Most of the higher cost of benefits incurred by the federal government stems from retirement benefits. Image: SCOTTCHAN/Shutterstock.com
By: FEDweek StaffA Congressional Budget Office report on total compensation—pay plus the value of benefits—in the federal government vs. the private sector cautions that estimates of the value of benefits “are much more uncertain” than estimates of wages.
That difference is “primarily because most retirement benefits will be paid in the future and because less-detailed data are available about benefits than about wages,” says the report, which is the latest development in the long-running argument about whether comparisons of the two sectors should include the value of benefits.
Overall, the CBO found that the federal sector has a significant advantage on the benefits side. On average, benefits such as health insurance, retirement income and paid leave are “43 percent higher for federal civilian employees than for private-sector employees with certain similar observable characteristics,” it said.
It found that advantage at all educational levels, from 88 percent for those with a high school diploma or less to 1 percent at the highest level, professional degree or doctorate. That’s in contrast to a pay disadvantage for federal employees averaging 10 percent overall—29 percent at the highest level and 10 percent for those with bachelor’s degrees, but with a pay advantage for those with less than a four-year degree.
Said the report, “Most of the higher cost of benefits incurred by the federal government stems from retirement benefits. The federal government provides retirement benefits to its workers through both defined benefit plans (pensions) and defined contribution plans, whereas many large private-sector employers have replaced defined benefit plans with defined contribution plans. The federal government also provides subsidized health insurance to qualified retirees, an arrangement that has become much less common in the private sector.”
“CBO’s approach shows that a large portion of the differences in benefits can be attributed to the fact that federal workers have more years of education and experience, on average, than private-sector workers do . . . The most important factor contributing to federal workers’ larger benefits is the retirement income they will receive if they remain in federal employment for enough years,” it added.
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