Congress of the United States

Congressional Budget Office

Washington, D.C.

BACKGROUND PAPER NO 19 The Federal Government's

Pay Systems:

Adjustment Procedures and

Impacts of Proposed Changes

February 1977

THE FEDERAL GOVERNMENT'S PAY SYSTEMS

ADJUSTMENT PROCEDURES AND

IMPACTS OF PROPOSED CHANGES

The Congress of the United States

Congressional Budget Office

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402 - Price $1.10
U1L_

GENERAL NOTES

The principal data source for this paper is the fiscal

year 1976 Work Year and Personnel Costs Report published

December 1, 1976, by the Office of Management and Budget

(in compliance with OMB Circular A-93). Unless otherwise

indicated, all employment and cost figures pertain to

civilian and military employment of the executive branch

of the federal government and include the U.S. Postal

Service. Costs include appropriate allowances for the

estimated effect of manpower reductions projected in the

Department of Defense (uniformed military) and U.S. Postal

Service and are in current dollars.

Details in the text and tables of this paper may not

add to totals because of rounding.

11
PREFACE

The Congressional Budget Office's first background

paper on federal pay appeared in March 1976. It dealt

primarily with the budgetary implications of alternative

approaches to setting pay for the federal civilian work

force. In the intervening period we have received

numerous questions on the "mechanics" of federal pay

systems and the budgetary impact of changes recommended

by the President's Panel on Federal Compensation

(Rockefeller Panel).

This background paper provides a more detailed

discussion of the procedures for adjusting pay and

generally updates much of the material in the earlier

paper. We hope this treatment of the subject will prove

useful to the Members of Congress and their staff

representatives who are concerned with federal pay systems.

The paper was prepared by David M. Delquadro of the

Management Programs Division of the Congressional Budget

Office, under the supervision of Howard M. Messner and

Seymour D. Greenstone. It was prepared for publication

under the supervision of Johanna Zacharias. Betty Ripple

typed the manuscript.

Alice M. Rivlin

Director

January 1977

iii

TABLE OF CONTENTS

Page

General Notes ii

Preface iii

Summary xi

Chapter I. Introduction—Major Pay Systems

and Approaches to Setting Pay 1

Chapter II: The Current System for

Determining General Schedule (GS) Pay 7

Data Collection 7

Development of Pay Rates 11

Chapter III: Report of the President's Panel

on Federal Compensation (December 1975) and

its Potential Impact on the Current System ... . 17

Appendix A. Job List for the PATC Survey 25

Appendix B. PATC Salary Data Weighted by

Composition of the Federal Work Force 31

v
.._ IILJUJL.
TABLES

1. Five-Year Cost Projections for Executive Branch

Payroll and Benefits, Fiscal Years, Dollars

in Billions 5

2. Distribution of Executive Branch Employment by

Pay Plan, Numbers in Thousands 6

3. PATC Survey Criteria—Size of Industry 8

4. Computation of General Schedule Pay Rates,

Fiscal Year 1977 15

5. Cost Impact on Executive Branch Payroll of the

Administrative Changes to the Comparability

Process 18

6. Five-Year Cost Impact of the Administrative

Changes to the Comparability Process,

Dollars in Billions 19

7. Occupational Distribution of General Schedule

Employees, Dollars in Billions 20

8. Pay Adjustments Accompanying the Replacement

of the General Schedule, Dollars in Millions . 22

9. Five-Year Impact of Replacing the General

Schedule, Dollars in Millions 22

10. Five-Year Cost Impact of Recommendations Two

and Three, Dollars in Millions 23

vn

FIGURES

Page

1. Distribution of Executive Branch Payroll and

Benefit Costs by Major Pay Systems,

Dollars in Billions 4

2. GS Percentage Increases for the "SGH" and

"Standard" Curves 13

IX

82-861 O - 77 - 2

SUMMARY

The federal government's annual pay and benefits to

its executive branch civilian and military employees will

cost approximately $71.8 billion in fiscal year 1977.

Between fiscal years 1977 and 1982, compensation to federal

employees will increase an estimated $22.7 billion.

Obviously, any adjustments in the annual rates of pay will

have substantial budgetary impact.

The principal criterion for adjusting federal pay,

regardless of the pay system or the manner of adjustment,

is comparability with the private sector.

In terms of impact on the federal budget, the annual

adjustment of the General Schedule (GS) pay system is the

most significant. The GS system determines the pay rates

for about 53 percent of all civilian employees and directly

affects the 2 million uniformed military. The Federal

Wage (Blue-Collar) and Postal Service are the two other

major federal pay systems. They represent 19 percent and

24 percent of the total civilian executive branch work

force, respectively. Federal Wage rates are based on

prevailing local wage norms. Postal pay is set by

collective bargaining between postal management and the

postal unions.

THE CURRENT SYSTEM FOR ADJUSTING GENERAL SCHEDULE PAY

There are two steps in the development of General

Schedule pay adjustments: (1) the collection of national

salary data by the Bureau of Labor Statistics, and (2)

the development of new pay rates by the Civil Service

Commission and the Office of Management and Budget. The

salary data collected by BLS is published as the National

Survey of Professional, Administrative, Technical, and

Clerical pay (PATC Survey).

XI

TTT"
The occupational coverage and design of the PATC

survey is the responsibility of OMB/CSC. The BLS

advises only on the feasibility aspects of proposed

survey changes. After the private sector salary data

is received by CSC, a pay line or curve linking the

salary levels is constructed. A similar pay line is

developed linking the existing General Schedule salaries.

The new GS rates are then determined by comparing the

difference between the private sector and GS pay lines.

The subsequent adjustment is intended to result in

federal pay rates comparable to those of the private

sector (external pay alignment) while maintaining work

and performance distinctions between federal employees

(internal alignment). The annual adjustment to GS pay

rates is based on comparability; it is not a cost-ofliving adjustment.

