[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                     ARE FEDERAL WORKERS UNDERPAID?

=======================================================================



                                HEARING

                               before the

                   SUBCOMMITTEE ON FEDERAL WORKFORCE,
                  U.S. POSTAL SERVICE AND LABOR POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 9, 2011

                               __________

                            Serial No. 112-6

                               __________

Printed for the use of the Committee on Oversight and Government Reform


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform




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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy

                   DENNIS A. ROSS, Florida, Chairman
JUSTIN AMASH, Michigan, Vice         STEPHEN F. LYNCH, Massachusetts, 
    Chairman                             Ranking Minority Member
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
JASON CHAFFETZ, Utah                     Columbia
CONNIE MACK, Florida                 GERALD E. CONNOLLY, Virginia
TIM WALBERG, Michigan                DANNY K. DAVIS, Illinois
TREY GOWDY, South Carolina


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 9, 2011....................................     1
Statement of:
    Berry, John, Director, U.S. Office of Personnel Management...     4
    Sherk, James, senior policy analyst in labor economics, the 
      Heritage Foundation; Andrew Biggs, Ph.D., resident scholar, 
      American Enterprise Institute; Max Stier, president and 
      CEO, Partnership for Public Service; and Colleen Kelley, 
      national president, National Treasury Employees Union......    28
        Biggs, Andrew............................................    39
        Kelley, Colleen..........................................    62
        Sherk, James.............................................    28
        Stier, Max...............................................    48
Letters, statements, etc., submitted for the record by:
    Berry, John, Director, U.S. Office of Personnel Management, 
      prepared statement of......................................     6
    Biggs, Andrew, Ph.D., resident scholar, American Enterprise 
      Institute, prepared statement of...........................    41
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............    26
    Kelley, Colleen, national president, National Treasury 
      Employees Union, prepared statement of.....................    64
    Sherk, James, senior policy analyst in labor economics, the 
      Heritage Foundation, prepared statement of.................    31
    Stier, Max, president and CEO, Partnership for Public 
      Service, prepared statement of.............................    51


                     ARE FEDERAL WORKERS UNDERPAID?

