High

School

Diploma

or Less

Some

College

Bachelor’s

Degree

Master’s

Degree

Professional

Degree or

Doctorate

Average Federal

Wages

Average Federal

Benefits

Average Private-Sector

Wages

Average Private-Sector

Benefits

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

CBO

Comparing the

Compensation of

Federal and

Private-Sector

Employees, 

2011 to 2015

APRIL 2017
Notes

Numbers in the text, tables, and figures of this report may not add up to totals because 

of rounding. For the same reason, the percentage differences shown in some of the tables 

may not correspond precisely to the dollar amounts shown.

Unless otherwise indicated, the numbers in the tables and figures apply to full-time, 

full-year workers.

Wages, benefits, and total compensation in this report were converted to 2015 dollars 

using the employment cost index.

www.cbo.gov/publication/52637
Contents

Summary 1

Wages 1

Benefits 2

Total Compensation 3

Comparison With CBO’s Analysis of the 2005–2010 Period 3

Scope of the Analysis 4

Comparing the Compensation of Federal and Private-Sector Employees 5

The Federal Workforce 5

Differences Between the Federal and Private-Sector Workforces 6

CBO’s Approach to Analyzing Compensation for Federal and Private-Sector Employees 9

Comparison of Wages in the Federal Government and the Private Sector 10

Comparison of Benefits in the Federal Government and the Private Sector 13

Comparison of Total Compensation in the Federal Government and the Private Sector 15

Comparison With CBO’s Analysis of the 2005–2010 Period 15

BOX: CHANGES IN COMPENSATION FOR NEWLY HIRED FEDERAL EMPLOYEES 20

Appendix A: CBO’s Analytic Approach 21

Summarizing CBO’s Approach 21

Differences Between the Approach in This Report and That Used in the 2012 Report 22

Appendix B: Wages and Benefits for Federal Employees 23

Wages 23

Benefits 23

List of Tables and Figures 25

About This Document 26

Summary

The federal government employs about 

2.2 million civilian workers—1.5 percent 

of the U.S. workforce—spread among more 

than 100 agencies in jobs that represent over 

650 occupations. As a result, the government employs 

workers with a broad complement of talents, skills, and 

experience, and it competes with other government 

and private-sector employers for people who possess the 

mix of attributes needed to do the work of its agencies.

In fiscal year 2016, the government spent roughly 

$215 billion to compensate federal civilian employees. 

About two-thirds of that total was spent on civilian 

personnel working in the Department of Defense, the 

Department of Veterans Affairs, or the Department of 

Homeland Security. Federal employees typically receive 

periodic increases in their wages on the basis of performance, longevity, and changes in private-sector pay. 

However, lawmakers eliminated annual across-the-board 

increases for most federal civilian workers in calendar 

years 2011, 2012, and 2013.

How does the compensation of federal civilian employees 

compare with that of employees in the private sector? 

The answer to that question is complicated by the fact 

that the federal and private-sector workforces differ in 

characteristics that can affect compensation, such as 

experience, education, and occupation. On the whole, 

federal workers tend to be older, more educated, and 

more concentrated in professional occupations than 

private-sector workers. To account for such differences, 

the Congressional Budget Office has used data for 2011 

through 2015 reported by a sample of households and 

employers to estimate differences between the cost of 

wages and benefits for federal employees and the cost 

of wages and benefits for similar private-sector employees, 

defined as those having a set of similar observable characteristics. Specifically, in its analysis, CBO sought to 

account for differences in individuals’ level of education, 

years of work experience, occupation, size of employer, 

geographic location (region of the country and urban or 

rural location), veteran status, and various demographic 

characteristics (age, sex, race, ethnicity, marital status, 

immigration status, and citizenship). This report updates 

a 2012 CBO report that compared the compensation of 

federal and private-sector employees for the 2005–2010 

period.1

Even among workers with similar observable characteristics, however, employees of the federal government 

and in the private sector may differ in other traits, such 

as motivation or effort, that are not easy to measure but 

that can matter a great deal for individuals’ compensation. Moreover, substantial ranges of compensation exist 

in both the federal government and the private sector 

among workers who have similar observable attributes. 

Therefore, even within groups of workers who have such 

similarities, the average differences in compensation 

between federal and private-sector employees do not 

indicate whether particular federal employees would 

receive more or less compensation performing a similar 

job in the private sector.

CBO’s analysis focuses on wages, benefits, and total 

compensation (the sum of wages and benefits). It is 

intended to address the question of how the federal 

government’s compensation costs would change if the 

average cost of employing federal workers was the same 

as that of employing private-sector workers with certain 

similar observable characteristics.

Wages

During the 2011–2015 period, the difference between 

the wages of federal civilian employees and those of 

similar private-sector employees varied widely depending 

on the employees’ educational attainment. The extent of 

that variation is evident in the differences in wages for 

workers with a bachelor’s degree (the most common level 

of education in the federal workforce), the least educated 

workers, and the most educated workers:

1. Congressional Budget Office, Comparing the Compensation of 

Federal and Private-Sector Employees (January 2012), www.cbo.gov/

publication/42921.
2 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

O Federal civilian workers whose highest level of education was a bachelor’s degree earned 5 percent more, 

on average, in the federal government than in the 

private sector (see Summary Figure 1).

O Federal civilian workers with no more than a high 

school education earned 34 percent more, on average, 

than similar workers in the private sector.

O By contrast, federal workers with a professional 

degree or doctorate earned 24 percent less, on average, than their private-sector counterparts.

Overall, the federal government would have reduced its 

spending on wages by 3 percent if it had decreased the 

pay of its less educated employees and increased the pay 

of its more educated employees to match the wages of 

their private-sector counterparts.

Those estimates do not show precisely what federal 

workers would earn if they were employed in a comparable position in the private sector. The difference between 

what federal employees earn and what they would earn 

in the private sector could be larger or smaller depending 

on characteristics that were not included in this analysis 

(because such traits are not easy to measure). In addition, the estimated differences depend on how well the 

observable characteristics were measured in the samples 

of employees used by CBO and on other factors that are 

inherent in any statistical analysis.

The span between the wages of high- and low-paid 

employees was narrower in the federal government than 

in the private sector, even after accounting for employees’ education and other observable traits. The narrower 

dispersion of wages among federal employees may reflect 

the constraints of federal pay systems, which make it 

harder for managers to reward the best performers or to 

limit the pay of poor performers.

Benefits

During the 2011–2015 period, the federal and private 

sectors differed much more with regard to the costs that 

employers incurred in providing current and future benefits—including health insurance, retirement benefits, and 

paid leave—than they did with regard to wages. Again, 

the extent of that difference varied according to workers’ 

educational attainment: 

O Average benefits were 52 percent higher for federal 

employees whose highest level of education was 

a bachelor’s degree than for similar private-sector 

employees (see Summary Table 1).

O Average benefits were 93 percent higher for federal 

employees with no more than a high school education than for their private-sector counterparts.

O Among employees with a doctorate or professional 

degree, by contrast, average benefits were about the 

same in the two sectors.

On average for workers at all levels of education, the 

cost of benefits was 47 percent higher for federal civilian 

Summary Figure 1.

Average Compensation of Federal and PrivateSector Workers, by Educational Attainment

2015 Dollars per Hour

High

School

Diploma

or Less

Some

College

Bachelor’s

Degree

Master’s

Degree

Professional

Degree or Doctorate

0

20

40

60

80

100

120

Average Federal

Wages

Average Federal

Benefits

Average Private-Sector

Wages

a

Average Private-Sector

Benefits

a

Source: Congressional Budget Office, using data for 2011 through 

2015 from the March Current Population Survey, the Office of Personnel 

Management, and the National Compensation Survey.

The wages shown here include overtime pay, tips, commissions, and 

bonuses. The benefits shown here are measured as the average cost, 

per hour worked, that an employer incurs in providing noncash 

compensation.

a. Average wages and benefits for private-sector workers who resemble 

federal workers in occupation, years of work experience, and certain 

other observable characteristics that are likely to affect compensation.
SUMMARY Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 3

employees than for private-sector employees with certain 

similar observable characteristics, CBO estimates.

The most important factor contributing to differences 

between the two sectors in the costs of benefits is the 

defined benefit pension plan that is available to most 

federal employees.2 Such plans have become less common in the private sector. CBO’s estimates of the costs 

of benefits are much more uncertain than its estimates 

of wages, primarily because the cost of defined benefit 

pensions that will be paid in the future is more difficult 

to quantify and because less-detailed data are available 

about benefits than about wages.

Total Compensation

As with its components (wages and benefits), total compensation differed by varying degrees between the federal 

government and the private sector over the 2011–2015 

period depending on workers’ educational attainment: 

O Among workers whose education culminated in a 

bachelor’s degree, the cost of total compensation 

averaged 21 percent more for federal workers than for 

similar workers in the private sector.

2. Defined benefit plans provide retirement income that is based 

on fixed formulas, and the amount of that income is usually 

determined by an employee’s salary history and years of service.

O Among workers with a high school diploma or 

less education, total compensation costs averaged 

53 percent more for federal employees than for their 

private-sector counterparts.

O Total compensation costs among workers with a 

professional degree or doctorate, by contrast, were 

18 percent lower for federal employees than for similar 

private-sector employees, on average.

Overall, the federal government paid 17 percent more in 

total compensation than it would have if average compensation had been comparable with that in the private 

sector, after accounting for certain observable characteristics of workers.

Comparison With CBO’s Analysis of the 

2005–2010 Period

Some of the differences between federal and privatesector compensation have changed since CBO’s previous 

analysis of the issue, which covered the years from 2005 

to 2010. For instance, the average total compensation 

of federal workers without a bachelor’s degree exceeded 

that of their counterparts in the private sector by more 

between 2011 and 2015 than between 2005 and 2010. 

