly in partnership with citizen watchdogs to deliver the facts

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to the American people and bring genuine reform to the Federal

bureaucracy. This the mission of the Oversight and Government

Reform Committee.

Today, we are here to discuss whether Federal employees are

adequately compensated. I’ll begin with my opening statement and

then defer to the Ranking Member Lynch for his.

According to the Office of Personnel Management, the average salary for Federal employees was $74,311 in 2010. The average private sector worker earned $50,462, according to an August 10,

2010, analysis conducted by the Cato Institute. The Federal Government also pays an average of 36 percent of employees’ base

health insurance and pension benefits, in addition to generous paid

leave. Taken together, Federal employees, on average, earned

$101,628 in total compensation in 2010, nearly four times more

than the average private sector worker.

The members of this subcommittee recognize that our talented

work force performs critically essential functions and missions

throughout the government on behalf of our Nation. We appreciate

their service. Federal employees should be compensated fairly. Yet

current Federal salaries and benefits are not in line with the marketplace when compared to the private work force compensation. In

a time when our economy is in a recession, the contrast between

the government and private sector pay is troubling. The Federal

Government has no incentive or obligation to reduce salaries in

order to be competitive to stay in business. It can simply borrow

more money or raise taxes.

With Federal spending and unemployment at or near record

highs, this hearing presents an opportunity for lawmakers of this

committee to hear important testimony from our distinguished panelists on how best to address the growing pay disparity between

the Federal civilian work force and the private sector work force.

Over the past decade, compensation of private sector employees

has not kept pace with that of Federal employees. Moreover, Federal workers receive generous benefits, vacation, health insurance,

pension plans, retirement savings, and disability pay. These benefits greatly exceed those that are normally provided to the private

sector work force.

Last November, President Obama announced a 2-year pay freeze

for Federal employees. Unfortunately, the pay freeze did not impact

salary increases driven primarily by the passage of time or bonuses, meaning President Obama’s pay freeze wasn’t really a

freeze.

Additionally, according to the Bureau of Labor Statistics, the

Federal Government grew by 157,000 people from December 2008

to 2010, while private sector lost 8.8 million jobs. The unemployment rate hovers around 9 percent. The President’s budget requests an additional 15,000 new Federal workers for the fiscal year

2012. Our taxpayers can no longer be asked to foot the bill for

these Federal employees, while watching their own salaries remain

flat and their benefits erode. Congress has an obligation to consider

all policy reforms that overhaul Federal compensation, reduce

costs, and better align with the private sector.

I thank the witnesses all for appearing today, and I look forward

to your testimony.

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I now recognize the distinguished ranking member from Massachusetts, Mr. Lynch, for his opening statement.

Mr. LYNCH. Thank you, Mr. Chairman. I thank the witnesses for

their attendance here. Good afternoon, members of the committee.

The topic of today’s hearing regarding Federal employees compensation requires us, I think, periodically to review the way we

are paying our Federal employees, reviewing the pay levels and

benefits that they receive. But, recently, this topic has generated

much debate.

As stewards of the people, we should conduct robust oversight

into the Office of Personnel Management’s pay-setting practices,

and we owe the U.S. taxpayer full transparency in this area, as

well as assurance that the salaries and benefits provided to our

Federal workers are reasonable and appropriate.

I note that the debate over Federal employee benefits predated

the 1883 enactment of the Pendleton Act overhauling the patronage system, and I’m quite confident this debate will outlive the

service of our committee.

Like all Americans, Federal employees are not immune from our

Nation’s economic and fiscal challenges; and they understand the

sacrifices called for in the 2-year pay freeze enacted this past December by Congress and the President.

However, we need to be careful not to get caught up in the oversimplistic data comparisons between private sector and Federal

jobs. A recent New York Times article pointed out that when comparing private and public sector occupations the clearest pattern to

emerge is an education divide. The most reliable factor in predicting compensation levels is actually the level of education; and when

comparing private and public sector occupations, the clearest pattern to emerge is an education divide, a divide that has grown

more pronounced in recent decades.

Today’s Federal civilian work force is highly educated, with over

half of all Federal employees working in the nine highest-paying

professional occupations in the country. It is also a work force

marked by a declining number of blue collar workers, dropping

from over 30 percent to just under 9 percent of the work force in

the last 40 years. So the Federal employees are a more professional

level of employee. We have contracted out most of the blue collar

jobs, the lower-paying jobs, which is why you get a discrepancy

when comparing Federal employees to the general public.

In light of the 2-year pay freeze which is squeezing the pockets

of Federal workers who are also facing ever-escalating health care

costs today, I’m reintroducing my bill to inject cost transparency

into the Federal Employees Health Benefit Program contracts between health plans and pharmacy benefit managers. This bill will

lower Federal employees’ out-of-pocket spending and the program’s

operational costs, resulting in a win-win for both Federal employees and taxpayers.

I look forward to hearing from the distinguished witnesses assembled here today as your expertise and guidance on compensation issues enables us to better forge a high-performing civil service

that is prepared to meet the challenges of the 21st century. Thank

you.

Mr. ROSS. Thank you, Mr. Lynch.

4

Members may have 7 days to submit opening statements and extraneous materials for the record.

We’ll now welcome our first panel, the Honorable John Berry,

who is the Director of the U.S. Office of Personnel Management.

Mr. Berry, pursuant to committee rules, all witnesses must be

sworn in before their testimony, before they testify. Please rise and

raise your right hand.

[Witness sworn.]

Mr. ROSS. Let the record reflect the witness answered in the affirmative.

Mr. Berry, please limit your opening statement to 5 minutes. We

do have your testimony, and we’re grateful for that, and we’re very

grateful for you to be here. You may begin.

STATEMENT OF JOHN BERRY, DIRECTOR, U.S. OFFICE OF

PERSONNEL MANAGEMENT

Mr. BERRY. Thank you Chairman Ross, Ranking Member Lynch,

and members of the subcommittee. It’s an honor to be with you

here today, and I appreciate the opportunity.

I believe that the members of this subcommittee and I, and all

Federal employees, share the goal of making government more efficient while improving services; and I look forward to working together with you to accomplish that.

President Obama said it best last week when he said, ‘‘I don’t

think it does any good when public employees are denigrated or

vilified or their rights are infringed upon. We need to attract the

best and the brightest to public service. Our times demand it.’’

Our need for great workers could not be more clear. Federal employees hold lives in their hands and oversee large sums of taxpayer dollars. We need talented and innovative people at the Department of Defense supporting our warfighters. We need great

doctors and nurses at our veterans hospital doing lifesaving work.

And we need tough men and women at the Departments of Justice

and Homeland Security to protect us from another terrorist attack.

And it is just a fact, Mr. Chairman, in order to get these workers

we must provide pay and benefits on par with other large companies for whom we compete with talent. We cannot and should not

be the employer of last resort.

Despite the complex challenges we face, the Federal civilian work

force is virtually as small today as it has been throughout the modern era. In 1953, there was one Federal worker for every 78 residents. Today, 2009, it was one for every 147.

President Obama has frozen annual pay adjustments for 2 years.

The raw comparisons of average pay between Federal and private

sector employees often can ignore important differences between

skill levels, complexity of work, scope of responsibility, size of organization, location, experience level, as well as exposure to personal

danger. Even comparisons that purport to compare employees in

the same occupations can sometimes be misleading.

For example, some claim that Federal attorneys make more than

private sector attorneys. In fact, while more than half of our general attorneys in the Federal Government earn less than $90,000

in their first year of service, the median first-year salary for comparable attorneys in the private sector is $145,000.

5

As another example, Federal cooks may seem overpaid until you

consider that many of them work in our prison system where they

supervise inmates in a very dangerous environment.

The Federal Government, like most large employers, also provides an array of benefits. While we need to do this to be competitive, note that these benefits are not free to our employees. Employees share in the cost of those benefits and, in many cases, pay

100 percent of the cost. For health benefits, enrollees share 30 percent of the premium costs. For dental and vision, they pay 100 percent of the cost. For life insurance, they pay 66 percent for the

basic premium but 100 percent for any coverage beyond that. For

long-term care, they pay 100 percent.

I’d also like to note that Congress and President Reagan reformed our benefits, our retirement benefits, 25 years ago, and this

has avoided the struggles that State and local governments are

now going through. Those reforms guarantee that our FERS retirement system is financially sound and fully funded at 100 percent.

Bottom line, this administration is committed to providing the

superior service the American people expect and deserve. Managers

and employees who aren’t doing that should be held accountable

and ultimately fired if they don’t improve. There should be no place

in the Federal Government for non-performers to hide.

Our pay system is not perfect. I have said before, it is six decades old and could use a re-examination. We are required by law

to reduce all of the comparisons to one average number. This is imperfect and does not reflect the complexity of the work force.

But, even so, we must reject misleading uses of data that perpetuate the myth that Federal employees are, as a whole, overcompensated. They are not. Our wages and our benefits are fair, and they

are competitive. Any reforms we undertake must meet the following principles that our existing GS system does well: transparency,

equal pay for equal work, no political influence, and the ability to

recruit and retain the work force we need. This is how it must be

if we are to recruit and retain the best workers and carry out our

critical life-saving and life-enhancing missions. Falling behind is

unacceptable.

Thank you, Mr. Chairman. I’m happy to answer any questions.

[The prepared statement of Mr. Berry follows:]

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11

Mr. ROSS. Thank you, Mr. Berry. I will yield myself 5 minutes

for questions.

Mr. Berry, I note that in the President’s January 2011, Pay

Agent report it showed a 22 percent difference between Federal

employee pay and private sector pay, and I was wondering, did

that include benefits, that assessment, that report?

Mr. BERRY. No, that is focused specifically just on the pay.

Mr. ROSS. And, subsequent to you testifying, we’ll have another

panel. Mr. Biggs will testify that a Federal pay premium of 14 percent, and when combined with benefits premium of 33 percent,

total Federal salary and benefits are nearly 25 percent above those

of similar private sector employees; and Mr. Sherk will testify that

Federal employees earn a total compensation of 30 to 40 percent

greater comparable than private sector workers. Do you agree with

their findings?

Mr. BERRY. Absolutely not.

Mr. ROSS. And why not? Because, in one sense, we’re talking

about strictly compensation. In the other, we’re talking about compensation and benefits.

Mr. BERRY. If we just—if we’ll stay for compensation for a second, Mr. Chairman—and I agree, I’m happy to look at them together. But for the purposes of this discussion, it’s easier if we can

keep them separate for a moment.

Their comparisons are based on gross averages. As Congressman

Lynch mentioned, the Federal work force is now a very skilled,

white collar, high sophisticated work force. It used to be 40 years

ago over a third of our work force was blue collar. Less than 10

percent is today. And so we need to compare the Federal Government with like to like.

What the Bureau of Labor Statistics does and the Department of

Commerce is they go into literally every locality, every one of your

States in the country, and they will compare entry-level, mid-level,

and senior-level career for each position.

So they’ll look at an engineer, for example. They will find a job

in the private sector that is almost duplicative. And the private

sector doesn’t use the GS system, so you could imagine this is very

exhaustive. It’s expensive. It takes a lot of work.

The work that you’re going to hear from in the next panel, they

don’t have the resources to do that. The Bureau of Labor Statistics

does that on an annual basis for us, and that’s the data we’re comparing. So we’re getting real comparison of like jobs to like jobs.

The averages you’re going to hear about from that panel are

looking at the total labor force of the civilian market. The primary

jobs in the private sector are retail clerks and service workers,

waiters and waitresses. We don’t have those in the Federal Government and those that we do are generally provided on a contract

basis with the private sector. So that average, you can see, pulls

down the private sector number. But when you compare engineer

to engineer, lawyer to lawyer, doctor to doctor, nurse to nurse,

what it shows consistently for 20 years is that Federal employees

lag the private sector.

Mr. ROSS. But wouldn’t you also agree, because I don’t believe

OPM considers the job security as a criteria when determining the

value of a job. Is that correct?

12

Mr. BERRY. No, sir. Obviously, working in the Federal Government, our mission is long term in nature.

