Pay system reform: an idea whose time is now

While a two-year pay freeze for federal civilian employees is under way, the debate about whether federal workers are overcompensated continues.

Republicans and conservative think tanks have been especially critical of federal employees’ salaries. In a public opinion poll conducted by the Washington Post last year, 83 percent of Republican respondents said they believed feds get better pay and benefits than other workers, and almost two-thirds said they thought feds are overpaid.

But John O’ Leary, a research fellow at the Ash Center of the Harvard Kennedy School, argues in a recent Governing magazine blog entry that the government doesn’t just overpay, it underpays as well.

“Fair pay is often in the eye of the beholder,” O’Leary writes in the Feb. 2 blog post. “Anti-government types will loudly complain about the New Jersey turnpike worker who made $321,985 or the Boston police lieutenant who made $271,882. On the other hand, public-sector sector managers know how hard it is to attract capable lawyers, accountants and IT professionals who being offered more money in the private sector.”

O’Leary adds, “But here is the Goldilocks truth: Among any group of public employees, some are underpaid, others are overpaid and still others are just paid about right.”

He discusses the fairness of pay scales and the impact of retirement benefits on organizational effectiveness, ultimately suggesting that federal and state governments should work on designing better compensation systems.

O’Leary also poses some thought-provoking questions, such as: How can our compensation approach promote more efficient operations? And how can we attract and retain good employees yet make sure underperformers aren’t rewarded?

Too many people, he writes, “obsess over the size of the compensation package while ignoring the detrimental impact that the structure of both the pay and pension systems can have on operating efficiency.”

In my last blog post, I posed the question of whether the idea of implementing a pay-for-performance system might resurface as a way to lower costs and improve the government’s effectiveness. With O’Leary’s comments in mind, does pay for performance present a possible way forward?