Conversely, relative to their private-sector counterparts, 

federal workers with a master’s degree received less average total compensation during the 2011–2015 period 

Summary Table 1. 

Differences in Average Hourly Compensation Between Federal and Private-Sector Workers, 

by Educational Attainment

Difference in 2015 Dollars per Hour Percentage Difference

Total

Compensationa

Total

Wages Benefits Wages Benefits Compensation

High School Diploma or Less $8 $10 $18 34% 93% 53%

Bachelor’s Degree $2 $9 $12 5% 52% 21%

Professional Degree or Doctorate -$16 -$1 -$18 -24% -3% -18%

Source: Congressional Budget Office, using data for 2011 through 2015 from the March Current Population Survey, the Office of Personnel 

Management, and the National Compensation Survey.

CBO compared average hourly compensation (wages, benefits, and total compensation converted to 2015 dollars) for federal civilian workers and for 

private-sector workers with certain similar observable characteristics that affect compensation—including occupation, years of experience, and size of 

employer—by the highest level of education that workers attained. 

Positive numbers indicate that, on average, wages, benefits, or total compensation was higher in the 2011–2015 period for federal employees than 

for similar private-sector employees. Negative numbers indicate the opposite.

a. The numbers shown for total compensation may not equal the sum of the numbers for wages and benefits because of rounding to the nearest 

dollar and because of the composition of the samples used by CBO.
4 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

expresses a flow of current and future payments in terms 

of an equivalent lump sum paid today.) Thus, the cost 

of employing federal or private-sector workers includes 

an estimate of the cost of retirement benefits to be paid 

in the future to current employees. That present-value 

approach differs from the budgetary treatment of 

retirement benefits for federal workers; the cost of those 

benefits is recorded as federal outlays when people 

receive them rather than when the commitment to pay 

them is incurred.

CBO’s analysis is limited to selected benefits (such as 

health insurance and paid leave) provided to federal 

and private-sector workers. The analysis excludes certain benefits some workers receive—for example, the 

above-market rate of return the federal government offers 

its employees through the G Fund (one of the investment options in their retirement plan) and the stock 

options that some private-sector firms provide to their 

employees. In CBO’s judgment, the benefits that are not 

included in this analysis are less costly, on average, than 

the benefits that are included.

A key consideration in setting compensation is the ability 

to recruit and retain a highly qualified workforce. But 

assessing how changes in compensation would affect 

the federal government’s ability to recruit and retain the 

personnel it needs is beyond the scope of this analysis. 

Factors other than the amount of compensation can affect 

that ability. For example, greater job security tends to 

decrease the compensation that the federal government 

needs to offer, relative to compensation in the private 

sector, to attract and retain highly qualified employees. 

Conversely, the government’s cost of total compensation 

for a federal employee includes a greater share of costs for 

retirement benefits, which workers may find less valuable 

than an equivalent amount of cash received today. If so, 

and if all other things are equal, that mix of compensation 

would tend to increase the total amount of compensation 

needed to pay federal workers relative to similar workers 

in the private sector.

than during the 2005–2010 period. The differences in 

total compensation by educational attainment changed 

because wages grew more quickly among less educated 

workers in the federal government than they did among 

workers in the private sector and because CBO adjusted 

its approach to determining who is a federal employee. 

(Except for that adjustment, both analyses used broadly 

similar approaches.)

Two significant policy changes have affected federal wages 

since 2010. First, lawmakers eliminated across-the-board 

salary increases for federal employees from 2011 to 2013, 

limiting the total increase from 2010 through 2015 to 2 

percent. In contrast, salaries increased by about 10 percent in the private sector over the 2010–2015 period. 

However, in addition to the across-the-board increase of 

2 percent, average federal hourly wages were boosted by a 

decrease in federal hiring—because recently hired federal 

employees typically have lower salaries than other federal 

employees—and by a temporary reduction in the number 

of hours worked by salaried federal employees.

Second, lawmakers increased the share of wages that 

workers first hired after 2012 must contribute to the 

federal defined benefit retirement plan. That change will 

gradually reduce the cost to the federal government of 

defined benefit pensions beginning in 2017, but it does 

not factor into this analysis because workers hired after 

2012 have not yet accumulated the five years of service 

needed to receive those benefits.

Scope of the Analysis

CBO’s results apply to the cost of employing full-time, 

full-year workers. The analysis focuses on those workers—who accounted for about 94 percent of the total 

hours worked by federal employees from 2011 through 

2015—because more-accurate data are available for 

them than for other workers. CBO measured the cost of 

employing those workers as the present value of providing compensation, some of which may be paid out 

in the future. (A present value is a single number that 
Comparing the Compensation of Federal and 

Private-Sector Employees

The Federal Workforce

The federal government employs about 2.2 million 

workers (not counting military personnel or employees 

of the U.S. Postal Service) in a wide variety of departments, agencies, and occupations. Those workers receive 

compensation in the form of wages and benefits, such as 

health insurance and pensions, at a total cost to the government of about $215 billion in fiscal year 2016. About 

65 percent of that amount is spent on the three departments that employ the most workers: the Departments 

of Defense, Veterans Affairs, and Homeland Security.

Size of the Federal Workforce

For the past 30 years, the number of civilians employed 

by the federal government has hovered around 2 million people (see Figure 1).1

 During that period, federal 

employees have accounted for a declining share of the 

total U.S. workforce, because employment by the private 

sector and by state and local governments has grown 

along with the economy. In 1985, when about 85 million people worked in the private sector and 13 million 

worked for state or local governments, federal employees made up 2.1 percent of the workforce. By 2015, 

private-sector employment had reached 123 million 

and employment by state and local governments had 

reached 19 million. As a result, federal civilian employees 

accounted for 1.5 percent of the workforce in that year.

Besides federal civilian workers, who are the focus of this 

analysis, the government directly or indirectly employs 

other people to provide various services. In particular, 

the armed services include about 2.2 million uniformed 

personnel, about 1 million of whom are reservists. (The 

1. In this report, the size of a workforce is measured by the number 

of full-time and part-time employees. An alternative measure 

of size converts the work schedules of part-time employees to a 

full-time basis. Because part-time work is less common in the 

federal government, federal workers are a larger portion of the 

workforce under that alternative measure—2.3 percent in 1985 

and 1.6 percent in 2015.

Congressional Budget Office has analyzed the compensation of military personnel in several publications.)2

In addition, about 700,000 people work for government enterprises that typically pay for their employees’ 

compensation through the sale of services rather than 

through tax revenues. (By far the largest government 

enterprise in terms of employment is the Postal Service.) 

Finally, because the federal government uses the private 

sector to carry out some of its functions, a number of 

private-sector employees work under contract to the 

federal government but have their compensation set by 

their employer.3 This analysis does not include military 

personnel or employees of self-financing government 

enterprises such as the Postal Service; federal contractors 

are included as private-sector workers.

2. For a comparison of military and private-sector compensation, 

see the testimony of Carla Tighe Murray, Senior Analyst for 

Military Compensation and Health Care, Congressional Budget 

Office, before the Subcommittee on Personnel of the Senate 

Committee on Armed Services, Evaluating Military Compensation

(April 28, 2010), www.cbo.gov/publication/21430; and 

Congressional Budget Office, Evaluating Military Compensation

(June 2007), www.cbo.gov/publication/18788. CBO compared 

military compensation with federal civilian compensation in 

“Analysis of Federal Civilian and Military Compensation,” an 

attachment to a letter to the Honorable Steny H. Hoyer (January 

20, 2011), www.cbo.gov/publication/22002.

3. The number of federal contractors is estimated in John J. Dilulio, 

10 Questions and Answers About America’s “Big Government”

(Brookings Institution, February 2017), http://tinyurl.com/

gouqmpw. Spending on federal contractors is tabulated in 

Congressional Budget Office, Federal Contracts and the Contracted 

Workforce (March 2015), www.cbo.gov/publication/49931. The 

compensation of federal contractors is discussed in Project on 

Government Oversight, Bad Business: Billions of Taxpayer Dollars 

Wasted on Hiring Contractors (POGO, 2011), www.pogo.org/

our-work/reports/2011/co-gp-20110913.html. In addition to 

federal contractors, the government supports the jobs of other 

private-sector employees through its purchases of goods and 

services produced by private firms. For example, the government 

buys computers and office supplies from companies in the private 

sector.
6 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

Agencies and Occupations

Federal civilian employees perform a broad range of tasks 

in more than 650 occupations. Although federal workers are employed by more than 100 departments and 

agencies, 60 percent of them work at three departments 

in the executive branch (see Figure 2):

O The Department of Defense employs 34 percent of 

the federal civilian workforce. Those employees work 

in hundreds of different occupations; the most common are program administrator, information technology worker, and program analyst.

O The Department of Veterans Affairs employs 

17 percent of the federal civilian workforce. About 

60 percent of its employees work in various medical 

professions, the most common of which is nursing.

O The Department of Homeland Security employs 

9 percent of the federal civilian workforce. The most 

common job in that department is inspector for 

the Transportation Security Administration, which 

accounts for just under a quarter of the department’s 

employees.

An additional 37 percent of federal employees work 

for the other departments and agencies of the executive 

branch. The most common occupations among those 

workers are program administrator, information technology worker, and program analyst. The remaining 

3 percent of the federal workforce is employed by the 

legislative and judicial branches of government.

Differences Between the Federal and 

Private-Sector Workforces

Various characteristics of employees—including their 

occupation, education, and age—are likely to influence 

their compensation, regardless of whether they work for 

the federal government or the private sector. The federal 

and private-sector workforces differ in several significant 

ways that CBO incorporated into its comparison of 

compensation between the two sectors.