Mr. ROSS. And it should be for any employment. I mean, people

go into employment for careers and not to change jobs through a

revolving door. And I guess my question is, is that when you look

at fiscal year 2010, the quit rate for GS employees was 11⁄2 percent

and the layoff rate was 0.37 percent. And do you have any opinion

as to how that would compare to the private sector?

Mr. BERRY. Our attrition rates pretty much track the private sector. You know, I have heard some misinformation from some folks

talking about that the Federal Government doesn’t have a retention problem. Let me just give you doctors and nurses. In 2005, we

hired 5,300 of them. As of today, we have lost 2,300, for a quit rate

of over 43 percent. I have a retention problem. And that is primarily based—when we are talking to employees as they leave, one

of the biggest and leading concerns is the fact that they’re underpaid.

Mr. ROSS. But, again, speaking as a whole Federal work force,

we’re only looking at a 11⁄2 percent quit rate. I mean, so I wouldn’t

consider that to be so much of a problem. If it was 40 percent as

a total of the entire work force, then I would consider it a problem.

But let me ask you, you talked about highly skilled occupations,

engineers and lawyers, being paid below the market. Are there any

circumstances or instances where Federal employees are paid

above the market?

Mr. BERRY. Absolutely. Yes, sir. The average—when I say—I do

not mean to represent when I say the 22 percent pay gap that the

Department of Labor references doesn’t apply to each and every job

reaching every employee. That is a gross average, which means

some employees are paid more, some are paid less, some are paid

the same. Clearly, to get that number of the gap, the clear majority

are paid less. There are some that are paid more.

Mr. ROSS. Real quickly. I’ve just got a couple of seconds. How

many days of paid leave are Federal employees entitled to? Do you

know?

Mr. BERRY. We can give you—it varies based on years of service,

Mr. Chairman, so if I could I’ll just provide that to you for the

record.

Mr. ROSS. OK. Thank you.

Mr. BERRY. So you’ll have it exactly.

[The information referred to follows:]

[NOTE.—No insert/information provided.]

Mr. ROSS. I see my time’s up.

I’ll now recognize the distinguished gentleman and ranking

member from Massachusetts, Mr. Lynch, for 5 minutes.

Mr. LYNCH. Thank you, Mr. Chairman.

Welcome, Director Berry. I want to thank you for the good work

you’re doing over there.

One of the things I just want to start out by pointing out is I

notice behind me there’s a chart here, employment changes, that

the Federal Government added 157,000 jobs. I just want to—now,

this is 2008 through 2010. Now, you would think that meant that

employment at the Federal—in the Federal sector actually went

up. During—I went back, and I got the numbers because I was surVerDate 11-MAY-2000 13:36 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67258.TXT KATIE PsN: KATIE
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prised by that number, and I went back and actually calculated the

number of separations, the number of people who left the Federal

Government. We had almost 207,000 leave in 2010, 90,000 in

2009—just over 90,000—and 219,000 in 2008, for a total separation

of 616,359 employees. So while they’re saying there’s 157,000 new

first-time employees, there’s also been a reduction of 616,000 employees who left. And I think that also speaks to the argument of

job security. If 616,000 employees—and these were deaths, firings,

these were quits, these were retirements, all combined. So it does,

I think, provide a little wider picture.

Director Berry, much is said of the general schedule’s lack of performance management, mainly its inability to appropriately reward

individual performance. I think it was because of some of those

concerns back in 2009 we experimented with an alternate pay system at the Department of Defense called the National Security Personnel System. We spent hundreds of millions of dollars implementing the new system and, oddly enough, we had 0.8 percent of

people who usually are rejected for step increases under the old

system, and under this new system, this pay-for-performance system, 0.2—0.2 percent were rejected for the step increases. So with

the new system, on pay for performance that’s been suggested as

being an alternative here, we had less people get disciplined or rejected for their step increases.

So I’m just curious. It seems like the managers were doing the

same thing under the new system as they did under the old system, and I’m just curious if that’s a—if you think that’s a viable

alternative here.

Mr. BERRY. Well, Mr. Lynch, I think you hit on two points that

I think it’s important for the committee to keep in its sights, if you

will, as you move forward on this path.

First is, you know, the Congress repealed NSPS, and so the Defense Department has been moving employees back into the GS

system. If you think that their pay-for-performance system, NSPS,

is going to save the taxpayer dollars, what we found is that 20 percent of the work force, in moving back, is on retained pay, meaning

that they are making more than they would have made had they

been in the GS schedule. And so, therefore, they’re going to stay

frozen until the GS schedule catches up with them. Now, that’s a

big number.

The second point is—it goes to something I’ve learned in the 2

years on the job here in working on this, and I’ve spent a lot of

time looking at pay, performance, and the combination thereof and

learning from the NSPS story. And I have concluded that it is more

important to focus on the performance side of the equation first

and get that right.

Good performance is based on three key things that we do to a

certain extent in the Federal Government, but I would not sit here

and tell you we do well. We need to do it a lot better. And that

is, align organizational mission and goals right down through the

SES down to the individual employee’s performance and then have

managers, employees regularly having conversations, just like they

do in the private sector. Are we on track or off track? And if we’re

off track, laying out the plan to be back on, and if they are not back

on, they’re gotten rid of.

14

That’s a good performance system. We can do that.

And so what I’m going to do, and what we just did yesterday

through the Chief Human Capital Officers Council, is we’ve created

a working group made up and shared by two career senior executives so it won’t have political interference or bias and they will report in on what can we do as the Federal Government to tighten

and strengthen our performance system. I think if we get that

right then we can have the discussion about pay, and we can avoid

repeating the same mistakes that were made under NSPS.

Mr. LYNCH. That’s great. Thank you, Mr. Director.

Thank you, Mr. Chairman. I yield back.

Mr. ROSS. Thank you, Mr. Lynch.

I recognize the distinguished gentleman from Utah for 5 minutes, and then we’ll probably recess to go vote.

Mr. CHAFFETZ. Thank you for being here.

I want to make sure we get the numbers. My understanding is

since the time Barack Obama took office until now there is a net

increase of Federal employees, which excludes the uniform military, census and postal, the net increase is 157,000 additional Federal workers, yes?

Mr. BERRY. There is an increase, Mr. Chaffetz; and about 75 percent of those would be comprised in VA hospitals, Homeland Security, Justice Department.

Mr. CHAFFETZ. But the net increase, the net increase of Federal

employees is roughly 157,000 additional Federal workers.

Mr. BERRY. Yes, sir.

Mr. CHAFFETZ. And you did announce in October that you plan

to hire an additional 125,000. Not all 125,000 would be a net increase, but roughly 40,000 to 50,000 would be a net increase in current employment levels in the Federal Government.

Mr. BERRY. I think that number, Mr. Chaffetz, has been overtaken by the President’s budget that was submitted which shows

that number staying flat for 3 years.

Mr. CHAFFETZ. My understanding of the President’s budget is

that he’s actually increased the compensation level in his budget by

21⁄2 percent, or roughly $6 billion, this year over last year.

Mr. BERRY. Well——

Mr. CHAFFETZ. Why the increase? Why the additional $6 billion?

If there’s a pay freeze and you’re not going to need very many new

employees, why a $6 billion increase in that line item?

Mr. BERRY. I would need to understand better exactly what line

you’re referencing in the budget.

Mr. CHAFFETZ. It went from $236,175,000 to $242 billion between

2011 and 2012 based on the executive branch, excluding the U.S.

Postal Service.

Mr. BERRY. There is a natural growth, sir, of promotions, for example. The President’s pay freeze does not prevent people from

being promoted based on performance.

Mr. CHAFFETZ. So the reality on a pay freeze is the net did not

save the American taxpayers money. In fact, it doesn’t keep them

equal. In fact, that number is actually growing, is it not, because

of bonuses and step increases and other things?

15

Mr. BERRY. No, the pay freeze, sir, is a cost-of-living adjustment that is a definite savings. It saves over $28 billion in 5 years and

$60 billion in 10 years.

Mr. CHAFFETZ. The reality is it will cost the taxpayers more. Taxpayers will pay more for Federal employees, as a whole, this year

as opposed to the year before.

Mr. BERRY. Had the President not frozen pay that same number would be $28 billion higher.

Mr. CHAFFETZ. What I’m saying is accurate, right?

I guess what is concerning to many of us is, when the President

and you, in your very first line say, ‘‘President Obama has frozen

annual pay adjustments for 2 years,’’ it gives the impression that

we’re not going to spend more money on personnel. But the reality

is we’re going to spend billions and billions more because of bonuses and step increases and other things. At the same time,

you’re hiring additional people. So for the Federal work force that

is working hard, they’re somewhat offended because their pay is

frozen. Meanwhile, you’re out hiring additional people.

Mr. BERRY. Mr. Chaffetz, in the President’s pay freeze he also directed OPM and the Office of Management and Budget to report

back to him on a program that will address and deal with bonuses

and the reward and incentive program for Federal employees. The

Office of Management and Budget and I will be doing that in short

order, and we will look forward to discussing that with you more.

But I think you will see that those numbers will change.

Mr. CHAFFETZ. My understanding is, in 2009, based on a letter

that you gave to this committee on February 16th, it said that

779,000 people in the Federal Government actually got awards,

which is a combination of bonuses and other things. In fact, over

63 percent of the Federal workers actually got, ‘‘awards.’’ Why so

many people are getting so many awards at a time when people are

losing their jobs?

Mr. BERRY. You have to understand with a 2.1 million size work

force the average number in that GS of those awards is below a

thousand dollars.

Mr. CHAFFETZ. But 63 percent of them.

Mr. BERRY. These are not the Wall Street bonuses that people

are used to when they think of a bonus. These are recognizing outstanding performance.

Mr. CHAFFETZ. That’s offensive to a lot of people. Sixty-three percent of Federal workers got a bonus, got an award, and there are

lot of people out there losing their job. They have their own businesses. They don’t understand when the President stands up and

says, oh, we’re going to have a pay freeze; and then you’re handing

out bonuses to get around it. It doesn’t make sense.

How much money are you going to give away in bonuses this

next year?

Mr. BERRY. It works out to be between 1 and 2 percent of payroll,

sir, that is used in bonuses for the GS schedule.

Mr. CHAFFETZ. What is the dollar amount of that?

Mr. BERRY. I’ll have to get you the exact number for the record,

sir.

[The information referred to follows:]

[NOTE.—No insert/information provided.]

16

Mr. CHAFFETZ. My understanding, according to

Federaltimes.com, which put out a report on December 6, 2010, it

said that more than three-quarters of the 1.4 million General

Schedule employees will get at least one pay raise between 2011

and 2012.

Mr. BERRY. One of the things that I—you know, and I will take—

it’s a legitimate concern to be addressed. And one of the things we

can take back to this working group that we’ve established, the

CHCO council, is that a fair number?

Mr. CHAFFETZ. Do you dispute that number?

Mr. BERRY. I trust you, Mr. Chaffetz. I would presume that

you’re reading from a legitimate document.

Mr. CHAFFETZ. Well, thank you. The answer is yes.

I yield back.

Mr. ROSS. Thank you. The gentleman’s time has expired.

What we’ll do is we’ll take a recess to continue our votes, and

we’ll reconvene 5 minutes after our last vote. It should be within

about a half hour. Thank you.

[Recess.]

Mr. ROSS. Good afternoon and welcome back. We’ll reconvene the

subcommittee. And, again, I appreciate everybody’s indulgence.

That should be the last vote series of the day, so we can go forward

with Mr. Berry and then with our second panel.

At this time I would like to recognize the distinguished gentlewoman from Washington, DC, Ms. Norton, for 5 minutes.

Ms. NORTON. Thank you very much, Mr. Chairman.

This hearing provides the opportunity, if we will use it, to clarify

a number of matters.

I want to thank you, Mr. Berry, because just in your first sentence you have told the American people something that almost

none of them know, and that is the very high-quality, upper-technology knowledge level of the work force. I will guarantee you that

there was almost no information.