                              ----------                              


                        WEDNESDAY, MARCH 9, 2011

                  House of Representatives,
    Subcommittee on Federal Workforce, U.S. Postal 
                          Service and Labor Policy,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:35 p.m., in 
room 2154, Rayburn House Office Building, Hon. Dennis Ross 
(chairman of the subcommittee) presiding.
    Present: Representatives Ross, Amash, Jordan, Chaffetz, 
Mack, Walberg, Lynch, Norton, Connolly, and Davis.
    Staff present: Ali Ahmad, deputy press secretary; Michael 
R. Bebeau, assistant clerk; Molly Boyl, parliamentarian; 
Benjamin Stroud Cole, policy advisor and investigative analyst; 
Howard A. Denis, senior counsel; Adam P. Fromm, director of 
Member liaison and floor operations; Jennifer Hemingway, senior 
professional staff member; Christopher Hixon, deputy chief 
counsel, oversight; Ryan Little, manager of floor operations; 
Justin LoFranco, press assistant; James Robertson, professional 
staff member; Kevin Corbin, minority staff assistant; Jill 
Crissman, minority professional staff member; Carla Hultberg, 
minority chief clerk; and Mark Stephenson, minority senior 
policy advisor/legislative director.
    Mr. Ross. Good afternoon and welcome to the Subcommittee on 
Federal Workforce, U.S. Postal Service and Labor Policy.
    Today, we have two panels that will be testifying before 
us. I do want to note, though, that we probably will have to 
take a break in between 2 and 3 for two votes. So we'll have to 
take a temporary recess for about 30 minutes at that time and 
then reconvene for the specific purpose of continuing our 
testimony. Hopefully, we will be able to get through the first 
panel before we have to go do our votes.
    With that, I will call the committee to order; and, as is 
custom with the full committee and the subcommittees, I will 
read the mission statement of the Oversight Committee.
    We exist to secure two fundamental principles: First, 
Americans have a right to know that the money Washington takes 
from them is well spent; and, second, Americans deserve an 
efficient, effective government that works for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect those rights. Our solemn responsibility is to 
hold the government accountable to taxpayers, because taxpayers 
have a right to know what they get from their government. We 
will work tirelessly in partnership with citizen watchdogs to 
deliver the facts to the American people and bring genuine 
reform to the Federal bureaucracy. This the mission of the 
Oversight and Government Reform Committee.
    Today, we are here to discuss whether Federal employees are 
adequately compensated. I'll begin with my opening statement 
and then defer to the Ranking Member Lynch for his.
    According to the Office of Personnel Management, the 
average salary for Federal employees was $74,311 in 2010. The 
average private sector worker earned $50,462, according to an 
August 10, 2010, analysis conducted by the Cato Institute. The 
Federal Government also pays an average of 36 percent of 
employees' base health insurance and pension benefits, in 
addition to generous paid leave. Taken together, Federal 
employees, on average, earned $101,628 in total compensation in 
2010, nearly four times more than the average private sector 
worker.
    The members of this subcommittee recognize that our 
talented work force performs critically essential functions and 
missions throughout the government on behalf of our Nation. We 
appreciate their service. Federal employees should be 
compensated fairly. Yet current Federal salaries and benefits 
are not in line with the marketplace when compared to the 
private work force compensation. In a time when our economy is 
in a recession, the contrast between the government and private 
sector pay is troubling. The Federal Government has no 
incentive or obligation to reduce salaries in order to be 
competitive to stay in business. It can simply borrow more 
money or raise taxes.
    With Federal spending and unemployment at or near record 
highs, this hearing presents an opportunity for lawmakers of 
this committee to hear important testimony from our 
distinguished panelists on how best to address the growing pay 
disparity between the Federal civilian work force and the 
private sector work force.
    Over the past decade, compensation of private sector 
employees has not kept pace with that of Federal employees. 
Moreover, Federal workers receive generous benefits, vacation, 
health insurance, pension plans, retirement savings, and 
disability pay. These benefits greatly exceed those that are 
normally provided to the private sector work force.
    Last November, President Obama announced a 2-year pay 