REVISING THE CURRENT PROCESS

Changes to the existing process for adjusting

General Schedule pay that have been discussed in recent

years usually focus on three or four major structural

reforms. The recent comprehensive review of federal pay

procedures conducted by the President's Panel on Federal

Compensation (Rockefeller Panel) resulted in four

significant proposals that would impact General Schedule

salaries directly.

o The President's agent (OMB/CSC) should continue

its efforts to improve the statistical techniques

used in the white-collar (PATC) survey design

and pay rate determination process.

o The present General Schedule, which covers whitecollar employees, should be replaced by a

Clerical/Technical Service and a Professional/

Administrative/Managerial/Executive Service.

o The Clerical/Technical Service should be paid

local or other geographical rates.

o The principle of comparability should be extended

to include benefits as well as pay.

xii
The administrative changes included in the 1976

pay adjustment were: (1) inclusion of salary data for

secretaries and computer operators, (2) introduction of

weighting to reflect the composition of the federal work

force, and (3) development of a new pay line or curve.

The result of these changes was to reduce the size of

the fiscal year 1977 increase from 10.3 percent under

the previous criteria to 5.17 percent. The cost impact

on the executive branch payroll for fiscal year 1977

was a net reduction of $2.5 billion.

The recommendation to replace the General Schedule

with a Professional/Administrative/Managerial/Executive

Service and a Clerical/Technical Service would place

about 600,000 employees in the former schedule and

about 800,000 in the latter. The potential cost impact

would be a net increase in total payroll costs of $50

million.

The proposal to adjust clerical/technical wages on

a local basis would reduce payroll costs by about $150

million, thus making the net saving from implementing

the two principal legislative recommendations of the

Rockefeller Panel about $100 million.

A total compensation approach, due to the number

of unknown variables, merits further development and

experimentation.

Xlll

TTT'TTir"7"r I""

CHAPTER I INTRODUCTION--MAJOR PAY SYSTEMS

AND APPROACHES TO SETTING PAY

There are four major federal pay systems: (1) the

General Schedule, (2) the U.S. Postal Service, (3) the

Federal Wage, and (4) the Uniformed Military. I/ These

four systems represent about 96 percent of all federal

civilian and military employees. Payroll costs and

benefits for the four major pay systems are estimated

to be $69 billion in fiscal year 1977. Total payroll

and benefits for all military and executive branch

employees will total $71.8 billion. The basic approaches

to adjusting pay in the federal government are determinations based on national surveys, collective bargaining,

prevailing wages in localities, and linkage of rate

changes in one system to those in another. In all cases,

the recurring theme is comparability with private sector

pay.

The General Schedule (GS) is the basic pay system

for 1.4 million federal white-collar employees, or about

one-half of the civilian employees in the federal government. The payroll costs and associated benefits of these

employees will total $25 billion for 1977. The General

Schedule is composed of 18 grades or levels of work and

is nationwide in its applicability.

The General Schedule salary system was instituted

by statute in 1949 and is currently maintained on the basis

of comparability with private enterprise rates. Pay

adjustments occur on an annual basis and become effective

in October, the first month of the fiscal year. Changes

in benefits other than pay are determined independently.

Other systems that will be discussed include the Foreign

Service system, the Physicians, Dentists, and Nurses of

the Veterans Administration, and the Executive Schedule.
The U.S. Postal Service, prior to 19'70, was linked

to the General Schedule for pay setting. Now approximately 80 percent of its 684,000 employees have their

pay rates established through collective bargaining

between Postal Service management and employee unions.

The bargaining is conducted in accordance with the

provisions of the Postal Reorganization Act of 1970.

This Act requires that compensation and benefits (a

"total compensation" approach) for all postal employees

be maintained on a standard of comparability with the

private sector for commensurate levels of work. The

current contract term is two years and provides for

cost-of-living adjustments (based on changes in the

Consumer Price Index) as well as periodic changes in

base pay. The 1977 Postal Service payroll is approximately $11.7 billion.

The Federal^ Wage or "Blue-Collar" System represents

about 524,000 trade, craft, and labor employees and a

1977 payroll of about $8.4 billion. Pay adjustments

are based on prevailing local wage norms; each local

wage area adjusts pay once a year but at different times.

About 60 percent of all increases occur during the first

six months of the fiscal year.

The Uniformed Military System's annual pay adjustment is "linked" to that of the General Schedule and

equal to the average percentage adjustment received by

GS employees. Thus, military personnel in all pay grades

receive a constant percentage increase—even when GS

adjustments vary by grade, as they did in October 1976.

Since 1974, adjustments in military pay have had an equal

and across-the-board impact on basic pay and quarters

and food allowances. However, in 1976 Congress granted

the President authority to allocate up to 25 percent of

the increase in basic pay to allowances for quarters or

food. As a result, the October 1976 basic pay increase

was reduced from 4.83 percent to 4.52 percent. The

remaining portion of the pay adjustment was allocated to

food and quarters allowances. The 2 million servicemen

represent an annual 1977 payroll of $23.6 billion.
Civilian Pay Systems linked to the General Schedule

include the Foreign Service, Veterans Administration

medical, Energy Research and Development Administration,

and minor elements of several other agencies. These

systems represent about 68,500 employees and 1977 payroll

costs and benefits of $1.9 billion.

These pay schedules are linked to the annual rate

adjustment process of the General Schedule by identification of two or more work levels and their equivalent

GS grades. Linkage points are determined by job evaluation comparisons. For example, the Foreign Service

FSO-4 is "linked" to GS-13, FSO-8 to GS-7, and FSO-10

to GS-4. Similarly, for the Veterans Administration

schedule, the directors are linked to GS-16, associates

to GS-11, and junior nurses to GS-6. Rates for the

remaining Foreign Service and VA work levels are then

extrapolated, based on the internal structure of the

respective pay schedules.

The Executive Schedule includes about 860 senior

officials who serve at the pleasure of the President

and have an annual payroll of approximately $37.2 million.

The schedule is composed of five levels that determine

pay for secretaries of executive departments and heads

of independent agencies, principal deputies, and assistants. Historically, the Executive Schedule has also

determined the compensation rate for members of Congress,

who have been tied to Executive level II. Each level is

compensated at a single annual rate subject to review

and adjustment once every four years by a commission

established for this purpose. The first quadrennial

review was conducted in 1968 and, in 1969, increases

suggested by the review were enacted. The recommendations

of the 1972 review were rejected by the Congress. The

recommendations of the 1976 Commission were considered

by the President and provided the basis for his recommendations concerning executive pay. These recommendations

were transmitted to the Congress in January 1977, as part

of the fiscal year 1978 budget.

82-861 O - 77 - 3
Figure 1.