When we hear what Federal employees, that generic term means

that you’re talking about judges, engineers, scientists, nuclear

plant inspectors, as less than a third of private sector workers

could fall into this category. The apples-to-bananas comparisons

have grown tiresome.

What was particularly interesting to me was the extraordinary

reduction in the Federal work force since the end of World War II,

where you say one Federal worker for every 78 residents in 1953;

in 2009, one for every 147. How much of this represents productivity of Federal workers? How do you account for that kind of reduction per capita?

Mr. BERRY. Congresswoman, I think certainly productivity is a

big piece of that and our technology. One of the reasons the work

force has gotten more sophisticated is they had to do more with

less, and so they needed to have people who could handle the technology.

Just managing Federal contracts, for example, to ensure that

there’s not fraud for the taxpayers, you need highly skilled people.

These are billions and billions of dollars they are accounting for

and keeping track of.

17

But take Medicare, for example. Twenty percent of the Federal

budget is Medicare, and it’s administered by—I think the number

is sort of like 0.002 of the Federal workforce. So the efficiency rate,

you know, in terms of the productivity and being able to deliver

those payments accurately, it is a combination, I would argue, of

highly skilled workforce and technology and productivity improvement.

Ms. NORTON. Now, one of the things that both Democratic and

Republican presidents have done over the past decades is to do

more and more contracting out, as if that were the answer to all

of our woes. I note that the Obama administration seems to be

going in the opposite direction, expecting to save $40 billion annually by reducing the number of contracted-out workers. Do these

contracted-out workers save us or cost us? Why have we been doing

it?

Mr. BERRY. It’s a little on both sides of the ledger. There’s no—

I don’t want to fall into the same trap of sort of a gross average

answer. Some cost us more over time. Some cost us and have true

savings, so it’s both.

Ms. NORTON. Do you know what—I tell you one thing. If there’s

overtime, you keep track of it in the Federal workforce. You keep

track of the productivity of your Federal workers. What do you do

about the contracting worker?

Mr. BERRY. Well, we don’t track that. The Office of Management

and Budget, Ms. Norton, would be the appropriate folks to get you

that data, and the various agencies would track that data, but, unfortunately I don’t have that.

Ms. NORTON. Well, it’s very difficult for us to understand a Federal workforce that has more contracted workers than Federal employees when the focus is on Federal employees, and most of the

workers, including workers that work alongside Federal employees,

are contracting employees. Now, why would a contracting employee

be working alongside a Federal employee?

Mr. BERRY. I can give you a good example in my agency, and it

goes to what the Office of Management and the Budget has asked

all of us to do, is to look at what are essential government functions that the government should be doing and what could be done

by the private sector.

We—OPM does 90 percent of the background investigations for

security clearances throughout the government. We do all of the

Department of Defense background investigations. We do that with

about 2,000 government workers, but about——

Ms. NORTON. Could I ask you one question before my time runs

out?

Mr. BERRY. Sorry.

Ms. NORTON. Collective bargaining in the Federal sector, our

workers do not bargain for pay or benefits, is that so?

Mr. BERRY. No, they cannot.

Ms. NORTON. So what do they cost us? Is there any reason why

anybody would want to pull back on collective bargaining in the

Federal sector?

Mr. BERRY. We—the administration are strong supporters of the

partnership of approach. We believe that sort of workers and manVerDate 11-MAY-2000 13:36 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67258.TXT KATIE PsN: KATIE
18

agers working together can produce better service to the taxpayers,

and we’re working in that direction.

Ms. NORTON. Thank you very much, Mr. Berry.

Mr. ROSS. Thank you.

Now we’ll recognize the distinguished chairman of the Oversight

Committee, the gentleman from California, Mr. Issa.

Mr. ISSA. Thank you, Mr. Chairman, and thank you for holding

this important hearing.

It’s very good to see you again.

Let me run through a couple of items, just as somebody who

came out of the electronics industry and allied with the auto industry. You know, we do have about a tenth as many people making

about eight times more cars, plus or minus some ratios. So doing

twice as much over a period of 70 years, or 60 plus years, I’m not

sure should be the standard for the Federal work force.

However, I certainly think that the Federal work force—and I

would give you this—if they failed to give us efficiencies, it’s as

much this side of the dais at fault as it is your side or anyone else

in the administration.

We are at a time, though, when we’re trying to produce real savings. Mr. Chaffetz, before the break, talked to you about step increases. If you cannot support step increases today from a standpoint of their long-term effects, can you work with us to look for

a way to have step increases frozen, even if there’s a catch-up provision later, but, for the specific year’s budgeting, a freeze so that

the President’s freeze will, in fact, be a freeze not just for those

who don’t have step increases but for everybody? And we’re talking

only step increases here, not any of the other merit related that I

know Mr. Chaffetz also was asking about. Is that something you

could support if we worked together on it?

Mr. BERRY. Mr. Chairman, I think at this point in time the answer would be no. We’re happy—I’m happy to go back and take

that back and discuss that with the Office of Management and

Budget to see if there’d be any opening there. But I believe what

you’re talking about is within-grade increases; am I correct?

Mr. ISSA. Within grade. That’s what we call step. And that’s really where $500 million between now and the end of the year will

occur—or between 3 weeks ago and the end of the year would

occur—in automatic—you’re simply still vertical. You could actually

be disabled, but as long as you’re still on the payroll you’re going

to get these increases totaling about $500 million this year alone;

and then, of course, it continues up.

Mr. BERRY. My concern with that, Mr. Chairman, would be we’re

talking about the retention rate.

Mr. ISSA. OK. So I’m going to cut you short for a moment. Your

view is, we freeze for real, we have a retention problem.

Mr. BERRY. If you can imagine, the within grades allow a natural

progression and, you know, especially for——

Mr. ISSA. My time is short.

The President announced a freeze. There is no freeze because

with step increases people are getting pay increases automatically.

They are getting pay increases automatically this year. They will

make more money.

19

People on this side of the dais will make the same money this

year they made last year and the year before because we have a

freeze going on. We did not vote ourselves a pay raise. The President announced a pay raise—a pay freeze. The truth is, there will

be pay raises through this process, and you support that from the

standpoint of retention. And that’s—a simple answer like that is

fine. I’m not asking you to be on our side of that particular issue

or even the President’s side.

Let me go to a couple more that I think are important.

You mentioned Medicare. I would mention, as proud as I am that

you do Medicare with so few people, that Medicare has a 10 percent fraud rate. It is the worst in health care. That is by our own

IG, and it’s by the stimulus oversight chairman and so on that this

is, in fact, the most fraud-ridden program. And we’re talking not

about necessarily bad doctors. In some cases, we’re talking about

organizations who pretend to be doctors and the system doesn’t

catch them.

So the last point I want to ask a specific question on is, we just

finished, just in your seat a couple of days ago, the GAO report

being presented to us shows $100 billion in savings by consolidation, elimination of duplicative programs. Many of those are within

the purview of the administration. They weren’t created by a

unique act of Congress.

Have you looked at whether or not the Federal work force can be more efficient, take advantage of some of that $100 billion, simply by some consolidation within the recommendations of that report? And if you haven’t read the report, would you commit to read

it?

Mr. BERRY. Oh, absolutely. I’m aware of report, Mr. Chairman,

and I think—in fact, I have just a summary, sort of a one-page

summary of the highest risk items that they mention. And what I

would note is that three-quarters of those items have a human capital connection. And whether or not we are successful in addressing

these issues are going to be incumbent on us, whether we have

good people in the jobs to handle these issues. And so recruiting

and retaining an outstanding work force——

Mr. ISSA. I see you’ve circled back to the same answer, and I appreciate that.

Earlier, you commented that the AEI and Heritage reports did

not include an adjustment or a recognition of education experience

and so on. In fact, I reviewed them; and they do. So would you look

at them again and commit, for the record, to give us an answer on

why you think there are flaws in their process?

Because this committee’s at a point of going back to the GAO and

doing one more study to try to find out whether or not these organizations are correct in their assessments. Because if they’re correct in their assessments, clearly we’re probably paying some people too little and we’re clearly paying, according to them, some people quite a bit more than would be necessary to recruit and retain.

So if you’d give us your comments within, let’s say, 2 weeks, that

would allow us to make a decision going forward on action from

here.

Mr. BERRY. Yes, sir. Mr. Chairman, I’ll be happy to do that.

[The information referred to follows:]

20

[NOTE.—No insert/information provided.]

Mr. ISSA. Thank you. I yield back.

Mr. ROSS. Thank you, Mr. Chairman.

We’ll now recognize the distinguished gentleman from Illinois,

Mr. Davis, for 5 minutes.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. Berry, it’s good to see you again; and thank you for being

here.

Let me, first of all, commend you for some movement that I have

seen in promotions, especially as it relates to women and other

members of minority groups; and I appreciate that movement that

I have observed.

Let me ask you exactly what was the President doing when he

initiated a freeze? What was he accomplishing?

Mr. BERRY. I think it’s an important point, Congressman, that

you’ve hit on, because it goes to some of the back and forth that

we’ve had at the hearing here today, is the employment cost index

reflects the cost of labor increase that is determined by what is

happening in the private sector.

The department, what we do is we get that data, and the law

provides that Federal employees would get that, minus half a percent. That is not built into the budget every year. It has to be

added or projected in terms of budgets, and it is an overarching

number because it affects every employee of the Federal Government. All 2.1 million get that adjustment.

The within grades that we were talking about here, not every

employee gets that on an annual basis. Those are experience based.

So you need—some people get them every year; some people get

them every 3 years. So there are some people who don’t get any

for a 2-year period, and those numbers are not additive to the

budget. They’re built into the agency’s baseline. There are always

people leaving and coming, and as senior people leave, higher salary waged folks leave, younger folks come in at lower pay, and so

that balances out within the agency budget.

And so the reason why I would have argument with the numbers

that were being thrown around is that those are within the overall

budget, and what the President has done is to direct those downward. The President has a 5-year domestic spending freeze, which

will take our budget to what it was when Eisenhower was in the

White House.

Now, that is, you know, a $400 billion savings. That’s the way

to approach reducing the Federal Government, not by across-theboard cuts, not by freezing within grades, but by dealing with the

budget numbers that are real. That’s what the taxpayers want.

That’s what the President is trying to deliver.

Mr. DAVIS. And at the end of the day you’ve experienced some

cost savings and you’ve reduced budget and you’ve accomplished

something.

Let me go to another area. Many people that I encounter take

the position or they believe that somehow or another the public

work force is not as efficient, not as productive, and ultimately not

worth as much as private sector employees; and almost no matter

what kind of information you give to them, they still maintain that

21

feeling. Have you ever encountered any studies, any reports, any

information that would validate that kind of thinking?

Mr. BERRY. There aren’t any, sir. In fact, I can give you sort of

two things that I think address your point.

The first is my own experience. I’ve been in Washington, DC,

since 1985 and sat in the chairs where many of your staff are sitting today and would regularly hear members of the Reagan administration and the Bush administration come in and variance or

under testimony was what do you think of Federal employees? And

to a person, to a person, every one of them said, I have been so

impressed with the quality, the integrity, the work ethic, the dedication, and the skill that I’ve encountered. And, in fact, many of

them will list it as the biggest surprise they encounter in Washington.

Now, I was with Clay Johnson last Friday night. He says the

exact same thing. So I think anecdotally people who are around

Federal employees, who see what they do, come away very impressed.

But the other thing, if I could just very quickly, is we survey our

employees every year with questions. The most recent employee

survey showed that 97 percent of respondents answered positively

to the question, when needed, I am willing to put in extra effort

to get the job done. Whether it means staying late, whether it

means working over a weekend, whatever, I will work to get it

done. It matters to America.

Our Federal employees are committed. They understand the

criticality of their mission. They are defending us from terrorists.

They are protecting our interests. And I’m here to tell you, I have

never seen a study that would question their work ethic.

Mr. DAVIS. Thank you very much.

Thank you, Mr. Chairman.

Mr. ROSS. Thank you.

Mr. Cummings, the distinguished ranking member of the Oversight Committee. Mr. Cummings. Thank you.