freeze for Federal employees. Unfortunately, the pay freeze did 
not impact salary increases driven primarily by the passage of 
time or bonuses, meaning President Obama's pay freeze wasn't 
really a freeze.
    Additionally, according to the Bureau of Labor Statistics, 
the Federal Government grew by 157,000 people from December 
2008 to 2010, while private sector lost 8.8 million jobs. The 
unemployment rate hovers around 9 percent. The President's 
budget requests an additional 15,000 new Federal workers for 
the fiscal year 2012. Our taxpayers can no longer be asked to 
foot the bill for these Federal employees, while watching their 
own salaries remain flat and their benefits erode. Congress has 
an obligation to consider all policy reforms that overhaul 
Federal compensation, reduce costs, and better align with the 
private sector.
    I thank the witnesses all for appearing today, and I look 
forward to your testimony.
    I now recognize the distinguished ranking member from 
Massachusetts, Mr. Lynch, for his opening statement.
    Mr. Lynch. Thank you, Mr. Chairman. I thank the witnesses 
for their attendance here. Good afternoon, members of the 
committee.
    The topic of today's hearing regarding Federal employees 
compensation requires us, I think, periodically to review the 
way we are paying our Federal employees, reviewing the pay 
levels and benefits that they receive. But, recently, this 
topic has generated much debate.
    As stewards of the people, we should conduct robust 
oversight into the Office of Personnel Management's pay-setting 
practices, and we owe the U.S. taxpayer full transparency in 
this area, as well as assurance that the salaries and benefits 
provided to our Federal workers are reasonable and appropriate.
    I note that the debate over Federal employee benefits 
predated the 1883 enactment of the Pendleton Act overhauling 
the patronage system, and I'm quite confident this debate will 
outlive the service of our committee.
    Like all Americans, Federal employees are not immune from 
our Nation's economic and fiscal challenges; and they 
understand the sacrifices called for in the 2-year pay freeze 
enacted this past December by Congress and the President.
    However, we need to be careful not to get caught up in the 
over-simplistic data comparisons between private sector and 
Federal jobs. A recent New York Times article pointed out that 
when comparing private and public sector occupations the 
clearest pattern to emerge is an education divide. The most 
reliable factor in predicting compensation levels is actually 
the level of education; and when comparing private and public 
sector occupations, the clearest pattern to emerge is an 
education divide, a divide that has grown more pronounced in 
recent decades.
    Today's Federal civilian work force is highly educated, 
with over half of all Federal employees working in the nine 
highest-paying professional occupations in the country. It is 
also a work force marked by a declining number of blue collar 
workers, dropping from over 30 percent to just under 9 percent 
of the work force in the last 40 years. So the Federal 
employees are a more professional level of employee. We have 
contracted out most of the blue collar jobs, the lower-paying 
jobs, which is why you get a discrepancy when comparing Federal 
employees to the general public.
    In light of the 2-year pay freeze which is squeezing the 
pockets of Federal workers who are also facing ever-escalating 
health care costs today, I'm reintroducing my bill to inject 
cost transparency into the Federal Employees Health Benefit 
Program contracts between health plans and pharmacy benefit 
managers. This bill will lower Federal employees' out-of-pocket 
spending and the program's operational costs, resulting in a 
win-win for both Federal employees and taxpayers.
    I look forward to hearing from the distinguished witnesses 
assembled here today as your expertise and guidance on 
compensation issues enables us to better forge a high-
performing civil service that is prepared to meet the 
challenges of the 21st century. Thank you.
    Mr. Ross. Thank you, Mr. Lynch.
    Members may have 7 days to submit opening statements and 
extraneous materials for the record.
    We'll now welcome our first panel, the Honorable John 
Berry, who is the Director of the U.S. Office of Personnel 
Management.
    Mr. Berry, pursuant to committee rules, all witnesses must 
be sworn in before their testimony, before they testify. Please 
rise and raise your right hand.
    [Witness sworn.]
    Mr. Ross. Let the record reflect the witness answered in 
the affirmative.
    Mr. Berry, please limit your opening statement to 5 
minutes. We do have your testimony, and we're grateful for 
that, and we're very grateful for you to be here. You may 
begin.