For example, 36 percent of federal employees work in 

professional occupations, such as the sciences or engineering, compared with only 20 percent of private-sector 

employees; in contrast, 24 percent of private-sector 

employees work in occupations such as sales, production, or construction, compared with only 5 percent of 

federal employees (see Table 1). Professional occupations 

generally require more formal training or experience 

than do the occupations more common in the private 

sector. Partly because of that difference, the average age 

of federal employees is substantially higher than that of 

private-sector employees (46 versus 42). The greater concentration of federal workers in professional occupations 

also means that they are more likely to have a bachelor’s 

degree: Sixty percent of the federal workforce has at least 

that much education, compared with 35 percent of the 

private-sector workforce (see Figure 3). Likewise, 28 percent of federal employees have a master’s, professional 

(such as a law or medical degree), or doctoral degree, 

compared with 11 percent of private-sector employees.

Figure 1.

Trends in Government and Private-Sector 

Employment Since 1985

Millions of People

1985 1990 1995 2000 2005 2010 2015

0

20

40

60

80

100

120

140

160

Private Sector

State and Local Governments

Total U.S. Employment, by Sector

Federal Employment, by Type

Federal

Government

1985 1990 1995 2000 2005 2010 2015

0

1

2

3

4

5

6

7

Civilian

Military

Government Enterprisesa

Source: Congressional Budget Office, using data from the national income 

and product accounts.

This figure includes employees who work part time or part of the year.

a. Government enterprises are federal entities that typically fund their 

operating costs, including employees’ compensation, through the sale 

of services rather than through tax revenues. By far the largest government enterprise in terms of employment is the U.S. Postal Service.
APRIL 2017 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 7

The characteristics of employers, as well as those of 

workers, differ between the federal government and the 

private sector. Many federal agencies are quite large; 

the biggest, the Department of Defense, employs about 

750,000 civilian workers. Nearly all federal employees work for entities that have at least 1,000 workers, 

whereas only about 42 percent of private-sector employees work for entities of that size.

The services that the federal government provides are 

needed across the nation, so federal employees work in a 

wide variety of locations. For instance, nurses and doctors who work at veterans’ hospitals, security screeners at 

airports, and air traffic controllers are spread throughout 

the United States. In all, about 16 percent of federal 

employees work in or around Washington, D.C. (compared with 2 percent of the private-sector workforce); the 

Figure 2.

Federal Civilian Employment, by Branch and Department, 2015

Defense (34%)

Veterans Aairs (17%)

Homeland Security (9%)

Justice (5%)

Treasury (5%)

Agriculture (4%)

HHS (4%)

Interior (3%)

SSA (3%)

Other Executive Agencies (13%)

Legislative and Judicial (3%)

100

Source: Congressional Budget Office, using data from the Office of Personnel Management.

This figure includes federal employees who work part time or part of the year. It excludes military personnel (who account for roughly the same number 

as federal civilian employees) and employees of government enterprises, such as the U.S. Postal Service. It also excludes the Central Intelligence Agency, 

the National Security Agency, the Defense Intelligence Agency, and the National Imagery and Mapping Agency.

HHS = Department of Health and Human Services; SSA = Social Security Administration.
8 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

Table 1. 

Characteristics of the Federal and Private-Sector Workforces

Percentage of Workforce

Federal Government Private Sector

Highest Educational Attainment

High school diploma or less 13 36

Some college 27 29

Bachelor’s degree 31 24

Master’s degree 20 8

Professional degree or doctorate 9 3 ____ ____

Total 100 100

Occupation

Professional 36 20

Management, business, financial 27 19

Administrative or office support 12 13

Service 12 12

Transportation 3 7

Installation, maintenance, repair 3 4

Production 2 8

Construction, extraction 2 5

Sales 1 11

Farming, fishing, forestry 1 1 ____ ____

Total 100 100

Size of Employer, by Number of Workers

Fewer than 10 * 11

10 to 99 * 25

100 to 499 * 15

500 to 999 * 6

1,000 or more 99 42 ____ ____

Total 100 100

Region

South 37 35

West 21 23

Washington, D.C., metropolitan area 16 2

Midwest 14 22

Northeast 11 18 ____ ____

Total 100 100

Memorandum:

Veterans (Percentage of workforce) 22 5

Average Age (Years) 46 42

Number of People in Sample 6,892 163,148

Source: Congressional Budget Office, using data for 2011 through 2015 from the March Current Population Survey.

* = between zero and 0.5 percent.
APRIL 2017 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 9

other 84 percent of federal workers—about 1.8 million 

people—are located throughout the country in roughly 

similar proportions to workers in the private sector.

The attributes of the federal workforce are more like 

those of private-sector workers at large firms than those 

of workers at small firms, because both large firms and 

federal agencies tend to require a workforce that is more 

specialized and educated than small firms do. (In this 

analysis, small firms are those with fewer than 1,000 

employees, and large firms are those with 1,000 or more 

employees.) Many federal employees have expertise 

in specific tasks, as over 95 percent of them work in 

agencies that divide tasks among more than 100 occupations. That degree of specialization is not possible for 

small employers. In addition, only 31 percent of workers 

at small firms have at least a bachelor’s degree, whereas 

the proportion of workers with that level of education is 

greater at large firms (41 percent).

CBO’s Approach to Analyzing Compensation 

for Federal and Private-Sector Employees

How would the federal government’s compensation costs 

differ if the average cost of employing federal workers 

was the same as that of employing workers with certain 

similar observable characteristics in the private sector? To 

address that question, CBO examined average compensation costs for employees in the federal government and 

the private sector, accounting for differences in those 

characteristics. The comparison between the two sectors 

is based on the cost that an employer incurs in providing compensation, including wages and salaries, a share 

of health insurance premiums, retirement benefits, and 

payroll taxes (which fund government programs such as 

Social Security and Medicare).

CBO measured the cost of benefits provided to retirees as the present value of future obligations—that is, 

as a single number that expresses a flow of current and 

future payments in terms of an equivalent lump sum 

paid today. Such benefits are not necessarily paid by the 

employer in the year that someone works. In particular, 

retirement benefits for federal workers are recorded as 

federal spending when someone receives those benefits 

during retirement.

In both the federal government and the private sector, 

compensation may depend on a number of factors that 

can be observed and measured. CBO sought to account 

for differences in those factors—education, occupation, years of work experience, geographic location 

(region of the country and urban or rural location), size 

of employer, veteran status, and certain demographic 

characteristics (age, sex, race, ethnicity, marital status, 

immigration status, and citizenship). That approach 

produces a comparison between the average compensation of federal workers and the average compensation of 

private-sector workers who have certain similar observable attributes. (For more details about that approach, 

see Appendix A.) Because education plays a particularly 

large role in determining compensation, CBO reports 

its results for five levels of educational attainment: high 

school diploma or less, some college, bachelor’s degree, 

master’s degree, and doctorate or professional degree.

People’s compensation is also affected by many characteristics that are not easy to observe or measure, such as 

their natural ability, personal motivation, and effort. The 

degree to which federal and private-sector employees 

may differ with regard to those characteristics is much 

Figure 3.

Differences in Education and Occupation Between 

the Federal and Private-Sector Workforces

Percentage of Workforce

Percentage of the

Workforce With at Least a

Bachelor's Degree

Percentage of the 

Workforce in

a Professional or Business Occupationa

0

20

40

60

80

Federal Government

Private Sector

Source: Congressional Budget Office, using data for 2011 through 2015 

from the March Current Population Survey.

a. Corresponds to the occupational categories “Professional” and 

“Management, business, and financial” listed in Table 1. About 65 percent of the workers in those occupations have at least a bachelor’s 

degree, compared with 17 percent of the workers in other occupations.
10 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

harder to quantify, and no adjustments were made for 

those attributes in this analysis.

Comparison of Wages in the Federal 

Government and the Private Sector

Using data from the Current Population Survey (CPS) 

and the analytic approach described above, CBO compared average hourly wages for federal civilian workers, 

by the highest level of education they achieved, with 

average hourly wages for private-sector workers who have 

certain similar observable traits that affect wages. CBO 

also compared the range between low and high wages for 

federal workers with the wage range for similar workers 

in the private sector.

Average Wages

By CBO’s estimate, the extent to which hourly wages 

differed for federal employees and private-sector 

employees with certain similar observable traits during 

the 2011–2015 period varied greatly according to workers’ educational attainment. The extent of that variation 

is evident in comparisons of the differences in wages for 

the least educated workers, workers with a bachelor’s 

degree (the most common level of education in the federal workforce), and the most educated workers:

O Federal employees with no more than a high school 

diploma earned 34 percent more per hour, on average, than private-sector employees with the same level 

of education (see Table 2).

O Federal employees whose highest level of education 

was a bachelor’s degree—about one-third of the federal workforce—earned roughly 5 percent more per 

hour, on average, than similar workers in the private 

sector.

O Federal workers with a doctorate or professional 

degree earned 24 percent less per hour, on average, 

than similar workers in the private sector.

On average, for employees at all education levels, wages 

were 3 percent higher for workers in the federal government than for private-sector workers with certain similar 

observable characteristics, CBO estimates. Thus, the 

federal government would have reduced its spending on 

wages by 3 percent if it had decreased the pay of its less 

educated employees and increased the pay of its more 

educated employees to match the wages of their privatesector counterparts.

If CBO had not structured this analysis to compare 

workers with similar observable traits, the difference 

in average wages between the two sectors would have 

been much larger. Comparing federal and private-sector 

employees with similar educational attainment was the 

most important element, for two reasons: Highly educated workers tend to earn much higher wages than less 

educated workers, and federal employees have more education, on average, than employees in the private sector. 

Accounting for differences in some of the other characteristics was also important because federal employees 

tend to work in higher-paying occupations and to have 

more years of work experience, which also tend to be 

associated with higher wages. Finally, employees of large 

firms tend to earn more per hour than employees of 

small firms, and federal employees are more than twice 

as likely as private-sector employees to work for entities 

that employ at least 1,000 people. Besides accounting for 

differences in those characteristics, CBO compared federal workers with private-sector workers who had similar 

demographic traits, but that adjustment did not have 

much effect on the difference between average federal 

and private-sector wages.