Distribution off Executive Branch Payroll

and Benefit Costs by Major Pay Systems

Dollars in Billions

Other represents:

2.6% Civilian linked to

General Schedule

" 1.4% Miscellaneous

(includes Executive

Schedule costs of

$37.2 million)

4.0%

$71.8 Billion Total
COST PROJECTIONS UNDER CURRENT PAY SYSTEMS

The cost of executive branch pay and benefits between

fiscal years 1978 and 1982 is estimated to increase by

$23 billion beyond the fiscal year 1977 total of $71.8

billion.

TABLE 1. FIVE-YEAR COST PROJECTIONS FOR EXECUTIVE BRANCH

PAYROLL AND BENEFITS, FISCAL YEARS, DOLLARS IN

BILLIONS

Pay Plans 1977 1978 1979 1980 1981 1982

General Schedule

Linked to General

Schedule

Uniformed Military

U.S. Postal

Wage Board

Miscellaneous

Total

$25.

1.

23.

11.

8.

1.

71.

2

9

6

7

4

0

8

$26.

2.

25.

12.

8.

1.

75.

7

0

0

3

6

1

7

$28

2

26

13

9

1

80

.3

.1

.4

.2

.2

.2

.4

$29.

2.

27.

14.

9.

1.

84.

9

2

8

1

7

2

9

$31.

2.

29.

15.

10.

1.

89.

5

3

2

0

2

3

5

$33.1

2.5

30.6

16.1

10.8

1.4

94.5

These projections are based on two assumptions: (1)

continuation of the current levels of employment in the

executive branch (with the exception of the U.S. Postal

Service and uniformed military), and (2) pay adjustments

on the basis of comparability with the private sector.
TABLE 2. DISTRIBUTION OF EXECUTIVE BRANCH EMPLOYMENT BY

PAY PLAN, NUMBERS IN THOUSANDS

Pay Plan

Total

Employment DOD

Civilian

Agencies

General Schedule

U.S. Postal

Wage Board

Other Civilian Systems

Subtotal

Percentage

Uniformed Military

Total

Percentage

1,404

684

524

171

2,783

100%

2,128

4,911

100%

607

394

23

1,024

36. 8%

2,088

3,112

63.4%

797

684

130

148

1,759

63.2%

40

1,799

36.6%

In terms of budgetary impact, the General Schedule

is the most significant pay system, directly affecting 1.4

million white-collar (GS) employees and, through linkage,

all the military and over half of the remaining civilian

employees—excluding Wage Board and Postal. Approximately

75 percent of the 4.9 million civilian and military employees

in the executive branch are affected by GS rate adjustments.

Because of the predominant influence of the General Schedule

on federal pay, the following discussion will consider the

process involved in determining the annual pay adjustment

under the General Schedule and the potential impact of

major changes to the system.

6
CHAPTER II THE CURRENT SYSTEM FOR DETERMINING

GENERAL SCHEDULE (GS) PAY

Pay and benefits for GS employees are determined

separately. Benefits, such as leave and retirement, are

determined through enactment of separate legislation on

an ad hoc basis. Pay rates are adjusted annually under

policies and procedures established by the Federal Pay

Comparability Act of 1970. Although the current system

for adjusting pay rates is relatively new, the comparability principle on which it is based goes back many

years. Broadly defined, "comparability" means equal pay

for substantially equal work, both within the federal

government (internal alignment) and in comparison with

equivalent jobs in the private sector (external alignment)

Specifically, internal alignment requires pay rates that

reflect work and performance distinctions among federal

employees; external alignment requires that federal

salaries be commensurate with private industry pay for

the same level of work. The system by which this is

accomplished is known as the "comparability process."

DATA COLLECTION

As a first step in the comparability process, the

Bureau of Labor Statistics conducts a National Survey of

Professional, Administrative, Technical, and Clerical

(PATC) Pay. This is an annual survey required by section

5301 of Title 5 of the United States Code, and was

designed specifically for the comparability process. The

first survey was conducted in 1960 and was based on data

collected over a six-month period (January-June). Since

then, changes in the design of the survey—i.e., the

determination of the industrial, geographic, establishment

size, and occupational coverages—have been the responsibility of the Office of Management and Budget and the

Civil Service Commission. The Bureau of Labor Statistics
provides advice to OMB/CSC concerning the feasibility of

proposed survey changes, and it is still responsible for

the conduct of the PATC survey and collection of data.

Geographic Coverage

The PATC survey covers metropolitan and nonmetropolitan areas of the United States, excluding Alaska

and Hawaii. Federal employees in Alaska and Hawaii

receive pay allowances to compensate for differing

conditions, but no other locality or geographic pay

differentials exist. The PATC sample is designed to

support national pay estimates for determination of a

servicewide General (salary) Schedule.

Industry and Size-of-Establishment Coverage

The survey covers all industry classes. But it looks

only at establishments that employ sufficient numbers in

the occupations surveyed to materially influence the

national estimates. The coverage is summarized as follows

TABLE 3. PATC SURVEY CRITERIA—SIZE OF INDUSTRY

Industry Division

Minimum

Size-of-Establishment

Manufacturing

Public Utilities a./

Wholesale Trade

Retail Trade

Finance, Insurance,

and Real Estate

Services b/

250 employees

100

100

250

100

100

a./ Transportation, commu

sanitary services.

nication, gas, electric, and

b_/ Engineering and architectural

cially operated research

laboratories only.

services, and commer-

, development, and testing

8
The sectors not covered by the survey include governments, agriculture, mining, contract construction, and

most of the service industries. Governments are excluded

by the statutory principle of comparability with rates

paid in "private enterprise." Other classes are excluded

because working conditions or pay practices are so

different from the federal government's as to materially

affect the meaning of the rates paid.

The minimum size-of-establishment cutoff varies

from one industry to another because the size of the

professional, administrative, technical, and clerical

(white-collar) work force varies from industry to industry,

In the finance industry, for instance, nearly the entire

work force is engaged in the white-collar occupational

universe covered by the survey. In manufacturing and

retail trade, however, 20 to 25 percent of the work force

consists of white-collar workers. Thus, the graduated

size criterion excludes from the survey establishments

not likely to have a white-collar work force of 50 to 60

employees.