  STATEMENT OF JOHN BERRY, DIRECTOR, U.S. OFFICE OF PERSONNEL 
                           MANAGEMENT

    Mr. Berry. Thank you Chairman Ross, Ranking Member Lynch, 
and members of the subcommittee. It's an honor to be with you 
here today, and I appreciate the opportunity.
    I believe that the members of this subcommittee and I, and 
all Federal employees, share the goal of making government more 
efficient while improving services; and I look forward to 
working together with you to accomplish that.
    President Obama said it best last week when he said, ``I 
don't think it does any good when public employees are 
denigrated or vilified or their rights are infringed upon. We 
need to attract the best and the brightest to public service. 
Our times demand it.''
    Our need for great workers could not be more clear. Federal 
employees hold lives in their hands and oversee large sums of 
taxpayer dollars. We need talented and innovative people at the 
Department of Defense supporting our warfighters. We need great 
doctors and nurses at our veterans hospital doing lifesaving 
work. And we need tough men and women at the Departments of 
Justice and Homeland Security to protect us from another 
terrorist attack.
    And it is just a fact, Mr. Chairman, in order to get these 
workers we must provide pay and benefits on par with other 
large companies for whom we compete with talent. We cannot and 
should not be the employer of last resort.
    Despite the complex challenges we face, the Federal 
civilian work force is virtually as small today as it has been 
throughout the modern era. In 1953, there was one Federal 
worker for every 78 residents. Today, 2009, it was one for 
every 147.
    President Obama has frozen annual pay adjustments for 2 
years. The raw comparisons of average pay between Federal and 
private sector employees often can ignore important differences 
between skill levels, complexity of work, scope of 
responsibility, size of organization, location, experience 
level, as well as exposure to personal danger. Even comparisons 
that purport to compare employees in the same occupations can 
sometimes be misleading.
    For example, some claim that Federal attorneys make more 
than private sector attorneys. In fact, while more than half of 
our general attorneys in the Federal Government earn less than 
$90,000 in their first year of service, the median first-year 
salary for comparable attorneys in the private sector is 
$145,000.
    As another example, Federal cooks may seem overpaid until 
you consider that many of them work in our prison system where 
they supervise inmates in a very dangerous environment.
    The Federal Government, like most large employers, also 
provides an array of benefits. While we need to do this to be 
competitive, note that these benefits are not free to our 
employees. Employees share in the cost of those benefits and, 
in many cases, pay 100 percent of the cost. For health 
benefits, enrollees share 30 percent of the premium costs. For 
dental and vision, they pay 100 percent of the cost. For life 
insurance, they pay 66 percent for the basic premium but 100 
percent for any coverage beyond that. For long-term care, they 
pay 100 percent.
    I'd also like to note that Congress and President Reagan 
reformed our benefits, our retirement benefits, 25 years ago, 
and this has avoided the struggles that State and local 
governments are now going through. Those reforms guarantee that 
our FERS retirement system is financially sound and fully 
funded at 100 percent.
    Bottom line, this administration is committed to providing 
the superior service the American people expect and deserve. 
Managers and employees who aren't doing that should be held 
accountable and ultimately fired if they don't improve. There 
should be no place in the Federal Government for non-performers 
to hide.
    Our pay system is not perfect. I have said before, it is 
six decades old and could use a re-examination. We are required 
by law to reduce all of the comparisons to one average number. 
This is imperfect and does not reflect the complexity of the 
work force.
    But, even so, we must reject misleading uses of data that 
perpetuate the myth that Federal employees are, as a whole, 
overcompensated. They are not. Our wages and our benefits are 
fair, and they are competitive. Any reforms we undertake must 
meet the following principles that our existing GS system does 
well: transparency, equal pay for equal work, no political 
influence, and the ability to recruit and retain the work force 
we need. This is how it must be if we are to recruit and retain 
the best workers and carry out our critical life-saving and 
life-enhancing missions. Falling behind is unacceptable.
    Thank you, Mr. Chairman. I'm happy to answer any questions.
    [The prepared statement of Mr. Berry follows:]
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    Mr. Ross. Thank you, Mr. Berry. I will yield myself 5 
minutes for questions.
    Mr. Berry, I note that in the President's January 2011, Pay 
Agent report it showed a 22 percent difference between Federal 
employee pay and private sector pay, and I was wondering, did 
that include benefits, that assessment, that report?
    Mr. Berry. No, that is focused specifically just on the 
pay.
    Mr. Ross. And, subsequent to you testifying, we'll have 
another panel. Mr. Biggs will testify that a Federal pay 
premium of 14 percent, and when combined with benefits premium 
of 33 percent, total Federal salary and benefits are nearly 25 
percent above those of similar private sector employees; and 
Mr. Sherk will testify that Federal employees earn a total 
compensation of 30 to 40 percent greater comparable than 
private sector workers. Do you agree with their findings?
    Mr. Berry. Absolutely not.
    Mr. Ross. And why not? Because, in one sense, we're talking 
about strictly compensation. In the other, we're talking about 
compensation and benefits.
    Mr. Berry. If we just--if we'll stay for compensation for a 