The large size of federal agencies does not necessarily 

imply that federal workers would receive the higher wages 

typical at large firms if they moved to the private sector. 

On the one hand, jobs are likely to be more specialized 

in the federal government and at large private firms than 

they are at smaller firms, so large private-sector employers might value the specialized skills of federal workers. 

That possibility suggests that accounting for the size of 

the employer leads to a more meaningful comparison 

of wages. On the other hand, the higher wages paid by 

large private firms may not reflect pay for skills that are 

transferable between the federal and private sectors, so 

adjusting for the employer’s size could understate the 

difference between average federal and private-sector 

wages for workers with similar traits. If adjustments for 

the employer’s size are not made, the difference between 

average federal and private-sector wages for all workers 

rises from 3 percent to 10 percent, and similar changes 

occur in the differences for workers at each level of 

education.

Differences between the average wages of federal and 

private-sector employees with the same measured traits 

could reflect the effects of personal characteristics that 

cannot be measured, differences in the way that the 

federal government and the private sector determine pay, 
APRIL 2017 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 11

or a combination of those factors. The data do not allow 

CBO to gauge the degree to which each of those factors 

affects differences in average wages between the sectors.

The findings of CBO’s analysis vary from the results of 

other studies of public- and private-sector wages. That 

variation is largely attributable to differences in analytic 

methods. The distinction between those methods and the 

relationship of CBO’s analysis to previous research are 

discussed at length in a CBO working paper from 2012.4

To address the question of how the government’s costs 

for wages and salaries would change if federal workers 

cost the same amount to employ as similar private-sector 

workers, CBO focused on differences in average wages, 

which are closely tied to total government spending for 

the pay of federal employees. Other studies that found 

4. Justin Falk, Comparing Wages in the Federal Government and 

the Private Sector, Working Paper 2012-3 (Congressional 

Budget Office, January 2012), Section II, www.cbo.gov/

publication/42922. That paper addresses CBO’s analysis of 

federal wages from 2005 through 2010, but the points remain 

relevant for the 2011–2015 period analyzed in this report. The 

relationship between CBO’s analysis and previous research is 

also discussed in Government Accountability Office, Federal 

Workers: Results of Studies on Federal Pay Varied Due to Differing 

Methodologies, GAO-12-564 (June 2012), www.gao.gov/

products/GAO-12-564; and David H. Bradley, Comparing 

Compensation for Federal and Private-Sector Workers: An Overview, 

Report for Congress R42636 (Congressional Research Service, 

July 30, 2012).

larger differences between federal and private-sector 

pay used a different measure of wages.5 However, their 

measure overstates the differences between the cost of 

employing federal workers and similar private-sector 

workers because of the way the measure accounts for the 

difference in the dispersion of wages (the range from low 

to high) between those groups.

Besides the use of averages, another key feature of CBO’s 

approach was comparing workers with similar characteristics, such as education, experience, and occupation. 

Other research that has compared the average pay of 

federal and private-sector workers who have similar jobs 

has found that the average salary for federal employees is 

much lower than the average for private-sector workers in 

comparable jobs.6 However, by focusing the comparisons 

on specific, detailed jobs, that research may have ended 

5. See Rachel Greszler and James Sherk, Why It Is Time to Reform 

Compensation for Federal Employees, Backgrounder 3139 on 

Labor (Heritage Foundation Center for Data Analysis, July 

2016), http://tinyurl.com/zf25ymg; and Andrew Biggs and Jason 

Richwine, Comparing Federal and Private Sector Compensation,

Economic Policy Working Paper 2011-02 (American Enterprise 

Institute, June 2011), www.aei.org/publication/comparingfederal-and-private-sector-compensation.

6. Federal Salary Council, Level of Comparability Payments for 

January 2018 (December 2016), https://go.usa.gov/xXCGm. 

Table 2. 

Federal and Private-Sector Wages, by Workers’ Educational Attainment

Average Wages

 (2015 dollars per hour) Percentage Difference 

Federal Government Private Sector Between Averages a

High School Diploma or Less 29.60 22.10 34

Some College 32.10 26.30 22

Bachelor’s Degree 39.50 37.60 5

Master’s Degree 45.00 48.20 -7

Professional Degree or Doctorate 51.90 68.00 -24

All Levels of Education 38.30 37.20 3

Source: Congressional Budget Office, using data for 2011 through 2015 from the March Current Population Survey.

Wages are measured as an average hourly wage rate and include overtime pay, tips, commissions, and bonuses.

a. Average wages for private-sector workers who resemble federal workers in occupation, years of work experience, and certain other observable 

characteristics that are likely to affect wages.
12 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

up comparing federal workers with private-sector workers 

who have more experience.7

The Distribution of Wages

In addition to looking at average wages, CBO examined 

the distribution of wages for federal workers and for 

private-sector workers with certain similar observable 

characteristics in each category of educational attainment. It then compared wages in the two sectors at the 

10th, 25th, 50th (the median), 75th, and 90th percentiles of those distributions.8

 Among employees with no 

more than a bachelor’s degree, low-wage workers (those 

at the 10th and 25th percentiles) earned more in the federal government than in the private sector. By contrast, 

among employees with at least a bachelor’s degree, highwage workers (those at the 90th percentile) earned less in 

the federal government than in the private sector. (That 

is also the case for workers at the 75th percentile of those 

who have a professional degree or doctorate. Among 

employees whose education culminated in a bachelor’s 

degree, workers at the 75th percentile earned more in the 

federal government than in the private sector.)

Both high and low wages tend to be less prevalent in 

the federal government than in the private sector, so the 

range between those wages—the dispersion of wages—

tends to be narrower for federal employees. For example, 

as measured by the range from the 10th percentile to the 

90th percentile, the dispersion of wages was smaller for 

federal employees with at least a bachelor’s degree than 

for similar private-sector employees. That difference was 

especially evident for people with a professional degree or 

doctorate, mostly because the 90th percentile of wages is 

much lower for federal employees than for private-sector 

workers with the same level of education (see Figure 4). 

In fact, the large differences between the high percentiles 

of those two wage distributions push the average wage 

of federal employees substantially below the average 

wage for their private-sector counterparts. In contrast, 

the 50th percentiles of those distributions are about 

7. See Melissa Famulari, “What’s in a Name? Title Inflation in 

the Federal Government” (draft, University of Texas at Austin, 

August 2002), www.econweb.ucsd.edu/~mfamular/pdfs/

FederalPrivatepay.pdf (182 KB).

8. For details about how CBO constructed the wage distributions, 

see Justin Falk, Comparing Wages in the Federal Government 

and the Private Sector, Working Paper 2012-3 (Congressional 

Budget Office, January 2012), Section V, www.cbo.gov/

publication/42922.

the same. The prevalence of higher wages also pushes 

the average wage above the 50th percentile for workers 

with other levels of education, particularly in the private 

sector. One implication is that about 50 percent of the 

federal workers whose education culminated in a bachelor’s degree earned less than the average wage of their 

private-sector counterparts, even though the average 

wage was higher among the federal workers.

The dispersion of wages also tends to differ between 

federal employees and their private-sector counterparts 

when the workers are grouped by occupation instead of 

educational attainment. For example, the range from the 

10th percentile to the 90th percentile was significantly 

Figure 4.

Dispersion of Federal and Private-Sector Wages, 

by Workers’ Educational Attainment

Wages, 2015 Dollars per Hour

High School Diploma

or Less

Bachelor’s Degree Professional Degree

or Doctorate

Federal Government

Private Sector

a

0

20

40

60

80

100

120

140

160

180

Source: Congressional Budget Office, using data for 2011 through 2015 

from the March Current Population Survey.

The horizontal line in the middle of each shaded box indicates the 

median (50th percentile) wage; the top and bottom of the box mark the 

75th and 25th percentiles, respectively; and the whiskers above and 

below the box mark the 90th and 10th percentiles.

a. Wages for private-sector workers who resemble federal workers in 

occupation, years of work experience, and certain other observable 

characteristics that are likely to affect wages.
APRIL 2017 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 13

narrower for federal managers than for similar privatesector managers. In that regard, those distributions 

differed by about the same amount as the distributions 

for workers with at least a bachelor’s degree.

The narrower dispersion of wages among federal workers 

may reflect the constraints of federal pay systems, which 

limit the pay of managers and make it harder for managers to reward the highest performers or to limit the compensation of the lowest performers. The highest salaries 

under federal pay schedules are substantially lower than 

the average salaries for most executive positions in the 

private sector.9 Federal pay systems also limit the number 

of workers with low wages, because most federal workers 

compensated under pay schedules move to progressively 

higher pay levels as they become eligible for those levels 

on the basis of their years of federal employment. (For 

more details about those pay schedules, see Appendix B.) 

However, federal pay systems also include tools, such 

as promotions and bonuses, that managers can use to 

reward some top performers.

Comparison of Benefits in the Federal 

Government and the Private Sector

The federal government and most large private employers 

provide various forms of noncash compensation, such 

as retirement benefits, health insurance, and paid leave. 

The cost of providing those benefits varies greatly among 

private-sector employers as well as between the federal 

government and the private sector. Smaller private 

employers generally offer less-generous health insurance 

and other benefits; some do not offer such benefits at 

all. However, almost all employers are required to pay 

various payroll taxes to fund all or part of the benefits 

that workers or retirees receive through the Social Security, 

Medicare, unemployment insurance, and workers’ compensation programs.

In both the federal government and the private sector, 

the cost of some benefits, such as retirement benefits and 

paid leave, is based largely on the wages that employees 

receive. Thus, the factors that determine an employee’s 

9. Congressional Budget Office, Comparing the Pay and Benefits 

of Federal and Nonfederal Executives (November 1999), www.

cbo.gov/publication/12015. That report compares pay in 1998. 