Jobs and Work Levels

Currently there are 19 jobs (such as chemist, clerktypist, buyer, etc.) and 80 work levels (e.g., accountant

I, II, III, IV) included in the PATC survey. A staff

technical paper recently completed by OMB/CSC recommended

a list of 28 jobs and 135 work levels. The new list does

not include five jobs currently surveyed—accounting clerks,

keypunch operators, keypunch supervisors, drafters, and

job analysts. These five jobs represent 15 work levels.

The rationale for excluding these jobs is their relative

lack of numerical significance. The recommended job list

would result in a significant improvement over current

job selection in terms of representation of the federal

work force. The current list covers about 25 percent of

General Schedule employees; adopting the new list would

expand coverage to about 45 percent. (See Appendix A.)

Occupational Coverage

An important question to be resolved in determining

pay is "which and how many?" jobs should represent given

9

nnr~
work levels in comparing federal and 'private enterprise

pay. While standards have been established to determine

which jobs qualify for inclusion in the PATC survey, _!/

there are no criteria for selecting the number and mix

of the eligible matches. The lack of such criteria allows

considerable latitude in selection and produces results

which are vulnerable from a statistical standpoint.

The lack of criteria for selecting the number and

mix of jobs and work levels is particularly critical in

those grades where there are more than two PATC occupational categories. 2_f For example, the 1975 PATC survey

included nine job matches at the GS-5 work level—four

professional, three technical, one clerical, and one

administrative. However, of the 153,712 federal employees

at the GS-5 level in March 1975, only 2.6 percent (3,954)

were in professional jobs, while 72.2 percent (110,971)

were employed in clerical positions. The professional

category was represented by four job matches; thus, 51

percent of all professional jobs at the GS-5 level were

represented in the survey. By contrast, the clerical

positions were represented by just one job match; less

than 5 percent of all GS-5 clerical jobs were represented.

The addition in 1976 of salary data for the job of secretary greatly increased the clerical job representation

at GS-5.

Timing

Since 1972, a March payroll period has been used as

the average reference period, with some survey data

collected both prior and subsequent to this date. The

\_l The criteria for including a job in the PATC survey

are that the job: (1) consists of work essentially

the same in private enterprise as in the government,

(2) is numerically important in both sectors, (3) is

surveyable by the job matching technique, (4) is covered

by a published Civil Service Commission classification

standard, and (5) exists across industry lines.

2_/ PATC categories are professional, administrative,

technical, and clerical.

10
lag between the March reference date and the October

effective date has been the subject of several discussions between OMB/CSC and representatives of the Federal

Employees Pay Council. BLS is unable to further reduce

the time necessary to complete the PATC survey. OMB/CSC

has rejected an alternative suggestion involving a

statistical adjustment of the pay data to produce an

estimate or projection of its movement after March. They

feel federal pay adjustments must be based on factual

data, not estimates or projections.

DEVELOPMENT OF PAY RATES

After the PATC survey data are collected, staff of

the Civil Service Commission compare the private enterprise

pay rates to the General Schedule salaries in order to

determine the size of the adjustment. Each of the work

levels for which salary data were collected corresponds

to a General Schedule grade. 3/

Weighting

Prior to 1976, each work level at each grade had

an identical impact on determining the private enterprise

pay rates used as reference points. In 1976, private

enterprise salaries were weighted to reflect the composition of the federal GS work force. This new procedure

weights each grade level for total GS employment at that

grade, and it also partitions (stratifies) the work levels

by professional, administrative, technical, and clerical

occupations. In 1976, the private enterprise weighted

grade average reflects both a job weight and a category

weight, rather than the simple arithmetic average used

in prior years. (See Appendix B.)

Although there are 18 grades, salary data for the

"supergrade" work levels (GS-16, 17, and 18) have

not been collected; adjustments for these grades

are extrapolated.

11

82-861 O - 77 - 4
The Pay Line

The pay line can be thought of as a smooth curve

that follows the trends of a salary schedule. Given

the weighted private sector grade averages, a number

of lines can be mathematically constructed to link the

weighted salaries. Regardless of the shape of the

line, however, it must provide a proper balance between

internal and external alignment. The "standard curve,"

which was developed in the 1960s, was in use for several

years. The curve was based on a diminishing (percentage)

intergrade differential, that is, the percentage difference between GS salaries at the lower grades was greater

than the percentage differential at the higher grades.

Since 1970, the difference between GS-1 and GS-3 was

between 27 and 29 percent while the difference between

GS-14 and GS-15 was approximately 16-17 percent.

In 1976, the standard curve was abandoned in favor

of a second-degree curve 4_/ which was fitted to the

weighted private sector salaries by standard regression

(least squares of the logarithms) techniques. According

to OMB/CSC, this curve (arbitrarily named the "SGH Curve")

"produces a better fit to the PATC data and does a better

job of closing the comparability gap, while providing

proper regularity in the pattern of intergrade differentials." 5_/

The SGH curve produced an intergrade difference of

28.7 percent between GS-1 and GS-2, which gradually

diminished to 14.3 percent between GS-14 and GS-15. By

constrast, had the standard curve been used in 1976

4/ The formula for th£ 1976 pay l.ine is represented by:

log Y = a + X log b + X2 log c; where X is equal to

the GS grade level, Y is the value of the pay line,

and a, b, c are constants equal to $5,576.8, $1.410,

and $.9983 respectively.

5_/ 1976 Pay Agent Report.

12
instead of the SGH curve, the intergrade differential

would decline at a slower rate and the difference

between a GS-14 and GS-15 would have been 16.9 instead

of 14.3 percent. As demonstrated in the accompanying

graph, the SGH curve reduced the size of increases for

employees between GS-4 and GS-13.

Figure 2.

GS Percentage Increases for the "SGH'

and "Standard" Curves

1976 Data Base

Percentage Increases

9 11

GS Grade Levels

12 13 14 15

13

'T
GS Reference Points

The last step is the determination of how the private

enterprise pay line will be used to make a pay comparison.

A critical aspect in this determination is the development

of salary reference points for federal employees at grades

GS 1-15. These reference points are based on salaries at

each GS grade and are analogous to the weighted averages

developed for the private enterprise pay lines. The

method for determining the value for these reference

points has been changed.

At the beginning of the pay comparability process

in 1962, step four (the median GS within-grade step) Q/

was considered to be the appropriate reference point.

However, in 1972, the median shifted to step five.

Analysis revealed a shift of relatively few employees

could cause the median to shift again. The upward shift

of the median (reference point) in 1972 would have substantially reduced the size of the pay adjustment, had

not the method been changed.