second, Mr. Chairman--and I agree, I'm happy to look at them 
together. But for the purposes of this discussion, it's easier 
if we can keep them separate for a moment.
    Their comparisons are based on gross averages. As 
Congressman Lynch mentioned, the Federal work force is now a 
very skilled, white collar, high sophisticated work force. It 
used to be 40 years ago over a third of our work force was blue 
collar. Less than 10 percent is today. And so we need to 
compare the Federal Government with like to like.
    What the Bureau of Labor Statistics does and the Department 
of Commerce is they go into literally every locality, every one 
of your States in the country, and they will compare entry-
level, mid-level, and senior-level career for each position.
    So they'll look at an engineer, for example. They will find 
a job in the private sector that is almost duplicative. And the 
private sector doesn't use the GS system, so you could imagine 
this is very exhaustive. It's expensive. It takes a lot of 
work.
    The work that you're going to hear from in the next panel, 
they don't have the resources to do that. The Bureau of Labor 
Statistics does that on an annual basis for us, and that's the 
data we're comparing. So we're getting real comparison of like 
jobs to like jobs.
    The averages you're going to hear about from that panel are 
looking at the total labor force of the civilian market. The 
primary jobs in the private sector are retail clerks and 
service workers, waiters and waitresses. We don't have those in 
the Federal Government and those that we do are generally 
provided on a contract basis with the private sector. So that 
average, you can see, pulls down the private sector number. But 
when you compare engineer to engineer, lawyer to lawyer, doctor 
to doctor, nurse to nurse, what it shows consistently for 20 
years is that Federal employees lag the private sector.
    Mr. Ross. But wouldn't you also agree, because I don't 
believe OPM considers the job security as a criteria when 
determining the value of a job. Is that correct?
    Mr. Berry. No, sir. Obviously, working in the Federal 
Government, our mission is long term in nature.
    Mr. Ross. And it should be for any employment. I mean, 
people go into employment for careers and not to change jobs 
through a revolving door. And I guess my question is, is that 
when you look at fiscal year 2010, the quit rate for GS 
employees was 1\1/2\ percent and the layoff rate was 0.37 
percent. And do you have any opinion as to how that would 
compare to the private sector?
    Mr. Berry. Our attrition rates pretty much track the 
private sector. You know, I have heard some misinformation from 
some folks talking about that the Federal Government doesn't 
have a retention problem. Let me just give you doctors and 
nurses. In 2005, we hired 5,300 of them. As of today, we have 
lost 2,300, for a quit rate of over 43 percent. I have a 
retention problem. And that is primarily based--when we are 
talking to employees as they leave, one of the biggest and 
leading concerns is the fact that they're underpaid.
    Mr. Ross. But, again, speaking as a whole Federal work 
force, we're only looking at a 1\1/2\ percent quit rate. I 
mean, so I wouldn't consider that to be so much of a problem. 
If it was 40 percent as a total of the entire work force, then 
I would consider it a problem.
    But let me ask you, you talked about highly skilled 
occupations, engineers and lawyers, being paid below the 
market. Are there any circumstances or instances where Federal 
employees are paid above the market?
    Mr. Berry. Absolutely. Yes, sir. The average--when I say--I 
do not mean to represent when I say the 22 percent pay gap that 
the Department of Labor references doesn't apply to each and 
every job reaching every employee. That is a gross average, 
which means some employees are paid more, some are paid less, 
some are paid the same. Clearly, to get that number of the gap, 
the clear majority are paid less. There are some that are paid 
more.
    Mr. Ross. Real quickly. I've just got a couple of seconds. 
How many days of paid leave are Federal employees entitled to? 
Do you know?
    Mr. Berry. We can give you--it varies based on years of 
service, Mr. Chairman, so if I could I'll just provide that to 
you for the record.
    Mr. Ross. OK. Thank you.
    Mr. Berry. So you'll have it exactly.
    [The information referred to follows:]
    [Note.--No insert/information provided.]
    Mr. Ross. I see my time's up.
    I'll now recognize the distinguished gentleman and ranking 
member from Massachusetts, Mr. Lynch, for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman.
    Welcome, Director Berry. I want to thank you for the good 
work you're doing over there.
    One of the things I just want to start out by pointing out 
is I notice behind me there's a chart here, employment changes, 
that the Federal Government added 157,000 jobs. I just want 
to--now, this is 2008 through 2010. Now, you would think that 
meant that employment at the Federal--in the Federal sector 
actually went up. During--I went back, and I got the numbers 
because I was surprised by that number, and I went back and 
actually calculated the number of separations, the number of 
people who left the Federal Government. We had almost 207,000 
leave in 2010, 90,000 in 2009--just over 90,000--and 219,000 in 
2008, for a total separation of 616,359 employees. So while 
they're saying there's 157,000 new first-time employees, 
there's also been a reduction of 616,000 employees who left. 
And I think that also speaks to the argument of job security. 
If 616,000 employees--and these were deaths, firings, these 
were quits, these were retirements, all combined. So it does, I 
think, provide a little wider picture.
    Director Berry, much is said of the general schedule's lack 
of performance management, mainly its inability to 
appropriately reward individual performance. I think it was 
because of some of those concerns back in 2009 we experimented 