Mr. CUMMINGS. Thank you.

One of my concerns is that, Mr. Berry, is that—Director Berry,

is that so often Federal employees are getting a bad rap. We all

up here work with Federal employees every day, and we see what

they go through. On this side of the aisle, every single one of our

employees had to take a 5 percent cut. Their salaries weren’t frozen. They took a cut. In a time when milk is going up, gas is going

up, rent is going up, they took a cut. And a lot of times I think

we forget that public employees carry out very important functions

until they’re not present. And we take so much for granted; and

part of the reason why we take so much for granted, Director

Berry, is because they are dependable.

And you said something a little bit earlier, and I want you to

elaborate on this. I look at the people who work for me—work with

me, rather—and I look at their education levels and I know without a doubt that they could be making a whole lot more money

than working on this hill. I know that they could be working a lot

less hours, some of them working till 2 and 3 a.m. And they don’t

get a whole lot of money. And I know that they get certain benefits,

but you’ve gone over those benefits.

22

And I just want you to go back—because I’m tired of these public

employees being beaten up on. It pains me tremendously. And so

I just want you to go back——

And you said something about education. Because I see—and, by

the way, when you talk about education, a lot of them are struggling trying to pay back loans because they wanted to be the best

that they could be. They wanted to take advantage of opportunity.

They wanted to come. And then, after they got an education, they

didn’t go to Wall Street. They didn’t go looking for the big bonuses.

They came because they wanted to serve the public; and they have

shed blood, sweat, and tears, simply trying to lift us up to make

this Congress better, to make sure our airports are safe, even

cleaning the airport bathrooms, cleaning these places, cafeterias.

So talk about that education thing again, because I think we lose

sight of that.

Everywhere else, by the way, you get elevated because you get

an education. A lot of these folks have an education and they just

stay level, pretty much level funded. And now I know over the next

2 years the President has said they’re going to be level funded.

But, anyway, talk to me about that.

Mr. BERRY. Well, Mr. Cummings, the President is, as are all

Americans, grateful for the sacrifice that Federal employees are enduring. The pay freeze for 2 years is a real sacrifice. As you mentioned, especially those who have families, who have to deal with

the inflationary costs and pressures on a family, the cost of milk,

the cost of gas, they still have to commute. And they still have to

deal with those costs. And the President is clearly aware of their

sacrifice and is grateful for it and recognized that they were the

first ones asked to step up to the plate to help the country address

the deficit.

Mr. CUMMINGS. And, by the way, let me just interject something.

When I had to ask the employees, when I took over this committee,

the Democratic side, I had to ask every single employee, I asked

them, would you take at least a 5 percent cut? And listen to me,

Director, not one of them, not one objected. And I asked them why.

You know, I said, I know you’re going to have tough times. They

said, because we want to serve the public.

And I think we have to be very careful in these conversations

that we have because we need to encourage the best and the

brightest to come to government. We don’t want to be caught up

in a culture of mediocrity. We want the best.

But, anyway, I cut you off. What were you saying?

Mr. BERRY. Well, Mr. Cummings, I think it goes to what you

were saying also about our benefit comparisons. And you’re going

to hear a lot that somehow our benefits are out of whack with the

private sector. I would argue they’re very much in line, especially

when you account for that we don’t have profit sharing or we don’t

have stock options in the Federal Government. And so most of my

work force is comparable with the large companies in the private

sector, so it is not fair to compare Federal employees to the entire

civilian labor force. I don’t have retail clerks. I don’t have short

order cooks. I don’t have waitresses. God bless all of those, and

they should be paid as they should be paid.

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But to say the Federal employees should be paid based on that

is not appropriate. You need to compare like to like, apples to apples. The Fortune 500 companies are a much better comparison

when you’re looking at who we are competing for in terms of recruitment and retention.

But going to your original question, sir, you asked—the current

data from the current population survey shows that half of Federal

workers work in the nine highest-paying occupations such as

judges, engineers, scientists, nuclear plant inspectors. By comparison, only a third of the private sector, the civilian labor force, work

in those nine categories.

And then look at the opposite end of that spectrum. In contrast

to a fifth of private sector workers in the four lowest-paying occupations, the ones that have high turnover, only 1 in 13 of Federal

employees are in that category.

So when you look at these gross averages, you can see how—you

know, for example, that comparison there, it is looking at the total

civilian labor force, not at like to like. And, as you see, what you

mentioned when you come into education, or comparing these

things, we need to reflect that the Federal work force is a highly

skilled, highly challenged work force.

Mr. CUMMINGS. Thank you very much. I see my time has expired. Thank you, Mr. Chairman.

Mr. ROSS. Yes, sir. Thank you, Mr. Cummings.

I now yield to the distinguished gentleman from Virginia, Mr.

Connolly, for 5 minutes.

Mr. CONNOLLY. I thank the chairman.

And if I could pick up where Mr. Cummings was just leaving off,

Mr. Berry, if I understand your testimony, what you’re saying is

that the skill set mix of the public sector, Federal work force, is

quite different than the private sector skill set of the work force at

large in the country.

Mr. BERRY. Of the total civilian labor force, absolutely, Mr.

Connolly. That’s my core point. And we really need to compare—

we’re running, if you will, a company of 2 million employees that

is dealing with challenges that rival anything—really doesn’t have

a comparison in the private sector, because it’s bigger than the Fortune 500, if you will. But to compare it to the total civilian labor

force, I can see why, politically, that might be a popular thing to

do if you had a certain ideological perspective, but it unfairly compares wages, and it is not an apple-to-apple comparison.

Mr. CONNOLLY. With respect to the size of the Federal work

force, is the current Federal work force significantly larger than it

was when President George H.W. Bush was in the White House in

1991?

Mr. BERRY. Mr. Connolly and Mr. Ross, I can leave this or give

this to you for the record. This is from GAO, so I did not make up

these numbers, but it shows you the civilian labor force from 1950

to the present. It is this red line. As you can see, it is pretty flat.

Federal expenditures are the blue line, Federal outlays. So outlays

have gone up, absolutely, over that time period, but the work force

has remained largely stable. And so these are GAO numbers.

Mr. CONNOLLY. In absolute numbers?

Mr. BERRY. Yes. Yes, sir.

24

Mr. CONNOLLY. So, despite the sign behind Mr. Lynch’s head,

which I’m sure the ranking member would prefer not be put there,

I hope our Republican friends remember this when we’re back in

the majority. There will be all kinds of signs. You may not like

them. Or we could be civil to one another and actually respect the

fact that the ranking member sits there and there shouldn’t be a

sign behind his head that he doesn’t want. But that would be a different issue.

Where were we, Mr. Berry? Oh, yes, so, despite the hysterics, actually, work force hasn’t grown that much, but the missions have.

Is that correct, Mr. Berry?

Mr. BERRY. There’s no question.

Mr. CONNOLLY. Can you think of some missions that have expanded since 1991 even though the work force has not?

Mr. BERRY. Absolutely. And in fact the majority of that increase

is in what would either be in——

Mr. CONNOLLY. Mr. Berry, I’m going to ask you not to point to

a sign that we’re going to pretend does not exist.

All right, go ahead.

Mr. BERRY. It would be either Homeland Security, dealing with

the very issue you’re talking about since 9/11. We have obviously

had to stand up a significant counterterrorism force in the country.

Both parties are in agreement that is something we need to do. We

need to protect our borders well. Both parties agree to that. So we

need to be careful and we need to protect our vets when they come

home with serious injuries, and we need more nurses and doctors

to care for them.

Mr. CONNOLLY. So let me understand. For example, since President H.W. Bush, George H.W. Bush, was in the White House in

1991 and the work force he had, which is roughly the work force

we have, we created a whole new agency of Federal Government,

Homeland Security; is that correct?

Mr. BERRY. Yes, sir.

Mr. CONNOLLY. In response to the terrorist attacks of 9/11; is

that correct?

Mr. BERRY. Yes, sir.

Mr. CONNOLLY. We beefed up FEMA after its utter collapse and

fecklessness in responding to Hurricane Katrina New Orleans and

the Gulf Coast; is that correct?

Mr. BERRY. I would have to check my budget numbers to answer

that one, sir.

Mr. CONNOLLY. I think the answer is yes.

Of course, since President H.W. Bush was in the White House,

we are fighting two wars right now, Iraq and Afghanistan; is that

correct?

Mr. BERRY. Yes, sir.

Mr. CONNOLLY. And all of the attendant costs associated with

that, including, as you say, caring for the wounded veteran when

he or she returns home.

Mr. BERRY. And increasing the hand-off in Iraq. There is a standup, an increase, as Mr. Lynch knows, who has been there many

times. As the military mission is drawing down, the State Department employees are drawing up. So there is an increase of people

going into a very highly dangerous area, serving their country and

25

putting their lives at risk. That’s a civilian increase. And so we

need to recognize that, and that number is folded into this number

as well.

Mr. CONNOLLY. Good point, and I’m going to end on that.

So, in other words, there are civilian Federal employees putting

their lives at risk next to uniformed military in both Iraq and Afghanistan; is that correct, Mr. Berry?

Mr. BERRY. Absolutely. And Mr. Lynch has invited me—and I

look forward to being able to attend with him—to one of his visits

to Iraq or Afghanistan where we can honor the service of both our

military and our civilian work force that both put their lives at

great danger to serve our country.

Mr. CONNOLLY. Thank you. Thank you.

I see my time is up. Thank you, Mr. Chairman.

[The prepared statement of Hon. Gerald E. Connolly follows:]

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28

Mr. ROSS. Thank you, Mr. Connolly.

That being the last of our questioners, we’ll recess now. Thank

you, Mr. Berry, very much for being here; and we’ll take a few minutes to have our clerks prepare for the next panel.

Mr. BERRY. Thank you, sir. It is an honor.

Mr. ROSS. Thank you.

Welcome to our second panel. We’ll now begin the second part of

our hearing today.

Today we have with us Mr. James Sherk, who is a senior policy

analyst in labor economics at the Heritage Foundation. We also

have Dr. Andrew Biggs, a resident scholar at the American Enterprise Institute. Mr. Max Stier is the president and CEO for the

Partnership for Public Service; and Ms. Colleen Kelley is the national president of the National Treasury Employees Union.

If you all wouldn’t mind, please stand to be sworn in. Pursuant

to committee rules, all witnesses must be sworn in.

Please raise your right hands.

[Witnesses sworn.]

Mr. ROSS. Thank you. Let the record reflect that all witnesses

answered in the affirmative. Please be seated.

I will now recognize each of you for 5 minutes to summarize your

testimony. The transcript, of course, has been submitted for the

record.

Mr. Sherk, we will start off with you. You have 5 minutes, thank

you.

STATEMENTS OF JAMES SHERK, SENIOR POLICY ANALYST IN

LABOR ECONOMICS, THE HERITAGE FOUNDATION; ANDREW

BIGGS, PH.D., RESIDENT SCHOLAR, AMERICAN ENTERPRISE

INSTITUTE; MAX STIER, PRESIDENT AND CEO, PARTNERSHIP FOR PUBLIC SERVICE; AND COLLEEN KELLEY, NATIONAL PRESIDENT, NATIONAL TREASURY EMPLOYEES

UNION

STATEMENT OF JAMES SHERK

Mr. SHERK. Chairman Ross, Ranking Member Lynch, and members of the subcommittee, thank you for inviting me to testify.

My name is James Sherk, and I’m a senior policy analyst at the

Heritage Foundation. The views I express in this testimony are my

own and should not be construed as representing an official position of The Heritage Foundation.

I want to explain to you this afternoon that the Federal pay system is broken. As a consequence of its failings, the average Federal

employee earns significantly more than they would in the private

sector.

There are three features of the Federal pay system that Congress

should be aware of. The first feature is that it does a poor job of

approximating market pay. The General Schedule places heavy emphasis on internal equity so the job’s similar level of work receive

the same pay. An engineer, an IT specialist, and a budget analyst

at the same GS grade all receive the same pay.