Since then, the highest salaries in the federal pay schedules have 

risen to $207,800 for the Executive Schedule and $187,000 for 

the Senior Executive Service. Those amounts remain below the 

average salaries for most executive positions at large private-sector 

firms even in 1998.

wages—such as education, occupation, and experience—

will also influence the cost that an employer incurs to 

provide those benefits. For example, workers with more 

education tend to receive more expensive benefits as well 

as higher wages. The cost of other benefits, by contrast, is 

not directly affected by the wages that employees receive. 

In particular, the cost of providing health insurance for 

federal workers depends directly on the insurance plan 

chosen and on whether an employee has single, singleplus-one, or family coverage (although that cost may 

be indirectly affected by the employee’s wages if higherincome workers tend to choose more expensive insurance 

plans).

CBO compared the cost of the benefits provided to 

federal and to private-sector employees, accounting for 

the same differences in workers’ characteristics that were 

used to analyze wages. For consistency with the measure 

of hourly wages, the cost of benefits was measured on an 

hourly basis by dividing estimates of the annual cost that 

an employer incurred to provide those benefits by the 

number of hours that an employee worked during the 

year.

As with wages, differences in the cost of benefits in the 

federal government and the private sector varied by 

employees’ highest level of education (see Table 3). For 

example, CBO estimates that, relative to costs for similar 

workers in the private sector, benefit costs were about:

O 93 percent higher, on average, for federal workers 

with a high school diploma or less education;

O 52 percent higher, on average, for federal workers 

whose highest level of education was a bachelor’s 

degree; and

O Roughly the same, on average, for federal workers 

with a professional degree or doctorate.10

On average for workers at all education levels, benefits 

for federal employees cost about $26 per hour worked, 

whereas benefits for private-sector employees with 

certain similar observable characteristics cost $18, CBO 

10. CBO estimates that benefits for federal workers with a 

professional degree or doctorate are 3 percent lower, on average, 

than benefits for private-sector workers with similar observable 

characteristics. However, that estimate is subject to considerable 

uncertainty because of the small number of workers in the data 

who have that level of education.
14 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

estimates. Thus, benefits for federal workers cost 47 percent more per hour worked, on average, than benefits for 

private-sector workers with similar observable attributes. 

Benefits also constituted a larger share of compensation 

for federal workers, accounting for 41 percent of the cost 

of total compensation, compared with 32 percent for 

workers in the private sector.

Most of the higher benefit costs incurred by the federal 

government stem from differences in retirement benefits. The federal government provides retirement benefits to its workers through both a defined benefit plan 

and a defined contribution plan, whereas many large 

private-sector employers have replaced defined benefit 

plans with defined contribution plans.11 The federal 

government also provides subsidized health insurance to 

qualified retirees, an arrangement that has become much 

less common in the private sector. As a result, deferred 

11. Defined benefit plans provide retirement income that is based 

on fixed formulas, and the amount of that income is usually 

determined by an employee’s salary history and years of service. 

In contrast, the amount of retirement income provided by a 

defined contribution plan, such as a 401(k) account, depends on 

the performance of the account’s investments as well as on the 

amount of contributions made by the employer and employee. 

compensation accounts for a greater portion of total 

compensation in the federal government than in the 

private sector, on average. That difference could affect 

the types of workers who choose federal employment 

over private-sector employment. Federal pension and 

health care benefits for retirees are likely to attract workers who plan to stay with the same employer for many 

years, because the value of those benefits rises sharply 

if an employee waits to leave federal service until he or 

she is eligible for an immediate pension (at which point 

the employee is generally also eligible to receive federal 

health care benefits in retirement).

Comparisons of benefits by other researchers have not 

used data that allow federal employees to be compared 

with private-sector employees who have similar job-related 

attributes.12 Those comparisons have found bigger differences between average federal and private-sector benefits 

than CBO finds. However, CBO’s analysis indicates that a 

large portion of those bigger differences is attributable to 

the fact that federal workers have more years of education 

and experience, on average, than private-sector workers do.

12. For details, see Justin Falk, Comparing Benefits and Total 

Compensation in the Federal Government and the Private Sector, 

Working Paper 2012-4 (Congressional Budget Office, January 

2012), Section II, www.cbo.gov/publication/42923.

Table 3.

Federal and Private-Sector Benefits, by Workers’ Educational Attainment

Average Benefits

(2015 dollars per hour) Percentage Difference

Federal Government Private Sector Between Averages a

High School Diploma or Less 21.30 11.10 93

Some College 24.20 13.50 80

Bachelor’s Degree 27.50 18.10 52

Master’s Degree 29.80 22.90 30

Professional Degree or Doctorate 29.70 30.70 -3

All Levels of Education 26.50 18.00 47

Source: Congressional Budget Office, using data for 2011 through 2015 from the March Current Population Survey, the Office of Personnel 

Management, and the National Compensation Survey.

Benefits are measured as the average cost, per hour worked, that an employer incurs in providing noncash compensation. The average benefits 

shown here are for workers at institutions that employ at least 1,000 people.

a. Average benefits for private-sector workers who resemble federal workers in occupation, years of work experience, and certain other observable 

characteristics that are likely to affect benefits.
APRIL 2017 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 15

CBO’s estimates of differences in benefits between the 

two sectors are more uncertain than its estimates of differences in wages. That greater uncertainty reflects the complexity of measuring benefits and the extrapolations that 

were necessary to integrate data sets from various sources 

(for more details about those sources, see Appendix A).

Comparison of Total Compensation in the 

Federal Government and the Private Sector

CBO combined its analyses of wages and benefits to 

assess differences between the federal government and 

the private sector in total compensation for workers with 

certain similar observable characteristics:

O Among workers with a high school diploma or less 

education, total compensation costs were 53 percent 

higher, on average, for federal employees than for 

similar private-sector employees (see Table 4).

O Among workers whose education ended in a bachelor’s degree, the cost of total compensation averaged 

21 percent more for federal workers than for similar 

workers in the private sector.

O Among workers with a professional degree or doctorate, by contrast, total compensation costs were 18 

percent lower, on average, for federal employees than 

for private-sector employees with similar attributes.

For workers with a bachelor’s degree or less, the cost of 

total compensation averaged about $60 per hour worked 

for federal employees, compared with about $46 per 

hour worked for employees in the private sector with 

certain similar observable characteristics. In contrast, the 

cost of total compensation averaged about $77 per hour 

worked for federal employees with a master’s degree, professional degree, or doctorate, which is about $3 less than 

the average for their private-sector counterparts. Overall, total compensation was about 17 percent higher, on 

average, for federal workers than for similar private-sector 

workers, indicating that the government spent about 

17 percent more on total compensation than it would 

have if it provided its employees compensation equal to 

that of their private-sector counterparts.

In part because both federal and private-sector workers 

may value wages differently than benefits, comparisons 

of total compensation are an incomplete indicator of 

the government’s ability to recruit and retain a qualified 

workforce. In this analysis, benefits are measured in 

terms of the cost that employers incur in providing them, 

which might not match the value that employees place 

on benefits. An implication is that differences in benefits 

might not compensate for apparently countervailing 

differences in wages, even if the measured differences in 

benefits and wages are similar. On the one hand, workers tend to pay less income tax on compensation that 

takes the form of benefits than they do on wages, which 

enhances the value of benefits. On the other hand, some 

recent research indicates that workers are willing to pay 

only a small portion of the cost of funding an increase 

in pension benefits, which suggests that they value wages 

more highly than pension benefits.13 A broader assessment of how changes in the amount or composition of 

total compensation would affect the government’s ability 

to recruit and retain a qualified workforce is beyond the 

scope of this analysis.

Comparison With CBO’s Analysis of the 

2005–2010 Period

CBO’s 2012 report on differences between the wages, 

benefits, and total compensation of federal and privatesector workers covered the years from 2005 through 

2010. This report, which used analytic methods that are 

broadly similar, covered the period from 2011 to 2015. 

Compared with the previous analysis, in this analysis the 

differences in compensation were substantially larger for 

less educated workers, smaller for workers with master’s 

degrees, and changed little for workers overall.

Changes in the Comparison of Wages

The differences in average wages by educational attainment primarily changed because wages grew more 

quickly among less educated workers in the federal 

government than among their counterparts in the private 

sector and because CBO adjusted its approach to determining who is a federal employee. Differences in wages 

were also affected by reductions in across-the-board 

increases to federal salaries, a slowdown in federal hiring, 

13. Maria D. Fitzpatrick, “How Much Are Public School Teachers 

Willing to Pay for Their Retirement Benefits?” American 

Economic Journal: Economic Policy, vol. 7, no. 4 (November 

2015), pp. 165–188, http://dx.doi.org/10.1257/pol.20140087. 

That study includes a discussion of why defined benefit pensions 

are still common in the public sector even though the value that 

workers place on them appears to be lower than their cost.
16 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

and a temporary reduction in the number of hours 

worked by federal employees.

Changes in the Comparison of Wages by Level of 

Education. At all five levels of educational attainment, 

the differences between the wages paid by the federal 

government and the private sector were larger during the 

2011–2015 period than they were during the 2005–

2010 period. The average wages of federal workers with 

a bachelor’s degree or less exceeded the average wages of 

their private-sector counterparts by more between 2011 

and 2015 than between 2005 and 2010 (see Table 5). 

Conversely, the average wages of federal workers with 

more than a bachelor’s degree fell further short of their 

counterparts’ in the private sector between 2011 and 

2015 than between 2005 and 2010. However, the 

change for more educated workers is small and imprecisely measured.