with an alternate pay system at the Department of Defense 
called the National Security Personnel System. We spent 
hundreds of millions of dollars implementing the new system 
and, oddly enough, we had 0.8 percent of people who usually are 
rejected for step increases under the old system, and under 
this new system, this pay-for-performance system, 0.2--0.2 
percent were rejected for the step increases. So with the new 
system, on pay for performance that's been suggested as being 
an alternative here, we had less people get disciplined or 
rejected for their step increases.
    So I'm just curious. It seems like the managers were doing 
the same thing under the new system as they did under the old 
system, and I'm just curious if that's a--if you think that's a 
viable alternative here.
    Mr. Berry. Well, Mr. Lynch, I think you hit on two points 
that I think it's important for the committee to keep in its 
sights, if you will, as you move forward on this path.
    First is, you know, the Congress repealed NSPS, and so the 
Defense Department has been moving employees back into the GS 
system. If you think that their pay-for-performance system, 
NSPS, is going to save the taxpayer dollars, what we found is 
that 20 percent of the work force, in moving back, is on 
retained pay, meaning that they are making more than they would 
have made had they been in the GS schedule. And so, therefore, 
they're going to stay frozen until the GS schedule catches up 
with them. Now, that's a big number.
    The second point is--it goes to something I've learned in 
the 2 years on the job here in working on this, and I've spent 
a lot of time looking at pay, performance, and the combination 
thereof and learning from the NSPS story. And I have concluded 
that it is more important to focus on the performance side of 
the equation first and get that right.
    Good performance is based on three key things that we do to 
a certain extent in the Federal Government, but I would not sit 
here and tell you we do well. We need to do it a lot better. 
And that is, align organizational mission and goals right down 
through the SES down to the individual employee's performance 
and then have managers, employees regularly having 
conversations, just like they do in the private sector. Are we 
on track or off track? And if we're off track, laying out the 
plan to be back on, and if they are not back on, they're gotten 
rid of.
    That's a good performance system. We can do that.
    And so what I'm going to do, and what we just did yesterday 
through the Chief Human Capital Officers Council, is we've 
created a working group made up and shared by two career senior 
executives so it won't have political interference or bias and 
they will report in on what can we do as the Federal Government 
to tighten and strengthen our performance system. I think if we 
get that right then we can have the discussion about pay, and 
we can avoid repeating the same mistakes that were made under 
NSPS.
    Mr. Lynch. That's great. Thank you, Mr. Director.
    Thank you, Mr. Chairman. I yield back.
    Mr. Ross. Thank you, Mr. Lynch.
    I recognize the distinguished gentleman from Utah for 5 
minutes, and then we'll probably recess to go vote.
    Mr. Chaffetz. Thank you for being here.
    I want to make sure we get the numbers. My understanding is 
since the time Barack Obama took office until now there is a 
net increase of Federal employees, which excludes the uniform 
military, census and postal, the net increase is 157,000 
additional Federal workers, yes?
    Mr. Berry. There is an increase, Mr. Chaffetz; and about 75 
percent of those would be comprised in VA hospitals, Homeland 
Security, Justice Department.
    Mr. Chaffetz. But the net increase, the net increase of 
Federal employees is roughly 157,000 additional Federal 
workers.
    Mr. Berry. Yes, sir.
    Mr. Chaffetz. And you did announce in October that you plan 
to hire an additional 125,000. Not all 125,000 would be a net 
increase, but roughly 40,000 to 50,000 would be a net increase 
in current employment levels in the Federal Government.
    Mr. Berry. I think that number, Mr. Chaffetz, has been 
overtaken by the President's budget that was submitted which 
shows that number staying flat for 3 years.
    Mr. Chaffetz. My understanding of the President's budget is 
that he's actually increased the compensation level in his 
budget by 2\1/2\ percent, or roughly $6 billion, this year over 
last year.
    Mr. Berry. Well----
    Mr. Chaffetz. Why the increase? Why the additional $6 
billion? If there's a pay freeze and you're not going to need 
very many new employees, why a $6 billion increase in that line 
item?
    Mr. Berry. I would need to understand better exactly what 
line you're referencing in the budget.
    Mr. Chaffetz. It went from $236,175,000 to $242 billion 
between 2011 and 2012 based on the executive branch, excluding 
the U.S. Postal Service.
    Mr. Berry. There is a natural growth, sir, of promotions, 
for example. The President's pay freeze does not prevent people 
from being promoted based on performance.
    Mr. Chaffetz. So the reality on a pay freeze is the net did 
not save the American taxpayers money. In fact, it doesn't keep 
them equal. In fact, that number is actually growing, is it 
not, because of bonuses and step increases and other things?
    Mr. Berry. No, the pay freeze, sir, is a cost-of-living 
adjustment that is a definite savings. It saves over $28 
billion in 5 years and $60 billion in 10 years.
    Mr. Chaffetz. The reality is it will cost the taxpayers 
more. Taxpayers will pay more for Federal employees, as a 
whole, this year as opposed to the year before.
    Mr. Berry. Had the President not frozen pay that same 
number would be $28 billion higher.
    Mr. Chaffetz. What I'm saying is accurate, right?
    I guess what is concerning to many of us is, when the 
President and you, in your very first line say, ``President 
Obama has frozen annual pay adjustments for 2 years,'' it gives 