The law requires the President’s Pay Agent to set Federal pay

by determining what level of work a private sector job entails and

what General Schedule grade that would translate into. The Pay

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Agent then sets the Federal pay by averaging pay across different

jobs it determines belongs in each grade. This effectively superimposes the General Schedule system onto private sector payrolls.

However, private sector employers do not base pay on anything remotely resembling the General Schedule. Market forces such as relative supply and demand for different skills, specialties, and occupations determine private pay.

Employees in different occupations performing similar, ‘‘levels of

work,’’ often earn very different salaries. As a result, Federal pay

often looks nothing like market rates in both directions. Some Federal employees have wildly inflated salaries, 40 to 50 percent above

what they would earn in the private sector. Other Federal employees do not receive a cash wage premium at all and may receive

slightly below market rates. Typically, highly skilled workers such

as scientists and lawyers do not receive premium wages in the government.

The second feature of the Federal pay system that Congress

should understand is that, on average, it overpays Federal employees. My research using data from Bureau of Labor Statistics shows

that, after you account for education, experience, and occupations

so that you can make an apples-to-apples comparison, once do you

that the average Federal employee makes 22 percent more an hour

than they would if they were in the private sector. Including the

value of their benefits raises the Federal compensation premium to

between 30 and 40 percent. The average Federal employee earns

more than they would then if they were in the private sector, and

paying this premium will cost taxpayers almost $50 billion this

year.

Many other economists with views that span the political spectrum have come to this view. Dr. Alan Krueger served as the Chief

Economist at the Treasury Department in the Obama administration. He found that—and I’m quoting him—‘‘The Federal Government appears to consistently pay higher wages than the private

sector for comparable employees. Economists do not debate whether the Federal Government overpays its employees. The research

consistently shows that they are.’’

It is important to emphasize, however, that this average Federal

premium is only part of the total variation between Federal and

market pay. It is simultaneously true that many Federal employees

are not overpaid and that the Federal Government pays private

sector employees more on average.

The only major study to disagree with this conclusion is the

President’s Pay Agent Report, which uses the flawed methodology

I described. No administration has ever found the results of the

Pay Agent Report credible or acted on them. The Pay Agent itself

frequently expresses concerns with the methodology that the law

requires it to use.

This is for good reason. If Federal employees were underpaid,

then the Federal Government would have severe retention problems. Just the opposite occurs. Federal employees quit their jobs

just one-third as often as private sector workers. This happens because they know they are getting a better deal in the Federal Government than they could get in the private sector.

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The third feature of the Federal pay system that Congress should

understand is that it rewards time served, not performance. Woody

Allen once observed that 90 percent of life is just showing up. For

Federal employees, 75 percent of life is just showing up. Less than

one-quarter of the money spent on Federal pay increases is meaningfully tied to performance. The rest is either automatic or essentially automatic.

Employees on the General Schedule start at the first step of their

assigned job grade. As long as they receive a 3 out of 5 performance

rating, they automatically receive step increases until they advance

to step 10. Managers who wish to give ratings below 3, however,

bear the burden of proving that the employee performs poorly. The

system assumes the Federal employees are adequate and gives

them raises. Consequently, Federal managers rarely use performance ratings below 3; and, like I said, most Federal employees receive step increases. It is social promotion for adults.

Unsurprisingly then with this system, Federal employees receive

raises and promotions more rapidly than private sector workers do.

My research shows that this is one of the major reasons Federal

employees receive above-market pay.

Thank you, and I appreciate the opportunity to talk to you about

the Federal pay system and how its flaws inflate Federal compensation.

[The prepared statement of Mr. Sherk follows:]

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Mr. ROSS. Thank you, Mr. Sherk.

Dr. Biggs, you’re recognized for 5 minutes.

STATEMENT OF ANDREW BIGGS

Mr. BIGGS. Chairman Ross, Ranking Member Lynch, and members of the committee, thank you for inviting me to testify with regard to Federal employment compensation.

My testimony today is based upon joint research with Jason

Richwine of The Heritage Foundation, and a copy of our working

paper has been enclosed with my testimony.

We limit our analysis to one question: Do Federal employees on

average receive greater compensation than these individuals could

receive in the private sector? Our answer, which is consistent with

several decades of economic research, yes.

To begin, you’re doubtless aware of the President’s Pay Agent,

which reports that Federal jobs pay over 20 percent less than comparable private sector positions. You should also be aware of why

most economists are skeptical of the Pay Agent approach. The most

important reason is simply that the Pay Agent’s approach compares apples and oranges.

While the Pay Agent claims to compare similar Federal and private sector jobs, it does not compare similar workers. That is, it

does not account for the fact that the Federal Government hires

workers at higher pay grades and promotes them faster than does

the private sector. For instance, a person working as a senior accountant in the Federal Government may have the experience and

education of only a junior accountant in the private sector.

A 1984 Congressional Budget Office study concluded that the average Federal worker resides two-thirds of the pay grade above the

similar private sector employee. A 1997 academic study found a

larger gap of three-quarters of a pay grade. A 2002 study using

BLS occupational data showed, ‘‘That Federal workers have significantly fewer years of education and experience than private sector

workers in the same level of responsibility in an occupation.’’ Once

this study accounted for differences in experience and education,

the supposed pay penalty disappeared.

So how do economists study public-private pay differences? Labor

economists begin by controlling for how individual workers differ

with regard to earnings-related factors such as experience, education, geographic location, and so forth.

Let me reiterate here that, despite what we heard throughout Director Berry’s testimony and in some of the questions, the study

I’ve conducted and that Mr. Sherk has conducted do control for differences in education between Federal employees and private sector employees. They do control for that. By controlling for these differences, you can isolate the effects on pay of working in the Federal or the private sector.

Using Census data from 2006 through 2010, we found that Federal employees received average salaries 14 percent higher than

similar workers employed by large private sector firms. This is actually a conservative comparison, since large firms offer the best

salaries and benefits. If we compare to all private sector workers,

the Federal salary premium rises to 22 percent.

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Some argue, however, that this method ignores relevant differences between workers. For instance, our educational data tells

us only if you have a certain degree, not your GPA or the quality

of the school you attended.

As an alternative, we followed individual workers’ salaries over

time, tracking how their pay changed as they moved into or out of

the government. Workers who switched between the Federal and

private sectors earned 8 percent more when employed by the Federal Government, and this is just the initial premium upon switching. Whether we examine different workers at the same point in

time or follow the same workers over time, it is clear that most

Federal employees would earn lower salaries in the private sector.

Benefits are an important component of overall compensation,

but comprehensive data on Federal benefits must be assembled by

hand. Using OMB and OPM data, we calculated the value of a

wide range of Federal benefits, from pensions and health coverage

to vacation time and employee awards. On average, Federal employees receive total benefits equal to around 66 percent of their

salaries. In large private sector firms, benefits average 50 percent

of salaries. In other words, Federal workers receive a benefit premium of around 33 percent over similar private sector employees.

Combined Federal salaries and benefits are roughly 25 percent

above what similar private sector employees would receive.

Economists since Adam Smith have noted that positions with

greater job security should pay lower salaries, just as safe investments like bonds pay lower returns than stocks. The BLS reports

that in any given year Federal workers are less than one-third as

likely as private sector employees to be fired or laid off.

We estimated the value of job security using the tools of financial

economics to calculate the pay reduction a private sector worker

would willingly accept to have the increased job security of Federal

employees. Using conservative assumptions, we find that Federal

workers’ job security is equivalent to an extra 11 percent of pay.

When salaries, benefits, and job security are properly valued, the

total Federal compensation package is worth upwards of 39 percent

more than is paid to similar private sector workers. The total Federal pay premium could top $60 billion per year.

Identifying the pay premium is far easier than fixing it. Simple

pay freezes or furloughs are blunt instruments that will not get to

the heart of the issue. Federal pay must be made to reflect market

conditions not with a one-time adjustment but with fundamental

reforms that work consistently into the future.

Thank you.

[The prepared statement of Mr. Biggs follows:]

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Mr. ROSS. Thank you, Dr. Biggs.

Mr. Stier, you are recognized for 5 minutes.

STATEMENT OF MAX STIER

Mr. STIER. Thank you very much, Chairman Ross, Ranking

Member Lynch, and members of the subcommittee. It is a pleasure

being here, and I appreciate the opportunity to testify.

I respectfully suggest that we’re asking the wrong question here.

It is not whether Federal workers are underpaid or overpaid, but

rather how do we move the system to a more market sensitive system? John O’Leary at Harvard said it is a Goldilocks truth. In any

group of public servants you are going to find some that are underpaid, some that are overpaid, and some that are paid just right.

Our challenge is to make sure that our government has the best

talent for the best price.

I would propose then we have seven core principals that you look

at in thinking about where we go from here:

First, No. 1, obviously, we need a pay system based on the market for needed talent. We need to make sure that, again, we have

competitive salaries set not just by geography but also by occupation and the relevant factors that have been set already.

Second, we need to account for benefits cautiously. So, yes, benefits do matter, but I don’t think you can look, for example, at job

security and see that as an across the board benefit. If you are trying to hire the very critical cybersecurity talent coming out of

school today, the fact that a job may have more security isn’t going

to be really relevant for them. In fact, that may be a turnoff. You

have to understand your talent, you’ve got to understand what appeals to them, and you’ve got to be specific to the jobs, the talents

that you actually need.

Third, we need to get better data. Right now, we are looking at,

again, across-the-board comparisons. If you look by geography,

we’re not looking at the very concrete specific surveys that most

companies do when they are trying to analyze what they ought to

pay for the talent that they need, and in government we need to

do a lot better in order to get that information.

Fourth, we also need to look at the quality of the hires we are

looking at. This is actually a balance here. You think about what

you’re paying, but you have to think about what you’re paying for.

And, right now, in government we don’t do a very good job of understanding what quality talent is and how to retain it. And unless

we have those quality measurements then in fact we’re not going

to ever be able to design the right system. So we’re not going to

know whether we’re getting the right value for the money that is

being spent. So we need to make sure that agencies are recruiting

the right talent and we know what right talent looks like.

No. 5, we need to make sure that we reform the Federal classification system. The pay system, the classification system are intertwined. The classification system wasn’t designed for the world

that we live in today, and we need to make sure that’s aligned with

today’s job market.

An example, a GS–11 is someone who performs work, ‘‘of marked

difficulty and responsibility,’’ while a GS–12 is someone who performs work of, ‘‘a very high order of difficulty and responsibility.’’

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It doesn’t make any sense. If you’re a GS–12, engineer, HR professional, budget analyst, whatever it may be, you get paid the same.

A lot of internal equity, but what that means is that you’re really

not actually matching the market for talent.

No. 6, we need to make sure we have good work force planning.

We need to make sure that we actually know what talent we need.

Today, we don’t actually have a governmentwide plan on the

human capital that we need to make sure the government runs

right, and we need that. In fact, we’re not forecasting enterprisewide the sorts of skills that we need to be able to succeed in the

world we’re going into; and that’s a component piece of what we

ought to be looking at here.

And then, No. 7, we need real flexibility. If you look at the government today, you in fact have a lot of agencies that have already

been given different authority to create different systems. For example, the VA, they were finding that they couldn’t actually recruit

the doctors and nurses that they need, so they were given authority. Financial regulatory institutions. You have a diverse set of

agencies all trying to do different things. We need to make sure

that whatever is done with this system that it permits for the flexibility to allow for the different needs of these organizations to recruit the talent that they need.

What about going forward here? I propose that there are four key

recommendations:

No. 1, this has to be a collective effort. We need the best minds.

We need to make sure everyone is at the table. That includes employee groups. It includes, obviously, the best minds that know

about compensation that can help design the right thing.

Second, we need to design from where we are today. This is not

a blank paper exercise. We have to design something that takes us

from where we are today to where we need to go; and that may

mean there are populations, for example, that may be viewed as

being overpaid. Well, how do you make sure that they are treated

fairly in the process of moving them to the new system? That’s an

extra challenge.

