Long-term impact of ‘Pay Interruptus’

For some feds, temporary (they hope) pay freezes are better than permanent changes in their benefits — especially the retirement package. Many feel that in a time of low inflation and high unemployment, having a steady federal job is not the worst option.

When President Barack Obama ordered the 2-year federal pay freeze, federal unions — the staunchest and loudest champions of civil servants — complained. But they also said it could have been worse. When he proposed a 0.5 percent raise for 2013 they said they were disappointed, but at least — given the times — it was something.

Members of Congress — many of whom are already millionaires — find that in an election year, one of the smartest things they can do is deny themselves a raise. And, for good measure they include you too.

But there are some feds who think their colleagues focus too much on perks and not enough on pay and the long-term impact of temporary pay freezes. One of them is a retired Marine who now works as a civilian fed. He plans to retire when he’s got 40 years of federal/military service time. I’ve shortened his lengthy letter to focus on what he says is the No.1 benefit for feds — pay:


“The most important benefit and really the basis for working is salary. Studies are all over the place on the proper comparison of salaries. I trust the studies with science and mathematics behind them. The most recent analysis is that federal employees with just a high school diploma are paid higher than the market rate. Federal employees with a bachelor’s degree are paid the market rate and the fed employees with multiple degrees, etc. are under paid. I am sure we could argue about each category but ultimately it seems to make common sense. Junior people worried about security take the low paying job in government and hang out for a long time so junior people tend to be overpaid compared to the private sector. The junior people are often people that have been on the job for thirty years. At the middle grades, pay and benefits are still equal to the private sector and this is proven by the fact that government still recruits new employees at these mid-grade positions. But at the higher policy, executive and professional levels, the employees are underpaid. The senior staff know they could go to the private sector and make more money, but they love what they do and it is about more than money to them.

“…If politicians want to attack federal employees (who apparently are the root of all evil in the government), then the most aggressive attack is to reduce salary. This is the first and primary category that scares me. My pay affects many other important benefits. So when you freeze pay, it isn’t about affecting one year. A pay freeze affects the rest of your career. Example: A person making $100k per year. If the government gave out a 2.5 percent bonus, it would give this employee $2,500 for this year. Not a huge but significant. But a bonus is a one-time thing. Give me a 2.5 percent pay raise and you have changed the whole game plan. To start with I get $2,500 this year and every year I continue to work. Over 20 years that is $50K! Now think about the next year’s pay raise. If the next pay raise is 2.5 percent again, you will gain a little more money (about $62) because you got last year’s pay raise. And this continues to compound over your career. Then think about retirement. I expect to retire with about 40 years or more of federal service. I will receive about 40 percent of my high three average pay. Forty percent of $2,500 is $1,000. So every year you freeze my salary, reduces my retirement. A two-year freeze can have drastic effects. If the freeze stopped two raises, each worth $2,500 for a total loss of $5,000, then the corresponding loss in retirement benefits would be $2,000 a year less in retirement. Also, if I die my family will get less insurance proceeds because those are based on salary too. So decisions to reduce/freeze or otherwise reduce salary will greatly affect federal careers…”


By Jack Moore

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