Currently, GS reference points are calculated using

an average salary basis; i.e., the total dollars paid

employees at a given grade divided by the total number of

employees at that grade. This method recognizes that the

representative step at a given grade reflects differences

in the rate of career progression among employees. In

addition, the method avoids abrupt fluctuations in determining a representative salary level.

(3/ There is a constant dollar differential between adjacent

steps at each GS grade. In order to determine the

salary rates for GS steps 2-10 at any grade, divide the

step one rate by 30 and round to the nearest whole

dollar. This is the dollar differential; i.e., step two

= step one rate + (1) x (dollar differential), step three

= step one + (2) x (dollar differential), etc.

14
Once the average salaries are determined, a pay line

identical in shape to the private sector pay line is

constructed through standard least square regression. The

resulting grade adjustments eliminate the pay gap between

the private sector and General Schedule pay lines. For

example, the difference between the private sector (PATC)

and General Schedule pay line for GS-5 (fiscal year 1977)

was 4.24 percent. The "proposed" GS-5 step one rate of

$9,303 represents a 4.24 percent increase over the "current*

rate of $8,925 (see table 4, overleaf).

The application of the SGH curve in 1976 produced

percentage increases of 4.5 percent at GS-1 step one,

4.2 percent at GS-5 step one (greatest concentration of

employees are at the GS-5 level), and 7.9 percent at GS-15

step one. The overall cost, as a percentage of payroll,

for the 1976 increases was 5.17 percent; the average percentage increase received by employees was 4.83 percent.

Under the standard curve, the overall cost would have been

5.18 percent of payroll, but the distribution would have

been much different (see graph on page 13).

One very important final point should be made. The

annual salary adjustment for federal employees has often

been referred to as a cost-of-living adjustment—it is

not. The annual adjustment reflects changes in productivity, labor supply and demand, organization of labor

markets, as well as the cost of living. It is a comparability adjustment and, theoretically, could result in a

reduction in federal pay.

15
TABLE 4. COMPUTATION OF GENERAL SCHEDULE PAY RATES, FISCAL YEAR 1977

Private Enterprise (PATC) Payline

Grade

GS-1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

PATC

Average

Salaries

$6,186

6,877

8,225

9,494

10,189

10,344

13,513

13,300

16,465

-

19,776

22,708

27,429

32,533

38,696

-

-

-

Intergrade PATC

Differentials Payline

28.

26.

25.

23.

21.

20.

18.

16,

15.

13.

12.

10.

_

45_ 0

. 735 _

04_ 3

,373

-

,725

,100

,496

,914

353

,813

,293

793

$6,352

7,212

8,160

9,201

10,341

11,583

12.931

14,387

15,953

17,631

19,419

23,322

27,636

32,311

37,271

42,419

47,634

52,775

General Schedule Payline

Current

GS

Average

Salaries

$5,658

6,487

7,617

8,881

10,139

11,411

12,429

14,145

15,037

17,092

18,288

21,848

26,009

30,541

35,63_ 6

_

-

Current

Average

Intergrade Salary

Differentials Payline,

28.

26.

24.

23.

21.

19.

17.

16.

14.

12,

10,

9,

_

702

-

,80_ 8

,94_ 2

,103

-

,292

,507

,748

.015

,308

.626

.969

.336

$6,078

6,909

7,823

8,826

9,920

11,109

12,395

13,778

15,258

16,835

18,507

22,117

26,042

30,213

34,536

38,897

43,163

47,192

Increases Needed

Difference

Current Between

Step 1 PATC & CS

Rates Paylines

$5,559

6,296

7,102

7,976

8,925

9,946

11,046

12,222

13,482

14,824

16,255

19,386

22,906

26,861

31,309

36,338

42,066*

48,654*

4.

4.

4.

4.

4.

4.

4 _

4.

4.

4.

4 .

5.

6.

6.

7.

9.

10.

11.

51%

39

30

25

24

27

33

42

55

72

93

45

12

94

92

06

36

83

Proposed

Step 1

Rates

$5,810

6,572

7,408

8,316

9,303

10,370

11,523

12,763

14,097

15,524

17,056

20,442

24,308

28 ,725

33,789

39,629*

46,423*

54,410*

NOTE: All figures rounded independently; actual computations utilized a very high degree of precision.

* Actual rates limited to the rate for level V of the Executive Schedule which, under this adjustment,

would become $39,600. Salary data for grade 10 were considered statistically suspect and not included.
CHAPTER III REPORT OF THE PRESIDENT'S PANEL ON FEDERAL

COMPENSATION (DECEMBER 1975) AND ITS

POTENTIAL IMPACT ON THE CURRENT SYSTEM

The cost magnitude, pervasiveness, and equity issues

raised by General Schedule pay have posed serious questions

about the current system for determining civil service pay.

In recent years, discussions of these questions have

revolved around three or four possible structural changes

in the system. The most recent major review of federal pay

was that of the President's Panel on Federal Compensation.

The primary objective of the Panel was to conduct a comprehensive review of major federal employee compensation

systems in order to recommend changes that would result in

a system "that is fair and equitable both to the employees

and to the public."

PRINCIPAL RECOMMENDATIONS—THEIR IMPACT ON THE CURRENT

SYSTEM AND COST IMPLICATIONS

The Panel's report, submitted in December 1975, made

four recommendations with direct impact on General Schedule

salaries:

(1) The President's agent (OMB/CSC) should continue

its efforts to improve the statistical techniques

used in the white-collar (PATC) survey design and

pay rate determination process.

(2) The present General Schedule, which covers whitecollar employees, should be replaced by a

Clerical/Technical Service and a Professional/

Administrative/Managerial/Executive Service.

(3) The Clerical/Technical Service should be paid

local or other geographical rates.

(4) The principle of comparability should be extended

to include benefits as well as pay.

17
Recommendation Number 1—Administrative Improvements in

the General Schedule Comparability Process

The cost impact of administrative changes can be

significant. For example, changes made in the determination of the GS pay rate adjustments for October 1976

(fiscal year 1977) resulted in a $2.5 billion cost

reduction. The major changes were: (1) inclusion of

salary data for secretaries and computer operators, (2)

introduction of weighting to reflect the composition of

the federal work force, and (3) development of the SGH

pay line.