One reason for the larger differences in wages in the 

2011–2015 period is that wages grew more quickly 

among less educated workers in the federal government 

than among their counterparts in the private sector. In 

particular, wages for federal workers who attended college 

but did not earn a bachelor’s degree grew by about 

11 percent between the 2005–2010 period and the 

2011–2015 period. In contrast, wages for private-sector 

workers with similar amounts of education grew by 

about 7 percent between the two periods. (Those growth 

rates are not adjusted for general changes in the cost of 

labor.) Those trends increased the difference between 

the average wages of those workers from 15 percent to 

19 percent. For the same reason, the difference between 

the average wages of federal workers and their privatesector counterparts was boosted from 21 percent to 

24 percent among workers with no more than a high 

school diploma. (In order to isolate the effect of different 

rates of wage growth, the estimates in this paragraph do 

not reflect CBO’s adjustment to its approach to determining who is a federal employee.)

Another reason that CBO estimated larger differences 

in wages for less educated workers is that the agency 

adjusted its approach to determining who is a federal 

employee. CBO primarily relies on data from the CPS 

in its analysis of wages because the CPS includes information on federal employees and workers in the private 

sector. However, data on federal employees compiled by 

the Office of Personnel Management indicate that the 

CPS substantially overstates the number of low-wage 

workers in the federal government, so CBO adjusted the 

data accordingly. Because most low-wage workers do not 

have a bachelor’s degree and tend to have lower wages than 

other federal employees with the same level of education, 

Table 4. 

Federal and Private-Sector Total Compensation, by Workers’ Educational Attainment

Average Total Compensation

(2015 dollars per hour) Percentage Difference

Federal Government Private Sector Between Averages a

High School Diploma or Less 50.90 33.40 53

Some College 56.30 40.40 39

Bachelor’s Degree 67.00 55.20 21

Master’s Degree 74.80 70.90 5

Professional Degree or Doctorate 81.70 99.80 -18

All Levels of Education 64.80 55.30 17

Source: Congressional Budget Office, using data for 2011 through 2015 from the March Current Population Survey, the Office of Personnel 

Management, and the National Compensation Survey.

Total compensation consists of wages and benefits. The average compensation shown here is for workers at institutions that employ at least 1,000 

people. Because a broader sample was used to compare wages than to compare benefits, the numbers shown here for total compensation may not 

equal the sum of the numbers for wages and benefits separately.

a. Average total compensation for private-sector workers who resemble federal workers in occupation, years of work experience, and certain other 

observable characteristics that are likely to affect compensation.
APRIL 2017 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 17

the adjustment substantially increased the average wages 

of federal workers with less than a bachelor’s degree. As 

a result of that adjustment, the estimated differences 

between the average wages of federal and private-sector 

workers grew from 24 percent to 34 percent among 

workers with no more than a high school diploma and 

from 19 percent to 22 percent among workers with 

some college education. (For additional details on the 

methodological changes CBO made in this report, see 

Appendix A.)

Changes in the Comparison of Average Wages. On 

average for workers at all levels of education, the difference 

in wages between the federal and private sectors changed 

little between the two periods because reductions in 

across-the-board salary increases for federal employees 

were offset by other factors. The Federal Employees Pay 

Comparability Act of 1990 specifies that the salaries 

of most federal employees be adjusted annually on the 

basis of changes in the salaries of private-sector workers. From 2005 through 2010, those changes averaged 

2.7 percent, which was similar to the increase in the 

salaries of private-sector workers during that period 

as measured by the employment cost index compiled 

by the Bureau of Labor Statistics (see Figure 5). From 

2011 through 2015, however, policymakers chose to 

implement smaller increases—averaging less than half a 

percent—for federal employees. In contrast, salaries of 

private-sector workers grew by an average of 1.9 percent 

during those years. In addition to across-the-board pay 

increases, federal employees can earn pay raises based on 

their seniority and merit, but those raises did not expand 

to offset the reduction in the across-the-board increases 

over the 2011–2015 period (see Figure 6).14 Thus, the 

lower across-the-board pay increases probably reduced 

the wages of federal employees relative to the wages of 

14. To further investigate the effects that the elimination of general 

pay increases from 2011 through 2013 had on the difference 

in average wages, CBO compared the average wage differential 

between federal and private-sector employees during 2014 and 

2015. By limiting the sample to the period after the pay freeze, 

CBO found that the average federal wage exceeded the average 

private-sector wage by 1 percent rather than 3 percent for the 

entire 2011–2015 period.

Table 5. 

Percentage Differences Between Federal and Private-Sector Compensation, by Analytic Period

2005 Through 2010 2011 Through 2015

Wages Benefits

Total 

Compensation Wages Benefits

Total 

Compensation

High School Diploma or Less 21 72 36 34 93 53

Some College 15 71 32 22 80 39

Bachelor’s Degree 2 46 15 5 52 21

Master’s Degree -5 36 8 -7 30 5

Professional Degree or Doctorate -23 2 -18 -24 -3 -18

All Levels of Education 2 48 16 3 47 17

Source: Congressional Budget Office, using data for 2005 through 2015 from the March Current Population Survey, the Office of Personnel 

Management, and the National Compensation Survey.

Differences are based on average compensation for private-sector workers who resemble federal workers in occupation, years of work experience, 

and certain other observable characteristics that are likely to affect compensation. 

Wages are measured as an average hourly wage rate and include overtime pay, tips, commissions, and bonuses.

Benefits and total compensation are measured as the average cost, per hour worked, that an employer incurs in providing noncash compensation. 

The differences in averages shown here are for workers at institutions that employ at least 1,000 people.

The approach that CBO used to compare compensation from 2011 through 2015 is broadly similar to the approach the agency used to compare 

compensation from 2005 through 2010 but differs in several respects. See the text for details.
18 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

their private-sector counterparts by roughly 7 percent by 

2015 and by an average of 4 percent over the 2011–2015 

period. The lower pay increases—and higher pension 

contributions mandated by policymakers—are evident 

in the average wage of newly hired federal employees (see 

Box 1).

The reduction in across-the-board salary increases was 

partially offset by a decline in federal hiring. Hiring 

fell from around 215,000 workers per year over the 

2006–2010 period to around 165,000 workers per year 

between 2011 and 2015. That drop in hiring increased 

the average federal wage over what it would have been 

otherwise, because the average salary of recently hired 

federal employees is substantially lower than that of federal employees overall.

The reduction in across-the-board salary increases 

was also offset by the increase in federal hourly wages 

caused by federal employees’ working fewer hours in 

the 2011–2015 period than they had in the 2005–2010 

period. In particular, salaried federal workers reported 

fewer hours of work in 2013, the year in which many 

federal employees were not allowed to work for the first 

16 days of October.

Changes in the Comparisons of Benefits and Total 

Compensation

As with wages, the cost of federal benefits exceeded the 

cost of private-sector benefits to a greater extent over the 

2011–2015 period than over the 2005–2010 period for 

workers with a bachelor’s degree or less. Conversely, for 

workers with a master’s degree, the amount by which the 

cost of federal benefits exceeded the cost of private-sector 

benefits declined between the two periods. And among 

workers with a professional degree or doctorate, the cost 

of federal benefits was less than the cost of private-sector 

benefits in the 2011–2015 period, whereas federal benefits were more expensive than private-sector benefits in the 

2005–2010 period. 

Changes in wages are largely responsible for the changes 

in benefits (because the costs of pensions, paid leave, 

and legally required benefits are closely tied to wages), 

but increases in the cost of health insurance also played 

a role. The amount employers contributed to their 

workers’ health insurance grew more than wages in both 

sectors, but that growth was more concentrated among 

workers with higher earnings in the private sector, many 

of whom are highly educated. Thus, the differences 

between the cost of benefits for workers with more 

education in the federal sector and the private sector 

changed by a greater extent than the changes in wages 

alone would suggest.

The differences in the total compensation of federal 

workers and their private-sector counterparts with the 

same educational attainment changed between the 

2005–2010 period and the 2011–2015 period as the 

differences in wages and benefits between those two 

groups changed. In some instances, the changes in the 

differences in total compensation between the two 

groups were more pronounced than the changes in the 

Figure 5.

Changes in Average Salaries, by Sector

Percentage Change per Year

2005–2010 2011–2015

0

1

2

3

Private

Sectorb

Federal 

Governmenta

Source: Congressional Budget Office, using data from the Office of 

Personnel Management and the Bureau of Labor Statistics.

The salaries that the changes in this figure are based on have not been 

converted to 2015 dollars.

a. Consists of across-the-board increases and changes in locality 

payments for workers on the General Schedule, as well as general 

market and structural pay adjustments for workers on other pay 

schedules. 

b. The change in the employment cost index for the salaries of workers 

in private industry.
APRIL 2017 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 19

differences in wages or benefits. The additional growth 

in total compensation stemmed from more rapid growth 

in benefits than in wages between the 2005–2010 and 

2011–2015 periods, which made the difference in benefits 

a larger share of the difference in total compensation. 

Figure 6.

Changes in Average Salaries for Federal Employees, Including Changes Based on Merit and Seniority

Percent

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

0

1

2

3

4

5

6

7

Across-the-Board Increases and

Changes in Locality Payments

a

Merit, Seniority, and All Other Pay

Changes

Source: Congressional Budget Office, using data from the Office of Personnel Management.

The salaries that the changes in this figure are based on have not been converted to 2015 dollars.

In this figure, the composition of the workforce changes from year to year, and the change in salary reflects, in part, additional work experience.

a. Also includes general market and structural pay adjustments for workers who are not on the General Schedule.

