A Smarter Way on Federal Pay

Congress and the Obama administration are chopping away piecemeal at the salaries and benefits of federal workers, focusing on short-term political payoffs while ignoring a more effective way to reform and manage our nation's government.

While political leaders are right to tackle skyrocketing deficits, this ad hoc approach to the workforce will not have a significant impact on the budget, and it certainly won't lead to improved government performance. Instead, proposals for a lengthy pay freeze, increased employee pension contributions, limited bonuses for outstanding employees and a hiring freeze will inevitably result in a demoralized, depleted and ultimately less talented and less effective workforce.

For meaningful reform and long-term budget savings, Congress and the White House should stop tinkering around the margins and totally revamp the fundamentally flawed civil service compensation system created in 1949.

By sticking with the arrangement from the past century, the public sector has largely missed the transformation that swept over the rest of the working world and has made itself vulnerable to criticism, especially during such tough economic times.

The answer is to adopt a true market-based labor system that would establish federal pay levels roughly comparable to that of major private-sector employers when filling similar jobs. It would take into account geographic differences in pay based on cost-of-living considerations and differences based on occupations, skill sets and levels of responsibility.

The value of federal employee benefits, such as health insurance and pensions, also would be considered when setting pay, with care taken to ensure that the total compensation package still enables government to compete for the talent it needs.

Under this system, federal pay would not be higher or significantly lower than private-sector pay. Ultimately, the federal pay system must allow the federal government to attract, motivate and retain highly qualified workers to carry out its many missions.

The current General Schedule pay scale relies on 15 salary grades and step increases within each one. This approach provides minimal ability to encourage and reward achievement, and it has become a system largely based on entitlement and longevity rather than on performance and labor market supply and demand.

Unfortunately, we don't have leadership at either end of Pennsylvania Avenue that is offering or willing to fight for fixing the compensation regime -- an undertaking that will not be easy and will probably be met with resistance from those worried about the uncertainty of change and the risk that reform might be used to diminish government. But today's approach is not serving the nation's interests, while political expediency is taking us over a cliff.

The potential fallout of hacking away at public service is threefold.

First, the government may well experience an exodus of its most experienced employees if they become frustrated and disenfranchised by the current environment. Almost one-fourth of the total workforce and about half of the senior executives are eligible to retire. These numbers would keep any self-respecting CEO awake at night pondering the potential loss of knowledge and expertise.

Second, across-the-board compensation cuts are likely to make it difficult for agencies to attract talent. Most skilled job seekers will have options, even in this economic climate. Government is losing the battle for talent in the fields of science, engineering, foreign languages, medicine, cybersecurity and more. With limited ability to reward high performers, with pensions and other benefits being slashed, and with a pay freeze in effect and a longer one possibly in the offing, government doesn't stand a chance.

Third, the erosion of federal capacity through workforce cutbacks and loss of experienced personnel because of the pay issues will inevitably lead to operational failures, the kind that make headlines, harm the country and individuals, and cause increased disillusionment with government.

The bottom line is that indiscriminately cutting compensation for federal employees may ultimately cost the nation far more than the price of the original salaries and benefits.

In the end, it would be prudent to put aside short-term palliatives and focus on meaningful reform of the compensation system for our nation's 2.1 million civilian federal workers, basing salaries and benefits on the market for talent. After all, we don't want our government to become the workplace of last resort.

The writer is president and chief executive of the nonprofit, nonpartisan Partnership for Public Service.

This was originally published as an exclusive to The Washington Post.