If the 1976 pay adjustment had been calculated on

the basis of the criteria used for the October 1975

adjustment, the additional cost for pay to General Schedule

employees would have been 10.3 percent of the payroll.

The administrative changes in the number and treatment of

job matches reduced the size of the fiscal year 1977

increase from 10.3 to 5.17 percent. The increase for

military personnel, as a result of being "linked" to

the average percentage increase received by GS employees,

was reduced from 10.3 to 4.83 percent. In addition, the

reallocation of basic pay increases to allowances for

quarters and subsistence produced an October 1976 effective

rate increase of 4.52 percent for military pay.

TABLE 5. COST IMPACT ON EXECUTIVE BRANCH PAYROLL OF THE ADMINISTRATIVE

CHANGES TO THE COMPARABILITY PROCESS

FY 1976 FY 1977 Payroll Cost

Schedule

General Schedule and

Linked Civilian

Uniformed Military

(Linked to GS)

Total

Payroll Base

( Annualized ;

Dollars in

Billions)

$25. 7

22.6

$48.3

October

1975

Criteria

$28.4

24.8

$53.2

October

1976

Criteria

$27.0

23.7

$50.7

Cost

Reduction

$1.

1,

$2.

.3

,2

.5

18
The five year cumulative cost reduction as a result of

the administrative changes will be $15.0 billion.

TABLE 6. FIVE-YEAR COST IMPACT OF THE ADMINISTRATIVE

CHANGES TO THE COMPARABILITY PROCESS,

DOLLARS IN BILLIONS

Pay System 1978 1979 1980 1981 1982

GS and Linked Civilian -$1.4 -$1.5 -$1.6 -$1.6 -$1.8

Uniformed Military -1.3 -1.3 -1.4 -1.5 -1.6

Total Reduction -$2.7 -$2.8 -$3.0 -$3.1 -$3.4

Recommendation Number 2—Replace the General Schedule with

a Professional/Administrative/Managerial/Executive Service

and a Clerical/Technical Service

At present, the General Schedule establishes pay rates

for about 1.4 million white-collar employees in a wide

range of professional, administrative, technical, and

clerical occupations. The 1977 payroll costs and associated benefits for these employees totaled about $25.2

billion.

19
TABLE 7. OCCUPATIONAL DISTRIBUTION OF GENERAL SCHEDULE

EMPLOYEES, DOLLARS IN BILLIONS

Compensation

Employees Cost

Occupation

Professional/

Administrative

Clerical/

Technical

Total

Number

604,500

800,000

1,404,500

% of

Total

43

57

100

Amount

$14.9

10.3

$25.2

% of

Total

59

41

100

The rationale for establishing two separate schedules

to replace the General Schedule is based on pay practices

in the private sector and on what some view as equity

considerations. Specifically, the existing General Schedule

does not provide:

(1) External pay alignment, since in the private

sector, professional pay is based on national

norms while local pay schedules are used for

clerical employees.

(2) Special consideration for entry-level positions

having high promotion potential, especially

professional positions.

(3) The flexibility necessary to balance internal and

external alignment; i.e., equal pay for equal

work both within the government and as compared

to the private sector.

20
All this implies that many of the 800,000 clerical/

technical employees paid under the General Schedule earn

more than their counterparts in the private sector. One

of the claimed objectives of establishing two separate

schedules to replace the General Schedule would be to

bring both professional/administrative and clerical/

technical rates closer to those paid in the private

sector (i.e., salaries of professionals would increase;

those of support positions would decrease).

Potential Cost Impact (3f Replacing the General Schedule

Based on an analysis of Bureau of Labor Statistics

data, _!/ the estimated cost of replacing the General

Schedule with two schedules is about $50 million (see

following table).

!_/ Payroll increases and decreases are based on March 1976

PATC survey data provided by the Bureau of Labor

Statistics. The cost changes were estimated by CBO.

The methodology required development of two GS pay

lines—one of which excluded clerical/technical salary

data, and the second of which excluded professional/

administrative salary data. The cost estimate is the

result of comparing these pay lines with the 1976 pay

line adopted by OMB/CSC.

21
I ___j LJL

TABLE 8. PAY ADJUSTMENTS ACCOMPANYING THE REPLACEMENT

OF THE GENERAL SCHEDULE, DOLLARS IN MILLIONS

Direct Pay Cost

Schedule and Benefits Impact

Professional/Administrative/

Managerial/Executive Service $14,910 $258

Clerical/Technical 10,260 -208

Total $25,170 $50

Implementation of this adjustment could be accomplished

in one step or phased. Replacing the General Schedule would

result in a larger cost base and associated increases in

annual costs. Assuming the adjustment were fully implemented

in 1978, annual GS payroll and benefit costs would increase

about $62 million by 1982.

TABLE 9. FIVE-YEAR IMPACT OF REPLACING THE GENERAL SCHEDULE,

DOLLARS IN MILLIONS

1978 1979 1980 1981 1982

$50 $53 $56 $59 $62

Recommendation Number 3—Salaries for Clerical and Technical

Postions Should be Adjusted on a Geographic Locality Basis

This recommendation is an extension of the one to

redesign the General Schedule. The average salary of

22
clerical workers paid under the General Schedule and living

in metropolitan areas other than Washington, B.C., is 6.6

percent higher than the wages of their counterparts working

for private concerns. _2/ Adjusting all clerical wages

(regardless of geographic location) on a local pay basis

would reduce payroll costs by about $154 million, thus

making the net saving from implementing recommendations

number two and three about $100 million. This estimate is

tenuous, and is based on summary information collected by

the Civil Service Commission for stenographers and typists

in 86 geographically diverse Standard Metropolitan Statistical Areas (SMSAs). 3/

Assuming recommendations two and three were both fully

implemented in fiscal year 1978, the cumulative five-year

cost reduction would be $560 million.

TABLE 10. FIVE-YEAR COST IMPACT OF RECOMMENDATIONS TWO

AND THREE, DOLLARS IN MILLIONS

1978 1979 1980 1981 1982

-$100 -$106 -$112 -$118 -$124

The transition and administrative costs associated with

implementation of local pay would be substantial. The

justification for local pay thus relates more to "good" pay

practices than to savings impact.

2/ Based on the Civil Service Commission staff report

Locality Pay Study of October 1975, and revised

employment figures provided by CSC at the request of CBO,

3^/ Similar information concerning technical employees was

not available. Consequently, the cost reduction assumes

no net change in salaries for technical employees.