No. 3, we need to build off of what’s worked. We’ve had experiments in government before. We’ve had demonstration project authority for 30 years. There are organizations that have tried different things. I had mentioned earlier the agencies that have already been given different authority, whether it’s financial organizations or many, many others, GAO being another example; and we

have to be looking at what’s worked with them.

And then, finally, we need to take a step back and understand

what success looks like. We need accountability on our end to make

sure that we’re actually driving toward the right outcomes. And,

again, that ought to be getting the right talent at the most costeffective fashion.

So Steve Colby said it best. He said, the main thing is to keep

the main thing the main thing. And that ought to be——

Again, outcome is for the American people which requires the

best talent at the most cost-effective mechanism and price. So we

have to avoid the distraction, I believe, of thinking underpaid, overpaid, and focus on that key issue.

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I appreciate the opportunity to be before you and hope I can answer some questions later.

[The prepared statement of Mr. Stier follows:]

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Mr. ROSS. Thank you, Mr. Stier.

Ms. Kelley, you’re recognized for 5 minutes. Thank you.

STATEMENT OF COLLEEN KELLEY

Ms. KELLEY. Thank you very much, Chairman Ross, Ranking

Member Lynch, and members of the subcommittee for the opportunity to testify today.

The pay system for the large majority of white collar Federal employees is known as the General Schedule. Its main thesis is that

Federal pay should be comparable to pay for similar work in the

private sector.

In 1990, Congress enacted the Federal Employees Pay Comparability Act [FEPCA], which introduced the concept of locality

adjustments to make the pay system even more sensitive to geographic market forces. FEPCA requires the Bureau of Labor Statistics to conduct surveys of the 32 separate localities and then provide that information to the President’s Pay Agent, which, as we’ve

heard today, consists of the Secretary of Labor, the Director of

OMB, and the Director of OPM, who then have the statutory responsibility of submitting a report to the President each year that

lists pay gaps in the 32 areas as well as a national average gap.

The Pay Agent reports showing lower pay for Federal employees

have been consistent in Democratic as well Republican administrations.

The reasons that the data from BLS and The Heritage Foundation differ are many. Most importantly, BLS compares actual job

duties, not just job titles but job duties. And, as we’ve heard, more

than 54 percent of Federal workers work in the nine highest-paying occupation groups. Federal employees are more experienced,

they are older, and they have many more years of education, as

we’ve already heard, than private sector workers.

With regard to benefits, Federal employees as well as Members

of Congress are covered by the Federal Employees Health Benefit

Program. Enrollees pay, on average, 30 percent of the total premium cost. According to Mr. Sherk, in the private sector workers

pay 18 percent of their premiums for single plans and 29 percent

for family plans.

In the 1980’s, the Federal Employees Retirement System was

created to replace a defined benefit system. There has been discussion about that today, also. The earlier plan had serious and growing unfunded liability problems that are similar to those faced by

many States today. But the first system today is fully funded and

financially sound with no unfunded liability. And Federal retirement pensions are not overly generous. Close to 70 percent of Federal retirees receive annuities of less than $3,000 a month.

Mr. Chairman, in a recent interview you were quoted as indicating your support for instituting so-called pay for performance in the

Federal Government. And I’m a big believer in setting goals, meaningful goals, and then figuring out how to reach those goals. With

regard to pay for performance I believe that past conversations

have proven that the goals are very often glossed over with statements like we want flexibility or it needs to be more modern.

It seems to me that a pay system should have a couple of major

goals attached it: No. 1, does it help to recruit and retain the best

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people for the jobs; and, No. 2, does it help to motivate employees

to better achieve the agency mission? I don’t know of a single payfor-performance system that is showing progress in either of these

goals today in the Federal Government.

I discuss the serious problems with several of these systems in

my written statement, including those at the TSA and the repealed

NSPS system at the Department of Defense.

The Treasury Inspector General for Tax Administration has gone

so far as to say of the IRS managers pay banding system that the

IRS risks reducing its ability to provide quality service to taxpayers

because the Internal Revenue pay-for-performance system potentially hinders the IRS’s ability to recruit, retain, and motivate highly skilled leaders.

The Government Accountability Office has found that the flexibilities that are most effective in managing the Federal work force

include things like time-off awards and flexible work schedules that

allow employees to better balance the demands of career and family life. These and other existing flexibilities need to be used more

widely.

Suggestions have also been made that contracting out more Federal work will lead to more cost efficiency. We have had recent experience with this notion, and it has not proven true. According to

OMB, excessive reliance on contractors has eroded the in-house capacity of agencies to perform many critical functions and has undermined their ability to accomplish their missions.

The Obama administration has begun to reform this out-of-control contracting by requiring agencies to cut wasteful contracting

practices and to improve oversight and accountability. These efforts

are expected to result in $40 billion in annual savings beginning

in 2011.

Mr. Chairman, some of the hardest-working people I represent make less than $30,000 a year, yet they are facing a 2-year pay

freeze; and retirees are in the second year without a cost of living

increase. NTEU members understand that the country faces challenges; and although they did not cause the fiscal crisis, they are

willing to work to help solve it.

Thank you for the opportunity to testify here today, and I will

be glad to answer any questions.

[The prepared statement of Ms. Kelley follows:]

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Mr. ROSS. Thank you, Ms. Kelley; and I will yield to myself 5

minutes.

Interesting in reading each transcript and then listening to both

sides of the dais here is that I think we all believe that we need

to recruit and retain and reward good employees in Federal employment, and I think that’s a good common ground to begin with.

I also note in the last panel there was testimony given about how

the Federal work force has remained almost stable in terms of

numbers since President George H.W. Bush until today, but yet

there seems to be a correlation also that, inversely, we have seen

an increase in debt significantly since George H.W. Bush, well over

60 percent.

And, Mr. Sherk, my question to you is, if you were a businessman and you had a work force and yet you maintained your same

work force but you’ve increased your debt by 60 percent, would that

be indicative of something that needed to be done with your personnel management?

Mr. SHERK. I think it would be a sign that you have some pretty

serious problems.

Mr. ROSS. You mentioned also—you talked briefly about Federal

benefits, benefits from Federal employees, what impact does it

have on total compensation, the value of Federal employee benefits?

Mr. SHERK. It increases it fairly substantially. If you take a look

at only the wage premium, the cash pay that shows up in your pay

stub, Federal employees, again, on average, when you’re making

that apples-to-apples comparison are making 22 percent more an

hour. But if you then add in the value of those benefits like the

pension benefits, both the defined benefit and the defined contribution pension they receive, and add in the value of those remaining

benefits, that compensation premium increases between 30 and 40

percent. So they get generous pay and even more generous benefits.

Mr. ROSS. Dr. Biggs, you’ve discussed that lowering wages would

only slightly reduce the quality of the Federal job applicants. Could

you discuss any of your work that led to that conclusion?

Mr. BIGGS. Well, in our working paper we actually cited some research by Professor Steven Venti of Dartmouth College in New

Hampshire. And the research he looked at are what are called

queues for government jobs. Research tries to look at is there more

demand for government jobs than private sector jobs? Are there

people waiting out there who would like to get government jobs

who cannot?

What Professor Venti found was that three to six times as many

people would be willing to accept Federal employment as are actually offered jobs, implying that Federal jobs offer significantly more

attractive overall compensation package than private sector employees.

Because you have such a large queue for Federal jobs, Venti

found that you could cut salaries significantly without hurting the

quality of applicants. Venti found that even a 16 percent reduction

in salaries would only slightly reduce the educational qualifications

of Federal job applicants.

I would add that Professor Krueger of Princeton took on an even

simpler approach. He measured the number of qualified applicants

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that Federal job openings received relative to private sector job

openings. He found that Federal jobs, on average, received 25 to 30

percent more applicants than private sector positions. Again, this

is another indication of demand for Federal jobs, which means that

if the salary were reduced you would not see a large reduction in

the quality of applicants for Federal position.

Mr. ROSS. Thank you.

Mr. Stier, I want to go to you real quickly. Because the General

Schedule which has been around since 1949 doesn’t take into consideration any market forces, does it?

Mr. STIER. It doesn’t. It takes——

Mr. ROSS. Locality.

Mr. STIER. Locality, correct.

Mr. ROSS. But in terms of incentivizing somebody to do well, as

opposed to somebody just to show up and get a paycheck, it really

doesn’t make that distinction, does it?

Mr. STIER. From a recruiting perspective, it’s not market sensitive. On the performance side, there are opportunities to give performance bonuses to people, to have increased step increases. So

there are performance mechanisms that are currently in the system.

Mr. ROSS. And you’ve talked about—to be quick here, you’ve

talked about pay-for-performance programs.

Mr. STIER. Yes.

Mr. ROSS. And I’d like to know quickly, do you feel that there

is an adequate pay-for-performance system out there that would

adequately compensate those in the Federal work force based on

outcomes?

Mr. STIER. I think that the data is clear, which is employees

don’t believe that they are currently being rewarded for doing better work. So I think the answer is, no, the system is not working

in the way it ought to. Otherwise, employees would be saying

something different.

Mr. ROSS. But do you think there could be one implemented, a

pay for performance?

Mr. STIER. I think that there could be. But I think the work that

needs to be done first is to get a handle on how to make sure we

know what good performance is and to be able to reward it accordingly.

Mr. ROSS. OK. Ms. Kelley, what I would like to do is I want to

just have you step aside from your role with the Treasury Union

right now and assume, if you will, that you were in charge of making decisions of a corporation that was showing a significant decline in revenue, so much so that their debt has increased by 60

percent over a 10-year period of time and you have to make a decision about personnel. Would you rather pursue a decision about

personnel that you would have to let people go or have to reduce

their salaries?

Ms. KELLEY. Well, the first thing I want to know is what caused

the decline in revenue and what caused the debt.

Mr. ROSS. But assume that it is. It is what it is, so now you have

to make a decision.

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Ms. KELLEY. If the work force didn’t cause it, then I need to get

to the root cause of what did. And in this case I think there are

a lot of other things to look at, like——

Mr. ROSS. So you can’t say one way or the other what you would

do.

Ms. KELLEY. Well, as I said, the work force didn’t cause the debt.

If they didn’t cause the debt, then I think that working with them

and figuring out what can be done and my bet is they are going

to have some suggestions of how to change and do the work better

and to not do things, for example, like cut taxes on the wealthiest

Americans that is probably impacting the revenues coming in.

Mr. ROSS. My time’s up.

I now yield to the distinguished Member from Massachusetts and

the ranking member, Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman.

President Kelley, you can put your union hat back on.

Look, 60 percent of Federal employees work in basically three departments, one being DOD; and we’ve already had a number of

Members talk about the fact that we’re in two wars. My wife says

I spend way too much time in Iraq and Afghanistan. She’s probably

right. The rest of the employees in that large group work at the

VA, and they work at DHS.

I know from my own experience when we look at what’s going

on in Iraq and Afghanistan, I know we have about 10 million—10

million private contractors across our government. It is sort of a

shadow government. And more and more responsibilities are being

contracted out, and I don’t see any reduction in cost.

You know, we had a dilemma early on in Afghanistan where we

were trying to decide whether embassy personnel, congressional

codels should be guarded by Blackwater. I’ve been under the care

and protection of Blackwater. They do an amazing job. But let’s

just look at the cost here for a minute, though.

Right now, Blackwater charges us or Xe or Triple Canopy charges about $1,500 a day—$1,500 a day for one security officer.

Whereas if I have a U.S. Marine or Army solider do it, we’re talking about $54,000 a year for the average. So $54,000 a year versus

$450,000 a year.

And I see in my own district—you know, that goes the same for

USAID. USAID does wonderful work in Afghanistan and Iraq, but

when that goes over to the contractor’s side the price goes right

through the roof.

And so it just troubles me greatly that people are saying we’ll

privatize this stuff, and we’ll save money. That has not been my

experience.

As well in my own district, I spend a lot of time at the VA. I

have a VA hospital in Brockton and one in west Roxbury and one

in Jamaica Plain. And, quite frankly, the nurses there—the biggest

problem I have is nurses and therapists being stolen away by the

private hospitals in the area. And, quite frankly, the one thing that

keep my VA nurses and docs and staff and therapists in place at

the VA is that they are so proud to serve veterans. It is their commitment to veterans. They love their job because they are caring

for the U.S. uniformed veterans. That’s what keeping them there.