For example, among workers with a bachelor’s degree, 

the difference in total compensation grew by 6 percentage 

points over the two periods, although the differences in 

its two components, wages and benefits, grew by smaller 

amounts.
20 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

Adjusted for private-sector wage growth, the compensation 

the federal government provides to newly hired employees 

decreased by about 11 percent between 2010 (the last year 

examined in the Congressional Budget Office’s previous report 

on compensation) and 2015 because lawmakers limited acrossthe-board increases to wages and raised the amount that new 

employees contribute to the defined benefit pension (see the 

figure).1 Over the 2011–2015 period examined in this report, those 

policies had a smaller effect on average compensation for all 

federal employees than for newly hired ones. CBO expects that 

the changes will further reduce the pay of the federal workforce 

over time as more employees are hired and as employees hired 

before the changes were put in place retire or leave the federal 

government. The changes also may hamper the government’s 

ability to recruit a highly qualified workforce—especially among 

workers whose jobs require advanced training—but analysis of 

that issue is beyond the scope of this report.

From 2010 through 2015, salaries paid to new federal employees 

declined by about 7 percent after adjusting for general changes 

in the cost of labor. Policymakers limited across-the-board wage 

increases to a total of 2 percent, which in turn constrained the 

growth in the average salary of new employees to roughly the 

same percentage. That is, without adjusting for general changes 

in the cost of labor, the average salary of new employees in 

2015 was roughly 2 percent more than the average salary of 

similar new employees in 2010. Over the same six-year period, 

the employment cost index for wages and salaries of workers in 

private industry—a measure of changes in private-sector pay that 

the Bureau of Labor Statistics adjusts so that the composition 

of the workforce is similar from one quarter to the next—grew 

by about 10 percent. Thus, adjusted for general changes in the 

cost of labor, starting federal salaries fell by about 7 percent, on 

average, between 2010 and 2015.

Lawmakers recently increased by 3.6 percentage points the portion 

of new federal employees’ salaries that those employees must 

contribute to their defined benefit pensions. First, the Middle Class 

Tax Relief and Job Creation Act of 2012 increased the contribution 

rate from 0.8 percent to 3.1 percent for most employees hired after 

December 31, 2012. Then, the Bipartisan Budget Act of 2013 further 

increased the contribution rate to 4.4 percent for most employees 

hired after December 31, 2013. After that rise in contributions 

was subtracted from compensation, the starting pay of federal 

employees fell by an additional 4 percent between 2010 and 2015. 

Thus, in total, average federal salaries for newly hired employees, 

after taking into account contributions to defined benefit pensions 

and general changes in the cost of labor, fell by about 11 percent 

1. Congressional Budget Office, Comparing the Compensation of Federal and 

Private-Sector Employees (January 2012), www.cbo.gov/publication/42921.

Box 1.

Changes in Compensation for Newly Hired Federal Employees

Starting Pay of Federal Employees, by Year Hired

Thousands of 2015 Dollars

2010 2011 2012 2013 2014 2015

50

0

52

54

56

58

60

Average Salary

Average Salary Minus Contributions

to Defined Benefit Pension

Source: Congressional Budget Office, using data from the Office of 

Personnel Management.

Average salaries are adjusted for changes over time in newly hired 

federal employees’ educations, occupations, and certain other 

observable characteristics likely to affect wages.

between 2010 and 2015. Because newly hired employees constitute 

a small share of the federal workforce, the change had only a minor 

effect on average compensation for all federal employees. However, 

that effect is expected to grow over time as more employees are 

hired, thereby reducing the difference in compensation between 

the federal government and the private sector.

The increase in employees’ contributions to their defined benefit 

pensions does not factor into the comparisons of benefits presented in this report because workers first hired after 2012 had 

not yet accumulated the five years of service needed to receive 

the defined benefit pension.2 If they leave federal employment, 

most workers with fewer than five years of service choose to have 

their contributions refunded to them at that time. However, once 

those workers have served long enough to receive an annuity, the 

cost of compensating them will be less than it would have been 

under a lower contribution rate because the additional contributions from employees will reduce the portion of the pension 

payments funded by the government.

2. This approach differs from the budgetary treatment of employees’ 

contributions to the defined benefit pensions; those contributions are 

categorized as revenue when they are withheld from employees’ pay. 

Under that treatment, the savings would still be a small fraction of the 

cost of total compensation because most federal employees were hired 

before 2013.
A P P E N D I X 

A

CBO’s Analytic Approach

This appendix summarizes the analytic approach 

taken by the Congressional Budget Office to 

compare compensation in the federal government with that in the private sector. The 

approach is broadly similar to that used by CBO in its 

previous report comparing compensation in those sectors, although the analyses differ in several respects.1

Summarizing CBO’s Approach

In both the federal government and the private sector, 

compensation may depend on a number of factors that 

can be observed and measured. In its analysis, CBO 

adjusted for differences between federal and private-sector 

workers in the following factors: education, occupation, 

years of work experience, geographic location (region of 

the country and urban or rural location), size of employer, 

veteran status, and certain demographic characteristics 

(age, sex, race, ethnicity, marital status, immigration 

status, and citizenship).2 Those adjustments produced a 

comparison between the average compensation of federal 

workers and the average compensation of private-sector 

workers who have certain similar observable attributes. 

Because education plays an especially important role, 

1. See Congressional Budget Office, Comparing the Compensation 

of Federal and Private-Sector Employees (January 2012), 

www.cbo.gov/publication/42921. For more details about the 

methodology underlying both this report and that one, see Justin 

Falk, Comparing Wages in the Federal Government and the Private 

Sector, Working Paper 2012-3 (Congressional Budget Office, 

January 2012), www.cbo.gov/publication/42922, and Comparing 

Benefits and Total Compensation in the Federal Government and 

the Private Sector, Working Paper 2012-4 (Congressional Budget 

Office, January 2012), www.cbo.gov/publication/42923.

2. Such adjustments do not completely account for differences 

in occupations and work experience between federal and 

private-sector employees. Occupations are classified in 24 broad 

categories, which in some instances group together federal 

and private-sector workers who do not perform similar duties. 

Experience is measured as the length of time that workers have 

been in the labor force, based on their age and education. That 

measure does not capture actual experience for people who may 

have been unemployed or out of the labor force, however, nor

does it capture the relevance or quality of their work experience. 

CBO reported its results for five levels of educational 

attainment: high school diploma or less, some college, 

bachelor’s degree, master’s degree, and doctorate or professional degree.

CBO analyzed hourly wages in the federal government 

and the private sector using data for 2011 through 

2015 from the Current Population Survey (CPS). That 

survey of households by the Bureau of Labor Statistics 

(BLS) and the Census Bureau contains a large amount of 

information about the attributes and earnings (including 

salary, overtime pay, tips, commissions, and bonuses) 

of roughly 7,000 federal and 160,000 private-sector 

workers over that period. CBO calculated hourly wages 

by dividing workers’ annual earnings by the number 

of hours they say they worked. CBO limited the CPS 

sample to full-time, full-year workers, who accounted 

for about 94 percent of the total hours worked by federal employees over the 2011–2015 period. CBO also 

analyzed how the cost to employers of providing benefits 

differed in the federal government and the private sector. 

As with wages, differences in benefits can stem from disparities in various factors, including attributes of employees that can be measured easily, attributes that cannot be 

measured easily, and the approaches used to determine 

compensation in the two sectors. The CPS does not 

include comprehensive information about employees’ 

benefits, so for that comparison, CBO supplemented the 

CPS with data on the benefits of private-sector workers 

from BLS’s National Compensation Survey and with 

data on the benefits of federal workers maintained by the 

Office of Personnel Management (OPM).3

The BLS and OPM data were used to calculate the 

relationship in each sector between an employee’s wages 

and the benefits that he or she receives. CBO then used 

those relationships to estimate benefits for the workers 

surveyed in the CPS, on the basis of their wages and 

sector of employment. Using those estimates, CBO 

3. OPM provided data from the Enterprise Human Resources 

Integration Data Warehouse Statistical Data Mart, formerly 

known as the Central Personnel Data File.
22 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

compared the average cost of benefits for federal and 

private-sector workers at the five levels of educational 

attainment described above, with adjustments for the 

other factors measured in the CPS (such as occupation, 

years of work experience, demographic traits, location, 

and size of employer). That approach allowed CBO to 

compare the benefits of federal employees with those 

of private-sector employees who have certain similar 

job-related attributes—something not possible with the 

data that other researchers have used for comparisons of 

benefits. However, CBO’s estimates of the differences in 

benefits between the two sectors are more uncertain than 

its estimates of the differences in wages. That greater 

uncertainty reflects the complexity of measuring benefits 

and the extrapolations that were necessary to integrate 

the CPS, BLS, and OPM data sets.

Differences Between the Approach in This 

Report and That Used in the 2012 Report

For this report, CBO adjusted the distribution of 

earnings of federal workers as reported in the CPS to 

match the distribution of earnings of federal workers 

as reported to OPM by federal agencies. The number 

of federal employees is about 40 percent higher in the 

survey data from CPS than in the data from OPM. 

Moreover, the overestimate of federal workers in the CPS 

is based largely on an overestimate of the share of federal 

workers with relatively low wages. For instance, a relatively large share of federal employees reported working 

in occupations that data from OPM indicate are uncommon among federal employees, such as teacher, child care 

worker, and cashier. As a result, relying solely on the CPS 

data would underestimate average wages among federal 

employees. To correct for that, CBO used a statistical 

matching technique to adjust the distribution of earnings 

for federal workers in the CPS to match the distribution 

of earnings for federal workers in the data from OPM.4

Those adjustments had the effect of reducing the number of federal workers in the CPS with low wages.

4. More specifically, CBO adjusted the relative weights placed 

on those workers using methods from Nicole Fortin, Thomas 

Lemieux, and Sergio Firpo, “Decomposition Methods in 

Economics,” in Orley Ashenfelter and David Card, eds., 

Handbook of Labor Economics, Volume 4A (Elsevier, 2011), 

pp. 1–101, http://tinyurl.com/ja9gdjy. In addition to adjusting 

its analysis to match the distribution of earnings, CBO also 

matched the distributions of age, sex, race, and ethnicity.