23

~IT~
Recommendation Number 4—The Principle of Comparability

Should be Extended to Include Benefits as Well as Pay

This recommendation for a "total compensation"

approach would require a development and testing period

"to determine the manner and extent to which the principle

of comparability can be implemented." 4/

To estimate the potential impact of a total compensation approach on the future level of federal employee

compensation or on the federal budget would require:

o Design of a cost-of-benefit or level-of-benefit

approach for measuring and comparing employee

benefits.

o Development of benefit comparison and linkage

criteria such as industry and occupational coverage,

establishment size, and costs.

The total compensation approach represents the most

far-reaching of the Panel's recommendations in its potential

impact on federal pay. If comparability with the private

sector remains the basis for determining federal pay, the

total compensation approach will merit serious consideration

in the future. However, due to the number of unknown

variables there is need for further development and experimentation with the total compensation approach.

4_/ Report to the President of the President's Panel on

Federal Compensation (December 1975).

24
APPENDIX A JOB LIST FOR THE PATC SURVEY

The following is a list of jobs recommended by the

Office of Management and Budget and the Civil Service

Commission. Additions to the job list currently used

in the PATC Survey are indicated by an asterisk. This

recommended list does not include five jobs currently

surveyed—accounting clerks, keypunch operators, keypunch

supervisors, drafters, and job analysts. These five jobs

represent 15 work levels. The rationale for excluding

these jobs is relative lack of numerical significance.

The recommended job list would result in a significant

improvement over current job selection in terms of

representation of the federal work force. The current

list covers about 25 percent of General Schedule employees;

adopting the new list would expand coverage to about 45

percent.

TABLE A-l.

PATC

Grade and Job Category a/

GS-1

Clerk Typist C

General Clerical and Admin.* C

Mail and File Clerk C

GS-2

Clerk Typist C

General Clerical and Admin.* C

Mail and File Clerk C

a,/ In addition to the standard PATC categories of professional

(P), administrative (A), technical (T), and clerical (C),

the expanded list includes jobs classified as other (0).

25

T"
TABLE A-l (Continued)

GS-3

Clerk Stenographer C

Clerk Typist C

General Clerical and Admin.* C

Guard* 0

Mail and File Clerk C

Nursing Assistant* 0

Supply Clerk and Technician* C

Surveying Technician* 0

GS-4

Clerk Stenographer C

Clerk Typist* C

General Clerical and Admin.* C

Guard* 0

Mail and File Clerk* C

Nursing Assistant* 0

Secretary C

Supply Clerk and Technician* C

Surveying Technician* 0

GS-5

Accountant P

Accounting Technician* T

Auditor P

Buyer A

Chemist P

Clerk Stenographer* C

Computer Operator T

Computer Specialist* A

Engineer P

Engineering Technician T

General Clerical and Admin.* C

Guard* 0

Nursing Assistant* 0

Secretary C

Supply Clerk and Technician* C

Surveying Technician* 0

26
TABLE A-l (Continued)

GS-6

Accounting Technician* T

Computer Operator T

Engineering Technician* T

General Clerical and Admin.* C

Guard* 0

Nursing Assistant* 0

Secretary C

Supply Clerk and Technician* C

Surveying Technician* 0

GS-7

Accountant P

Accounting Technician* T

Auditor P

Buyer A

Chemist P

Computer Operator T

Computer Specialist* A

Engineer P

Engineering Technician T

Equipment Specialist* T

Inventory Manager* A

Mail and File Clerk* C

Nurse* P

Secretary C

Social Insurance Admin.* A

Supply Clerical and Technical* T

GS-8

Accounting Technician* T

Clerk Stenographer* C

Computer Operator T

Engineering Technician* T

Mail and File Clerk* C

Secretary C

27
TABLE A-l (Continued)

GS-9

Accountant P

Accounting Technician* T

Attorney P

Auditor P

Buyer A

Chemist P

Computer Operator T

Computer Specialist* A

Engineer P

Engineering Technician T

Equipment Specialist* T

Inventory Manager* A

Management Analyst* A

Nurse* P

Social Insurance Admin.* A

GS-10

Accounting Technician* T

Computer Operator* T

Engineering Technician* T

Equipment Specialist* T

Social Insurance Admin.* A

GS-11

Accountant P

Attorney P

Auditor P

Buyer A

Chemist P

Computer Operator* T

Computer Specialist* A

Engineer P

Engineering Technician* T

Equipment Specialist* A

Inventory Manager* A

Management Analyst* A

Nurse* P

Personnel Management A

Quality Assurance* A

28
TABLE A-l (Continued)

GS-12

Accountant P

Attorney P

Auditor* P

Buyer* A

Chemist P

Computer Specialist* A

Engineer P

Equipment Specialist* A

Management Analyst* A

Personnel Management A

Quality Assurance* A

GS-13

Accountant P

Attorney P

Auditor* P

Buyer* A

Chemist P

Computer Specialist* A

Engineer P

Management Analyst* A

Personnel Management A

Quality Assurance* A

GS-14

Accountant P

Attorney P

Auditor* P

Buyer* A

Chemist P

Computer Specialist* A

Engineer P

Management Analyst* A

Personnel Management A

Quality Assurance* A

29
TABLE A-l (Continued)

GS-15

Accountant P

Attorney P

Auditor* P

Buyer* A

Chemist P

Computer Specialist* A

Engineer P

Management Analyst* A

Personnel Management A

Quality Assurance* A

30
APPENDIX B PATC SALARY DATA WEIGHTED BY COMPOSITION

OF THE FEDERAL WORK FORCE

Private sector jobs are arranged by work level and

salary, and then weighted to reflect the composition of

the federal work force. Specifically, work levels are

distributed to reflect analogous grades (GS 1-15) in

the General Schedule. Salary averages are first weighted

to reflect the relative importance of work within a

particular PATC occupation or occupational category

(i.e., professional, administrative, technical, and

clerical), and then to reflect the relative importance

of each PATC occupation at a particular grade.

For example: At GS-5 (see data for GS-5 in the

following table), all four PATC occupational categories

are represented. In the clerical occupation, 99 percent

of the clerical employees sampled are Secretary II and

earn on the average $9,641. The remaining 1 percent

are; Keypunch Supervisor II and earn an average of

$12,815. The percentage of employees within a job is

the job weight. The weighted category average of $9,673

is the sum of ($12,815 x .01) plus ($9,641 x .99).