They are working at lower rates, and the private sector hospitals

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are stealing them away. That’s one of my biggest problems, to encourage young nurses to go work at the VA.

And, you know, I just see a lot of this acrimony and attacks on

Federal employees are just not borne out under the facts.

Mr. Stier, you do raise a good point about how we can do this

better going forward. But, President Kelley, I want to ask you, in

terms of the folks that you’re seeing at NTEU, you know, we’re

asking you to oversee—in many cases, we’re asking your folks to

oversee tremendous responsibilities. They could make a ton of

money in the private sector. You mention in your testimony there

are some gaps and differences in what you see these studies providing and what you see actually in practice at Treasury. Could you

talk a little bit about that?

Ms. KELLEY. Well, if you look at—if you ever were a Federal employee and you know the work that they do, it is not work that you

can just measure on a piece of paper. I was an IRS revenue agent

for almost 15 years, and as an accountant and a CPA I know the

kinds of Wall Street representatives that the IRS agents have to

go up against and be knowledgeable on in order to find the financial schemes and scams that are happening. That’s the kind of talent and skill that you need, and you have to be willing to pay for

it.

And I also think that in this economy there has been a lot of talk

about how many applications and how willing people are to come

work for the government. In this economy, it is one world. I think

when the economy turns—and it’s obviously taking longer than we

all hoped—but when it does, I’m very worried about the talent that

the Federal Government has been able to recruit and whether or

not they will be able to keep them when you look at the compensation and the gaps that are very well known by the employees.

They make a conscious decision—as you said, they make a conscious decision every day. Many of them want to work, they have

a desire to serve, they have a desire to work for our country, and

they are willing to give up some of the extras. But, in the long run

and on most days, they want to be treated fairly; and that’s really

what this conversation is about.

Mr. LYNCH. Thank you very much.

I see my time has expired. Thank you, Mr. Chairman. I yield

back.

Mr. ROSS. Thank you, Mr. Lynch.

I now recognize the ranking member of the Committee on Oversight and Government Reform, the distinguished gentleman from

Maryland—on second thought, I’m going to recognize the distinguished gentlewoman from Washington, DC, Ms. Norton.

Ms. NORTON. Thank you very much, Mr. Chairman.

Ms. Kelley, you and I have sat in this very room when it was less

rehabilitated, I must say, in any number of hearings, including

joint hearings from Senate and House committees concerned about

the state of the Federal work force, particularly the retiring of the

so-called baby boomers. You testified that 90 percent of the SES,

senior service, could retire within the next 10 years. This, of

course, is considered by everybody to be the creme de la creme of

the work force of the United States, the people who were apparently drawn for a number of reasons, the post-Kennedy folks.

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There has been a lot of discussion here about Federal employees

but little discussion about a return on investment that any employer will understand. When you hire an employee—let’s take people in this very room. If you see one of your employees in whom

have you invested time and energy walk out the door, you’re seeing

your investment in that employee walk out of the door as well. And

so the return on your investment becomes important if that is a

high-quality employee.

The others on the panel have apparently agreed that there is a

greater return on experience in the Federal work force, and that

may account for some of the promotions. We know this. Rapid turnover takes investment, of course, out of the door. I wish you would

describe—and of course the notion of promotion from within encourages people to stay, and you want to encourage competition. If

you want people to compete for these employees, you at least want

to keep your investment in the Federal sector. So you’d like the investment to occur among Federal agencies, rather than have the

private sector benefit from the investment of the taxpayers in the

Federal employee. I wish you would describe that in places like the

IRS and the other agencies you represent.

Ms. KELLEY. There are many employees who begin their work for

the Federal Government in an entry level position in whatever

their agency is, and what they hope is that they will see opportunities to move into new positions, to be promoted, to learn, to enhance their skills, to receive training, and to move up within the

agency so they can do more complex and more important work for

the agency. In agencies where those promotional opportunities do

not exist you will tend to see people leave more. Because, obviously,

people want to know that they have some opportunity in the future.

But I also have to believe that happens in the private sector.

Most people do not go into a job and want to stay in that specific

job and that occupation for their entire career. They are looking for

opportunities to grow. And in the Federal Government the idea

that there are so many different jobs and so much important work

across agencies gives employees the opportunity to do just that,

and they take——

Ms. NORTON. And, of course, the Federal Government has made

a decision. It wants career employees. It is a career service. It is

a civil service.

I wish you would describe—there have been some inflammatory

statements made by others on the panel about the collective bargaining in Wisconsin and the rest. There seems to be very little understanding of the role that unions can play when there needs to

be reductions in the work force, when there needs to be give-backs

of some kind in the work force, as opposed to when you have to do

that and nobody is there to make the employers understand how

it occurred.

The President has had a management workers council. I wonder

if you’d describe how that works.

Ms. KELLEY. Well, about a year ago, labor management forums

were created under an executive order that the President signed;

and that executive order has as its underpinning the idea of collaboration and that working together we can figure out some of the

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most difficult problems that we face. And that has included situations as you describe, Congresswoman Norton, where the work

force has to change because the work of the agency changes and

either work goes away and therefore there needs to be a smaller

work force.

And it is the unions working side by side with management to

deal with these very, very difficult issues to try to do two things:

one, insure that the agency is able to continue to be successful in

whatever its mission is, but, at the same time, to do all they can

to have employees have opportunities to be placed somewhere else,

to make sure that those skills, those experiences are not lost.

But when there have had to be those kind of situations, the only

way that it happens in a way that’s successful for the agency and

for the work force, in my view, is if the unions are working with

management and if management has the unions in every conversation so that it is something that we can craft the best solution to.

Ms. NORTON. That’s how you get a labor piece. Thank you very

much, Ms. Kelley.

Mr. ROSS. Thank you, Ms. Norton.

I now recognize the distinguished gentleman from Illinois, Mr.

Davis, for 5 minutes.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. Sherk, let me ask you, are you a fan of pay for performance.

Mr. SHERK. I think it is a good idea. It needs to be done correctly,

but the general principle, yes.

Mr. DAVIS. Do you think it can be broadly used, can be broadly

used in, say, the Federal Government?

Mr. SHERK. Broadly speaking, yes.

Mr. DAVIS. OK. And we would expect better results than what

we get in terms of productivity as well as how we compensate our

employees?

Mr. SHERK. If it is designed correctly, you should.

Mr. DAVIS. Dr. Biggs, let me ask you, you were here when Mr.

Barry was testifying and you heard him talk about comparing apples with apples and oranges with oranges. And to arrive at the

conclusion that you made relative to the comparability of public

versus private sector pay, is that the methodology that you used?

Mr. BIGGS. I’ll pick my words carefully here and say that Director Barry did not correctly describe the methodology that I have

used in this study or that other academics have used.

The claim he made was that Federal employees are better educated on average than private sector employees, and that’s a correct claim. He also claimed, though, that the pay studies that I

have done and others have done do not correctly account for that.

They were comparing apples and oranges. In fact, that’s totally untrue. The studies we have done control for differences between the

education and other characteristics of the Federal work force and

private sector work force. In other words, we compare apples to apples. We control for these differences.

The Federal Pay Agent’s analysis, which finds a pay penalty of

20 to almost 25 percent by contrast, that doesn’t take education

into account. It looks at a job but does not account for the fact that

private sector employers tend to put more educated and more experienced individuals into those jobs than public sector employers do.

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And we know that the value coming out of a job is a culmination

of the job and the inputs of the individual himself. So I would say

he miscorrectly characterized the study that I did.

Mr. DAVIS. Well, let me ask you, based upon your description,

would a clerk at Wal-Mart be the same as a clerk in one of our

agencies if you were looking at the two?

Mr. BIGGS. In general, no. In general, we don’t categorize people

by job types. We categorize them by what’s called the human capital they are bringing to the game. A clerk in the Federal Government would generally have at least a high school education, a bachelors degree; and so we’re counting the educational experience, the

other experiences they may have, which will partly account for

them getting better pay.

Our study doesn’t say Federal employees shouldn’t be higher

paid on average than private sector employees. The question is how

much higher should they be paid. By controlling for differences in

education, experience, and other factors, we can find the effect of

working in the Federal Government or outside in the private sector. And what we find and our studies consistently have found in

peer-reviewed research over the past three decades is, if you take

the same individual and put them in the Federal Government versus the private sector, that individual will get a significant salary

premium in the Federal Government. That’s not just what we’re

saying. That’s what peer-reviewed research consistently says.

Mr. DAVIS. Let me ask you, you began your testimony by suggesting that maybe we were asking the wrong questions or exploring the wrong possibilities and options and that what we really

ought to be looking at is how do we get the best work force that

we possibly can for the price that we are prepared to pay? Could

you rearticulate that for me?

Mr. STIER. I may have this wrong, but in listening to everybody

here, I thought I heard everyone agree to the proposition that, at

some point in looking at the totality of the Federal work force,

there are going to be some folks that are underpaid, some that are

overpaid, and there are some that are paid just right. There may

be differences about what the proportions are amongst the panel,

but that general proposition is one that appears to have been accepted by everybody here.

I think then the next question that has to be asked is how do

we design a system that does a better job of actually insuring that

we are being as cost effective as possible to get the right talent, the

best talent for government. And my proposition would be that is

the conversation we should be having, and I’ve proposed a set of

principals that I hope can help push that conversation forward.

Mr. DAVIS. Thank you very much.

Thank you, Mr. Chairman; and I yield back.

Mr. ROSS. Thank you, Mr. Davis.

The chair now recognizes the ranking member of the Oversight

Committee, the distinguished gentleman from Maryland, Mr.

Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Dr. Biggs, let me make sure I understand this right. You’re saying that—in answer to one of the chairman’s questions, you’re sayVerDate 11-MAY-2000 13:36 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67258.TXT KATIE PsN: KATIE
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ing that there is a great demand for these Federal jobs; is that

right?

Mr. BIGGS. That’s what research has indicated, yes.

Mr. CUMMINGS. And because there’s a great demand, what does

that have to do with pay? Remind us.

Mr. BIGGS. A higher demand for Federal jobs does not prove that

they are overpaid. It is an indicator that individuals in the marketplace judge the package they are going to get from Federal employment which includes salaries, benefits, other characteristics of the

work more attractive than they would find private sector work.

You find similar indicators in things like quit rates. For Federal

employees, those are consistently lower than the private sector.

There could be other reasons for low quit rates. That is indicative

in general. It offers people an attractive compensation package,

yeah.

Mr. CUMMINGS. So most Members of Congress spend and collect

millions of dollars to come here, and most could make a lot more

money than what they’re making. Apparently, there’s something

that Members want that comes from this public service that we do.

By the way, we are Federal employees, public servants. And I’m

just wondering, is that one of those other things that you just

talked about? That is, the desire—when I talk to nurses, for example, and I talk to people who are in that kind of profession, they

will tell you in a minute in most instances I love my job because

I’m able to help people. This is what I always wanted to be, ever

since I was a little boy or girl. This is something that really means

something to me. And you ask them, you know, does it bother you

to have to be cleaning up blood and all that kind of stuff? And they

say, no, because it is what they really, really want to do.

When I talk to the people up here on the Hill, a lot of them will

come—and I have seen this many times, and I’m sure everybody

up here can tell you similar stories. They want to come not so

much for the pay. As a matter of fact, a lot of them are making

a lot less pay.

I really just interviewed a few minutes ago somebody willing to

take a 15 percent cut because he wants to be a part of government,

of helping people. So how much does that play? And, Ms. Kelley,

I want you to be thinking about that too. Is that part of that formula you just gave us?

Mr. BIGGS. No, I would not in any way deny that a desire for

public service and desire to serve your country is an attraction for

many people for serving the Federal Government. For myself, it

has been where I served as congressional staffer.

Mr. CUMMINGS. Oh, you were a public employee? OK.