the impression that we're not going to spend more money on 
personnel. But the reality is we're going to spend billions and 
billions more because of bonuses and step increases and other 
things. At the same time, you're hiring additional people. So 
for the Federal work force that is working hard, they're 
somewhat offended because their pay is frozen. Meanwhile, 
you're out hiring additional people.
    Mr. Berry. Mr. Chaffetz, in the President's pay freeze he 
also directed OPM and the Office of Management and Budget to 
report back to him on a program that will address and deal with 
bonuses and the reward and incentive program for Federal 
employees. The Office of Management and Budget and I will be 
doing that in short order, and we will look forward to 
discussing that with you more. But I think you will see that 
those numbers will change.
    Mr. Chaffetz. My understanding is, in 2009, based on a 
letter that you gave to this committee on February 16th, it 
said that 779,000 people in the Federal Government actually got 
awards, which is a combination of bonuses and other things. In 
fact, over 63 percent of the Federal workers actually got, 
``awards.'' Why so many people are getting so many awards at a 
time when people are losing their jobs?
    Mr. Berry. You have to understand with a 2.1 million size 
work force the average number in that GS of those awards is 
below a thousand dollars.
    Mr. Chaffetz. But 63 percent of them.
    Mr. Berry. These are not the Wall Street bonuses that 
people are used to when they think of a bonus. These are 
recognizing outstanding performance.
    Mr. Chaffetz. That's offensive to a lot of people. Sixty-
three percent of Federal workers got a bonus, got an award, and 
there are lot of people out there losing their job. They have 
their own businesses. They don't understand when the President 
stands up and says, oh, we're going to have a pay freeze; and 
then you're handing out bonuses to get around it. It doesn't 
make sense.
    How much money are you going to give away in bonuses this 
next year?
    Mr. Berry. It works out to be between 1 and 2 percent of 
payroll, sir, that is used in bonuses for the GS schedule.
    Mr. Chaffetz. What is the dollar amount of that?
    Mr. Berry. I'll have to get you the exact number for the 
record, sir.
    [The information referred to follows:]
    [Note.--No insert/information provided.]
    Mr. Chaffetz. My understanding, according to 
Federaltimes.com, which put out a report on December 6, 2010, 
it said that more than three-quarters of the 1.4 million 
General Schedule employees will get at least one pay raise 
between 2011 and 2012.
    Mr. Berry. One of the things that I--you know, and I will 
take--it's a legitimate concern to be addressed. And one of the 
things we can take back to this working group that we've 
established, the CHCO council, is that a fair number?
    Mr. Chaffetz. Do you dispute that number?
    Mr. Berry. I trust you, Mr. Chaffetz. I would presume that 
you're reading from a legitimate document.
    Mr. Chaffetz. Well, thank you. The answer is yes.
    I yield back.
    Mr. Ross. Thank you. The gentleman's time has expired.
    What we'll do is we'll take a recess to continue our votes, 
and we'll reconvene 5 minutes after our last vote. It should be 
within about a half hour. Thank you.
    [Recess.]
    Mr. Ross. Good afternoon and welcome back. We'll reconvene 
the subcommittee. And, again, I appreciate everybody's 
indulgence. That should be the last vote series of the day, so 
we can go forward with Mr. Berry and then with our second 
panel.
    At this time I would like to recognize the distinguished 
gentlewoman from Washington, DC, Ms. Norton, for 5 minutes.
    Ms. Norton. Thank you very much, Mr. Chairman.
    This hearing provides the opportunity, if we will use it, 
to clarify a number of matters.
    I want to thank you, Mr. Berry, because just in your first 
sentence you have told the American people something that 
almost none of them know, and that is the very high-quality, 
upper-technology knowledge level of the work force. I will 
guarantee you that there was almost no information.
    When we hear what Federal employees, that generic term 
means that you're talking about judges, engineers, scientists, 
nuclear plant inspectors, as less than a third of private 
sector workers could fall into this category. The apples-to-
bananas comparisons have grown tiresome.
    What was particularly interesting to me was the 
extraordinary reduction in the Federal work force since the end 
of World War II, where you say one Federal worker for every 78 
residents in 1953; in 2009, one for every 147. How much of this 
represents productivity of Federal workers? How do you account 
for that kind of reduction per capita?
    Mr. Berry. Congresswoman, I think certainly productivity is 
a big piece of that and our technology. One of the reasons the 
work force has gotten more sophisticated is they had to do more 
with less, and so they needed to have people who could handle 
the technology.
    Just managing Federal contracts, for example, to ensure 
that there's not fraud for the taxpayers, you need highly 
skilled people. These are billions and billions of dollars they 
are accounting for and keeping track of.
    But take Medicare, for example. Twenty percent of the 
Federal budget is Medicare, and it's administered by--I think 
the number is sort of like 0.002 of the Federal workforce. So 
the efficiency rate, you know, in terms of the productivity and 
being able to deliver those payments accurately, it is a 
combination, I would argue, of highly skilled workforce and 
technology and productivity improvement.
    Ms. Norton. Now, one of the things that both Democratic and 
Republican presidents have done over the past decades is to do 
more and more contracting out, as if that were the answer to 
all of our woes. I note that the Obama administration seems to 
be going in the opposite direction, expecting to save $40 
billion annually by reducing the number of contracted-out 