Because many people who report federal employment 

and low wages in the CPS also report relatively low 

educational attainment and lower-than-average wages 

for their educational group, the adjustment substantially 

increased the average wages of federal workers with 

less than a bachelor’s degree. To a lesser extent, it also 

increased CBO’s estimates of the average wages of their 

private-sector counterparts, because fewer private-sector 

workers in low-wage occupations are included as counterparts. Still, the adjustment substantially increased the 

extent to which the average wages of federal workers with 

less than a bachelor’s degree exceeded the average of their 

private-sector counterparts. However, the adjustment 

had little effect on the comparison of overall averages, 

because it also reduced the share of federal workers at 

lower levels of education, thus decreasing the influence 

of those workers on the overall average from what it 

otherwise would have been.

CBO also adjusted for veteran status when comparing 

wages, benefits, and total compensation of federal and 

private-sector workers for this analysis. (By contrast, the 

agency did not do so for the analysis covering the 2005–

2010 period). That adjustment was similar to the way 

in which the agency adjusted for other characteristics of 

workers, such as occupation and sex. In 2015, 22 percent 

of federal civilian employees were veterans, based on data 

from the CPS, compared with 5 percent of employees 

in the private sector. (Data from OPM indicate that an 

even larger share of federal workers—about 30 percent 

in 2015—were veterans, but CBO used data from the 

CPS because it measures veteran status consistently in 

both sectors.) However, the adjustment for veteran status 

had little effect on the pay comparisons. That is because 

veterans’ wages are similar to the wages of other workers 

after adjustments are made for differences in the other 

factors incorporated into the analysis.
Wages and Benefits for Federal Employees

A P P E N D I X 

B

The federal government compensates its 

employees with a mix of wages and benefits. 

Wages, which are mostly determined by various salary schedules, depend on an employee’s 

job description, qualifications, experience, performance, 

location, and other factors. Some benefits (such as pensions and paid leave) are determined mainly by formulas 

that depend on a worker’s annual salary or hourly wage, 

his or her years of service, and legal requirements that 

affect all employees in the public and private sectors; 

other benefits (such as health insurance) are largely 

unrelated to those factors.

The salary schedules and formulas that govern federal 

employees stem from classifications, guidelines, and laws 

enacted over many decades, including the Classification 

Act of 1949 and the Federal Employees Pay Comparability Act of 1990. The latter law states that federal salaries 

should be set at rates that are comparable with nonfederal 

salaries “for the same levels of work within the same local 

pay area.”1

Wages

For most federal employees, salaries or wages are determined by their rank in a pay schedule.2

 In particular, 

the salaries of about 64 percent of federal workers are 

based on the General Schedule, which consists of 15 

pay grades—each with 10 pay levels, or “steps”—for 46 

metropolitan areas. Cash compensation for other federal 

employees is based on various other pay systems. Some 

of those systems—such as the Federal Wage System, 

which covers about 9 percent of federal workers—are 

similar to the General Schedule; other systems differ 

more. As of 2010, the most recent year for which the 

Office of Personnel Management provided tabulations 

for performance-based pay systems, about 12 percent 

1. Federal Employees Pay Comparability Act of 1990, 5 U.S.C. 

§5301 (2012).

2. Federal workers are also eligible for cash awards and retention 

allowances, but such incentives typically account for a small 

portion of their total wages.

of federal employees were governed by such systems. 

Those systems typically give managers more discretion in 

setting an employee’s wages within the confines of ranges 

that are determined by the employee’s job classification.3

The salary for any particular worker covered by a federal 

pay schedule depends on the characteristics of the job 

and of the person filling it. Job classifications—such as 

statistician or nurse—are linked to different grade levels, 

so wages and salaries are determined by the requirements 

of the job. Employees’ qualifications and experience 

also influence their rank in a pay schedule. Over time, 

individual employees routinely move to higher levels of 

pay by advancing through their pay schedule on the basis 

of their experience and performance.4 Employees who 

perform well can advance more quickly than average, 

and employees who perform poorly can be denied such 

step increases, but almost all federal workers compensated under the General Schedule move to progressively 

higher grades as they are eligible. That system ensures 

that employees in the same type of job who have similar 

tenure receive similar pay, but it limits managers’ flexibility to reward workers who perform well or to constrain 

the salaries of workers who perform poorly.

Benefits

Like many employers in the private sector, the federal 

government also compensates its workers with noncash 

benefits, such as retirement accounts, partial payment 

of health insurance premiums, paid leave, and other 

benefits.

3. Some federal pay systems, such as the Senior Biomedical 

Research Service, are designed to pay market-based rates to highly 

educated workers. Those systems apply to a small fraction of the 

federal workforce.

4. Federal pay systems are discussed in more detail in Congressional 

Budget Office, Characteristics and Pay of Federal Civilian 

Employees (March 2007), www.cbo.gov/publication/18433.
24 Comparing the Compensation of Federal and Private-Sector Employees, 2011 to 2015 APRIL 2017

Retirement

Almost all federal workers participate in the Federal 

Employees Retirement System (FERS) or the Civil 

Service Retirement System (CSRS). In this analysis, 

estimates of the cost of federal pension benefits focus on 

FERS, which covers about 94 percent of current federal employees who work full time and almost all such 

employees newly hired by the government. People who 

began federal employment after 1983 are not eligible 

to participate in CSRS, which was replaced by FERS. 

Under both systems, the government provides most of 

the funding for an employee’s pension, and the amount 

of the pension depends on the employee’s salary, length 

of federal service, and age at retirement. Federal workers 

may also participate in the Thrift Savings Plan (TSP), 

which is similar to 401(k) accounts in the private sector. 

For employees subject to FERS, the federal government 

matches a portion of their contributions to their TSP 

accounts. (For workers subject to CSRS, those contributions are not matched by the government.)

Health Insurance 

Most federal workers are eligible to buy health insurance through the Federal Employees Health Benefits 

program, and many federal retirees are eligible to retain 

that coverage in retirement. On average, the government 

pays about 70 percent of the cost of health insurance 

premiums through that program.5

5. Specifically, the government pays the lesser of 72 percent of the 

weighted average premium for all plans or 75 percent of the 

premium for the plan an enrollee chooses.

Paid Leave 

Most federal employees receive 10 paid holidays a year; 

they also earn between 13 and 26 days of annual leave 

(vacation leave) per year depending on their length of 

federal service. In addition, most federal workers are 

eligible for up to 13 days of paid sick leave annually.

Other Benefits 

The federal government, like private-sector employers, is 

required to pay for certain legally mandated benefits for its 

current workers. Both the government and its employees 

pay payroll taxes for Social Security, Medicare, workers’ 

compensation, and unemployment benefits. (Many federal 

employees who participate in CSRS do not accrue Social 

Security benefits and do not pay Social Security payroll 

taxes; likewise, the federal government does not pay Social 

Security taxes for those workers.)

The federal government and some employers in the 

private sector also provide other types of benefits, such 

as subsidies for employees’ education or commuting 

expenses. Moreover, there are other benefits that only 

the federal government provides, such as above-market 

rate of return the federal government offers its employees 

through the G Fund (one of the investment options in 

the federal retirement plan), and some benefits that are 

primarily provided by private-sector employers, such as 

stock options. Those benefits are typically less costly than 

retirement benefits, health insurance, and paid leave. 

(Estimating the cost of those smaller benefits is beyond 

the scope of this analysis.)
List of Tables and Figures

Tables

1. Characteristics of the Federal and Private-Sector Workforces 8

2. Federal and Private-Sector Wages, by Workers’ Educational Attainment 11

3. Federal and Private-Sector Benefits, by Workers’ Educational Attainment 14

4. Federal and Private-Sector Total Compensation, by Workers’ Educational Attainment 16

5. Percentage Differences Between Federal and Private-Sector Compensation, 

by Analytic Period 17

Figures

1. Trends in Government and Private-Sector Employment Since 1985 6

2. Federal Civilian Employment, by Branch and Department, 2015 7

3. Differences in Education and Occupation Between the Federal and 

Private-Sector Workforces 9

4. Dispersion of Federal and Private-Sector Wages, by Workers’ Educational Attainment 12

5. Changes in Average Salaries, by Sector 18

6. Changes in Average Salaries for Federal Employees, Including Changes 

Based on Merit and Seniority 19

S-1. Differences in Average Hourly Compensation Between Federal and 

Private-Sector Workers, by Educational Attainment 3

S-1. Average Compensation of Federal and Private-Sector Workers, 

by Educational Attainment 2
About This Document

This Congressional Budget Office report was prepared at the request of the Chairman of the 

House Committee on Oversight and Government Reform. In keeping with CBO’s mandate to 

provide objective, impartial analysis, this report makes no recommendations.

Justin Falk prepared the report with guidance from Joseph Kile and Molly Dahl. Robert Arnold, 

Elizabeth Bass, Jordan Berne, Holly Boras, William Carrington, Heidi Golding, Jeffrey Holland, 

Nadia Karamcheva, Kim Kowalewski, Amber Marcellino, Carla Tighe Murray, Daniel Ready, 

Felix Reichling, Chayim Rosito, Stephanie Ruiz, John Seliski, and David Torregrosa provided 

comments. 

Sergio Firpo of the Insper Institute of Education and Research and Nicole Fortin of the 

University of British Columbia also commented. The Bureau of Labor Statistics and the Office 

of Personnel Management provided data. (The assistance of external reviewers and those agencies 

implies no responsibility for the final product, which rests solely with CBO.)

Wendy Edelberg, Mark Hadley, and Jeffrey Kling reviewed the report, Christine Bogusz edited it, 

and Jorge Salazar prepared it for publication. An electronic version is available on CBO’s website 

(www.cbo.gov/publication/52637).

Keith Hall

Director

April 2017