Mr. BIGGS. I know it’s very hard to believe.

Mr. CUMMINGS. No, no.

Mr. BIGGS. The desire for public service is strong and legitimate.

The question would be if what we had was simply a queue for Federal jobs or low quit rates, that could be entirely attributable to a

desire for public service. The results you find from pay studies,

though, which control for education, experience, and the rest, and

they find that the same person would earn a higher salary on average in the Federal Government from the private sector, that is

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something which tends toward the view that there’s overcompensation.

One of the aspects of the study we did was not simply controlling

for differences in education and so forth. We followed the same people over time, using Census Bureau data. When those individuals

switched from private sector employment to Federal employment,

on average, they got a pay increase. That does not mean every person gets a pay increase in the Federal Government. It does not

mean that the highest, best-qualified Federal employees couldn’t

earn any more in the private sector. It does mean that, on average,

the same person would earn a higher salary and much more generous benefits in the Federal Government than they would outside.

Mr. CUMMINGS. Well, let me put it like—now you really just said

something very interesting. Because a lot of people are constantly

trying to move forward, right? Hello. I assume that when you

moved from public servant you apparently made, I guess, more

money, did you?

Mr. BIGGS. Well, I make less money now than I did.

Mr. CUMMINGS. OK, well, you’re making my case. In other words,

what you just said—I mean, usually, if somebody is going to move

from one job to another, in many instances they are going to move

to more pay. So if they are going to move from public to private—

I mean private to public and they are moving on a normal course,

it’s logical, I guess, that they are going to make more money.

Mr. BIGGS. It is, but we control for that difference. Most people

get a pay increase when they switch jobs. That’s natural. Getting

a pay increase is one of the main reasons why people do switch

jobs. What we found was private sector workers who found a new

job in the Federal Government received pay around 8 percent higher than private sector workers who found a new job in the private

sector. So the same person getting different jobs—and this has

been replicated in other studies as well. So we’re not simply saying

do you get a pay increase when you find a new job, because most

people do. We’re saying if you get a larger pay increase if you find

a new Federal job than if you find a new private sector job, and

the answer to that is yes.

Mr. CUMMINGS. I see my time has expired.

Thank you, Mr. Chairman.

Mr. ROSS. Thank you, Mr. Cummings.

Now recognizing the distinguished gentleman from Virginia, Mr.

Connolly.

Mr. CONNOLLY. Thank you, Mr. Chairman.

Mr. Stier, is turnover in certain categories of jobs in the Federal

Government a problem?

Mr. STIER. Yes, it is. And if I might just take 2 seconds, the

name is Stier. It looks like steer, but parents decide pronunciation

so——

Mr. CONNOLLY. Mr. Stier.

Mr. STIER. Thank you.

Mr. CONNOLLY. Thank you.

Mr. STIER. Thank you.

The answer is, yes, absolutely. If you look at the overall attrition

number relative to the overall private sector number, it is lower.

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But in the critical areas, new employees first 2 years is actually

about 25 percent. You heard already nursing is close to 18 percent.

My favorite distressing example of the Department of Homeland

Security between 2003 and 2007, the first 4 years, three-quarters

of the SES left. And what’s amazing is no one was paying attention. No one did exit interviews to find out why. But the point is

what we really ought to be looking at is not generic attrition but

attrition for the people we need to keep that are really vital.

Mr. CONNOLLY. Exactly. So when we actually look at certain categories of employees, actually, the attrition may be considerably

higher than in the private sector.

Mr. STIER. Absolutely.

Mr. CONNOLLY. And your point, we have not bothered to find out

why.

Mr. STIER. Correct.

Mr. CONNOLLY. Which most private sector firms I know do exit

interviews.

Mr. STIER. The good ones do.

Mr. CONNOLLY. Ms. Kelley, can you think of some other categories of Federal workers where turnover is high?

Ms. KELLEY. The highest rate of turnover for the past few years

has been at TSA, those who protect our skies. The turnover rate

up until about a year ago was running at 20 percent.

Mr. CONNOLLY. A year?

Ms. KELLEY. Yes.

Mr. CONNOLLY. So these Federal salaries and cushy jobs and

wonderful working conditions somehow don’t prevent 20 percent of

the work force from leaving every year.

Ms. KELLEY. These TSA workers all earn less than $30,000 a

year. There is no way they could be into a category of overpaid anything.

Mr. CONNOLLY. Mr. Stier, a few years ago, when we had a much

lower unemployment rate—I mean, I’m hearing testimony about

how actually a lot of people are flocking to Federal service or public

service. Well, of course, when you’ve got an almost 10 percent unemployment rate, my guess would be historically that’s a pattern.

But when you’re looking at, say, 4 percent unemployment rate, especially in the higher end skill sets, my guess would be that the

labor market gets real tight in being able to recruit and retain

skilled workers for the Federal work force. Would that be true?

Mr. STIER. Absolutely. And as you suggested already, even with

high unemployment, there are certain skill sets that the Federal

Government is having a very hard time recruiting.

Mr. CONNOLLY. For example.

Mr. STIER. Well, the cybersecurity area is one that is, obviously,

front and center. You’ve got examples of nursing.

Mr. CONNOLLY. Well, let’s stop with cybersecurity for a minute.

I happen to represent a high-tech district. Why would that be a

problem? Why are we having trouble recruiting people to work in

the area of cybersecurity?

Mr. STIER. Because there’s a lot of competition.

Mr. CONNOLLY. And it requires a high skill set.

Mr. STIER. Absolutely.

Mr. CONNOLLY. Technical skill set.

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Mr. STIER. Yes.

Mr. CONNOLLY. What percentage of the Federal work force is eligible for retirement over this decade?

Mr. STIER. You know, again, you’re looking at—depending again

on the—you’re looking at over half.

Mr. CONNOLLY. Over half.

Mr. STIER. Well, a very large portion of the population will be eligible to retire. And, again, I think the general numbers are less important than looking at the specific populations that we should be

most concerned about. And there you see much higher numbers.

Mr. CONNOLLY. So if I listen just to what I’ve heard from Mr.

Sherk and Dr. Biggs, I would assume that, frankly, we’re not going

to have any trouble at all filling 50 percent of the existing Federal

slots as people retire over this next decade. Is that your view as

well, Mr. Stier?

Mr. STIER. It is my view that there will be no problem filling the

slots. The question is filling with whom and are you getting the

right talent.

Mr. CONNOLLY. Well, now, of course, that’s the question.

Mr. STIER. And I think the answer is that we have to do a better

job in a lot of different respects if we really want to have the right

talent in government.

Mr. CONNOLLY. Ms. Kelley, do you have a view on that subject?

Ms. KELLEY. I’m very worried about the ability to fill the positions when they’re vacated. You know, for years, everyone talked

about this tsunami that was coming of Federal retirement, and it

didn’t come in large part because of the economy. But it will come.

It will happen. And agencies are not in a position to be able to hire

the skill level, the skill set to be able to maintain what it is they’re

trying to do in their agencies today.

Mr. CONNOLLY. And of course, a final note, if I might be allowed

an observation. The more we debase Federal service, the less attractive we make it, and we go to Mr. Stier’s point, then you have

to worry about who you’re attracting to Federal service, especially

in the higher skill set.

I thank the chair.

Mr. CONNOLLY. Thank you, Mr. Connolly.

I now recognize the vice chair of the subcommittee, the distinguished gentleman from Michigan, Mr. Amash, for 5 minutes.

Mr. AMASH. Mr. Sherk and Dr. Biggs and all of you, thank you

for being here today.

Mr. Sherk and Dr. Biggs, I have a question. How much would

the Federal Government save if it equalized benefits with those

provided in the private sector?

Mr. SHERK. I took a look at both pay and benefits. I didn’t take

a look at benefits specifically. If you’d like that, I could get it later.

But if you took pay and benefits together, you’d save about $47 billion this year under my accounting.

Mr. BIGGS. I think that’s about right, yeah.

Mr. AMASH. OK. Thank you.

Another question. Ms. Kelley, your union represents a cross section of Federal workers who perform many key functions of government. Since the pay freeze was enacted, how many of your members have left Federal service?

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Ms. KELLEY. I couldn’t give you an exact number. I can tell you

that many are talking about leaving, and many who have been eligible to retire and were not going to and who planned to stay are

now talking about leaving. I think that we will see real numbers

in the foreseeable future. But I could not give you a number today.

Mr. AMASH. I have a general question to any of you who can answer it. The President has talked about freezing pay for 2 years.

Does this include the within grade step adjustments which are 3

percent a year?

Mr. SHERK. No, it doesn’t cover those at all. It’s purely the cost

of living adjustment. But the vast majority of Federal employees

are going to receive these within grade adjustments and will get

those 3 percent raises.

Mr. AMASH. When Mr. Berry was here earlier, he testified that

there should be no place in the Federal Government for nonperformers to hide. How would you respond to the fact that Federal

Government rarely fires employees, and, in the majority of cases,

pay raises result in length of service rather than job performance?

Mr. SHERK. It’s a pretty serious problem. Once they pass their

probationary year, which is the first year, within that first year it’s

about 20 percent of Federal employees either quit or are fired. But,

after that, it’s very, very rare to see a Federal employee get fired.

And there’s also very few rewards for performing above and beyond just a mediocre level. Federal managers rarely award performance ratings below three because it’s a lengthy appeals process. The employees basically get to appeal and can challenge an adverse decision. Most managers simply don’t want to go through the

hassle. They want to manage the agency and not do that kind of

work. So they almost always hand out a three or higher rating.

The employees, they qualify for the step increases, but very little

above and beyond that is there in terms of performance pay. So it’s

simply designed to encourage mediocrity but not going above and

beyond that and very tough to get rid of the bad apples after the

first year.

Mr. AMASH. In my opinion, showing an acceptable level of competence is not sufficient for raising a person’s salary. Would you

agree that productivity, work ethic, dedication, performance, and

exceeding expectations are the proper criteria for a salary increase?

Mr. BIGGS. Sure. I mean, I don’t want to in any way demean the

work ethic and the dedication of Federal employees. I’ve worked

with them over significant periods of time; and, as Director Berry

said, you are very surprised at how hardworking people are.

At the same time, it does not serve the hardworking, dedicated

Federal employees when people who are not pulling their weight

essentially cannot be fired. It’s a natural process in any business

that some people do very, very well and are promoted. Others don’t

do very well and are fired.

To explain the Federal rates of firing, we would have to assume

the Federal Government is extremely good at picking employees

such as it never finds anybody who doesn’t work out. It’s just not

plausible. You want to retain good employees. You want them to

buildup the job-specific skills that really do add to productivity. But

you also want to have the flexibility to move on people who are not

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working out as well, and I think you need to find a strong balance

between those two.

Ms. KELLEY. Congressman, can I add to this, though?

I think that the things that you identified are important, but I

also think that performance is important. And I think that performance is an aspect of the Federal system today. And the flaws

that are being described and are being grossly overstated, that Federal employees can never be fired, because they are fired. Federal

employees are fired after their probationary period.

And if they are not fired at the rates that somebody thinks they

shouldn’t be, then someone needs to look at the implementation of

the system within the agencies. And that means managers are not

being trained on how to deal with poor performers. They are not

doing what they should be doing to either help them correct that

performance or to move them out of the agency. That’s the manager’s job. That has nothing to do with the system. It’s about the

managers, and it’s about what the system supports for them from

a training perspective as well as implementation perspective.

Mr. ROSS. Thank you, Mr. Amash. That completes our questions.

Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman.

I ask for unanimous consent to submit for the record the statements of the American Federation of Government Employees, the

National Federation of Federal Employees, and the National Active

and Retired Federal Employees.

Mr. ROSS. Without objection, so ordered.

[The information referred to follows:]

[NOTE.—No insert/information provided.]

Mr. ROSS. That completes our program. I want to thank our

panel very much for being here. Appreciate your patience. And we

stand adjourned. Thank you.

[Whereupon, at 4:16 p.m., the subcommittee was adjourned.]

[Additional information submitted for the hearing record follows:]

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