The weighted category average of $9,673 is then

multiplied by the category weight of 66.6 percent.

This is the percentage of all GS-5 employees who are

in the clerical category. The product of ($9,673 x .666)

is then added to similarly derived products for the other

three categories to determine the weighted grade average

of $10,189 for GS-5. That figure becomes the GS reference

point for grade 5.

31
TABLE B-l.

Weighted Weighted

Job Job Category Category Grade

Average Weight a/ Average Weight a/ Average

GS-1

Clerical

File Clerk I $5,875

Messenger 6,676

GS-2

Clerical

File Clerk II 6,637

Keypunch Operator I 7,660

Typist I 6^827

GS-3

Technical

Drafter-Tracer 8,369

Engineering Technician I 9,064

Clerical

Accounting Clerk I 7,636

File Clerk III 8,205

Keypunch Operator II 8,811

Keypunch Supervisor I 9,939

General Stenographer 8,472

Typist II 7,975

GS-4

Technical

Accounting Clerk II 9,652

Drafter I 9,763

Engineering Technician 10,841

Computer Operator I 7,761

Clerical

Accounting Clerk II 9,652

Keypunch Supervisor II 11,470

Secretary I 8,882

Senior Stenographer 9,445

61.2%

38.8

100.0

16.4

9.8

73.8

100.0

25.6

74.4

100.0

1.8

8.6

11.4

7.3

70.8

100.0

34.5

14. 8

$6,186 100.

6,877 100.0

8,886 13.6

$6,186

6,877

,121 86.4

100.0 8^225

100.0

9,884

9,394

20.4

79.6

100.0 9,494

a/ Percentage weights are shown rounded to the nearest 1/10 of a percent and

then forced to total to 100; actual calculations utilized a very high

degree of precision.

b/ Less than 1/10 of 1 percent, but included in the actual calculation.

32
TABLE B-l (Continued)

GS-5

Professional

Accountant I $11,453

Auditor I 11,769

Chemist I 12,473

Engineer I 13,918

Administrative

Buyer I 11,732

Job Analyst I c/

Technical

Buyer I

Computer Operator II

Drafter II

Engineering Technician III

Clerical

Keypunch Supervisor III

Secretary II

GS-6

Technical

Computer Operator III

Clerical

Keypunch Supervisor IV

Secretary III

GS-7

Professional

Accountant II

Auditor II

Chemist II

Engineer II

Administrative

Buyer II

Job Analyst II

Technical

Buyer II

Computer Operator IV

Drafter III

Engineering Technician IV

Clerical

Keypunch Supervisor V

Secretary IV

11,732

8,774

12,029

12,268

12,815

9,641

10,162

14,883

10,413

13,394

13,427

14,077

15,184

14,200

13,559

14,200

11,881

15,288

14,178

c/

11,442"

14.

32.

6.

47.

100.

100.

100.

28.

31.

11.

28

100.

1.

99,

100.

100.

0.

99.

100.

14.

24.

7.

53,

100.

83.

16,

100.

10.

32,

7.

49

100,

100,

100,

.8%

0

. 1

,1

,0 $12,777 2.3%

0

,0 11,732 4.9

,9

.5

,6

,0

,0 10,981 26.2

,0

.0

.0 9,673 66.6

100.0 $10,189

0 10,162 33.2

,5

5

,0 10,435 66.8

100.0 10,344

,9

,3

. 3

.5

,0 14,409 12.1

,3

.7

,0 14,093 19.2

,3

.7

,2

.8

.0 13,509 58.3

.0

.0 11,442 10.4

100.0 13,513

c/ Data for this job did not meet BLS' statistical criteria for publication

in 1976.

33
TABLE B-l (Continued)

GS-8

Technical

Computer Operator V

Clerical

Secretary V

GS-9

Professional

Accountant III

Attorney I

Auditor III

Chemist III

Engineer III

Administrative

Buyer III

Job Analyst III

Technical

Computer Operator VI

Engineering Technician V

GS-11

Professional

Accountant IV

Attorney II

Auditor IV

Chemist IV

Chief Accountant I

Engineer IV

Administrative

Buyer IV

Job Analyst IV

Personnel Director I

GS-12

Professional

Accountant V

Attorney III

Chemist V

Chief Accountant II

Engineer V

$13,523

12,342

15,428

15,413

16,059

16,589

17,482

17,122

16,091

15,038

16,086

18,738

18,667

19,952

20,429

20,460

20,749

20,075

19,142

18,193

23,402

24,205

24,099

22,753

24,082

100.0% $13,523 81.1%

100.0 12,342 18.9

100.0 $13,300

13.7

3.2

28.9

11.1

43.1

100.0 16,624 20.0

80.1

19.9

100.0 16,917 39.3

13.0

87.0

100.0 15,950 40.7

100.0 16,465

7.9

6.2

26.0

7.4

2.0

50.5

100.0 20,225 37.7

48.9

41. 1

10.0

100.0 19,503 62.3

100.0 19,776

5.9

8.5

5. 8

2.6

77.2

100.0 24,019 43.0

Administrative

Personnel Director II 21,720 100.0 21,720 57.0

100.0 22,708

34
TABLE B-l (Continued)

GS-13

Professional

Attorney IV

Chief Accountant III

Chemist VI

Engineer VI

Administrative

Personnel Director III

GS-14

Professional

Attorney V

Chemist VII

Chief Accountant IV

Engineer VII

Administrative

Personnel Director IV

GS-15

Professional

Attorney VI

Chemist VIII

Engineer VIII

$29,828

28,136

28,868

27,737

26,845

36,308

33,559

33,916

30,850

33,060

43,747

40,723

36,236

11.5%

3.2

5.4

79.9

100.0 $28,051 48.4%

100.0 26,845 51.6

100.0 $27,429

17.0

5.3

5.0

72. 7

100.0 32,074 53.5

100.0 33,060 46.5

100.0 32,533

29. 3

5.8

64.9

100.0 38,696 100.0

Administrative

Personnel Director V c:/ -

100.0 38,696

c/ Data for this job did not meet BLS' statistical criteria for publication

in 1976.

35

U. S. GOVERNMENT PRINTING OFFICE : 1977 O - 82-861