workers. Do these contracted-out workers save us or cost us? 
Why have we been doing it?
    Mr. Berry. It's a little on both sides of the ledger. 
There's no--I don't want to fall into the same trap of sort of 
a gross average answer. Some cost us more over time. Some cost 
us and have true savings, so it's both.
    Ms. Norton. Do you know what--I tell you one thing. If 
there's overtime, you keep track of it in the Federal 
workforce. You keep track of the productivity of your Federal 
workers. What do you do about the contracting worker?
    Mr. Berry. Well, we don't track that. The Office of 
Management and Budget, Ms. Norton, would be the appropriate 
folks to get you that data, and the various agencies would 
track that data, but, unfortunately I don't have that.
    Ms. Norton. Well, it's very difficult for us to understand 
a Federal workforce that has more contracted workers than 
Federal employees when the focus is on Federal employees, and 
most of the workers, including workers that work alongside 
Federal employees, are contracting employees. Now, why would a 
contracting employee be working alongside a Federal employee?
    Mr. Berry. I can give you a good example in my agency, and 
it goes to what the Office of Management and the Budget has 
asked all of us to do, is to look at what are essential 
government functions that the government should be doing and 
what could be done by the private sector.
    We--OPM does 90 percent of the background investigations 
for security clearances throughout the government. We do all of 
the Department of Defense background investigations. We do that 
with about 2,000 government workers, but about----
    Ms. Norton. Could I ask you one question before my time 
runs out?
    Mr. Berry. Sorry.
    Ms. Norton. Collective bargaining in the Federal sector, 
our workers do not bargain for pay or benefits, is that so?
    Mr. Berry. No, they cannot.
    Ms. Norton. So what do they cost us? Is there any reason 
why anybody would want to pull back on collective bargaining in 
the Federal sector?
    Mr. Berry. We--the administration are strong supporters of 
the partnership of approach. We believe that sort of workers 
and managers working together can produce better service to the 
taxpayers, and we're working in that direction.
    Ms. Norton. Thank you very much, Mr. Berry.
    Mr. Ross. Thank you.
    Now we'll recognize the distinguished chairman of the 
Oversight Committee, the gentleman from California, Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman, and thank you for 
holding this important hearing.
    It's very good to see you again.
    Let me run through a couple of items, just as somebody who 
came out of the electronics industry and allied with the auto 
industry. You know, we do have about a tenth as many people 
making about eight times more cars, plus or minus some ratios. 
So doing twice as much over a period of 70 years, or 60 plus 
years, I'm not sure should be the standard for the Federal work 
force.
    However, I certainly think that the Federal work force--and 
I would give you this--if they failed to give us efficiencies, 
it's as much this side of the dais at fault as it is your side 
or anyone else in the administration.
    We are at a time, though, when we're trying to produce real 
savings. Mr. Chaffetz, before the break, talked to you about 
step increases. If you cannot support step increases today from 
a standpoint of their long-term effects, can you work with us 
to look for a way to have step increases frozen, even if 
there's a catch-up provision later, but, for the specific 
year's budgeting, a freeze so that the President's freeze will, 
in fact, be a freeze not just for those who don't have step 
increases but for everybody? And we're talking only step 
increases here, not any of the other merit related that I know 
Mr. Chaffetz also was asking about. Is that something you could 
support if we worked together on it?
    Mr. Berry. Mr. Chairman, I think at this point in time the 
answer would be no. We're happy--I'm happy to go back and take 
that back and discuss that with the Office of Management and 
Budget to see if there'd be any opening there. But I believe 
what you're talking about is within-grade increases; am I 
correct?
    Mr. Issa. Within grade. That's what we call step. And 
that's really where $500 million between now and the end of the 
year will occur--or between 3 weeks ago and the end of the year 
would occur--in automatic--you're simply still vertical. You 
could actually be disabled, but as long as you're still on the 
payroll you're going to get these increases totaling about $500 
million this year alone; and then, of course, it continues up.
    Mr. Berry. My concern with that, Mr. Chairman, would be 
we're talking about the retention rate.
    Mr. Issa. OK. So I'm going to cut you short for a moment. 
Your view is, we freeze for real, we have a retention problem.
    Mr. Berry. If you can imagine, the within grades allow a 
natural progression and, you know, especially for----
    Mr. Issa. My time is short.
    The President announced a freeze. There is no freeze 
because with step increases people are getting pay increases 
automatically. They are getting pay increases automatically 
this year. They will make more money.
    People on this side of the dais will make the same money 
this year they made last year and the year before because we 
have a freeze going on. We did not vote ourselves a pay raise. 
The President announced a pay raise--a pay freeze. The truth 
is, there will be pay raises through this process, and you 
support that from the standpoint of retention. And that's--a 
simple answer like that is fine. I'm not asking you to be on 
our side of that particular issue or even the President's side.
    Let me go to a couple more that I think are important.
    You mentioned Medicare. I would mention, as proud as I am 
that you do Medicare with so few people, that Medicare has a 10 
percent fraud rate. It is the worst in health care. That is by 
our own IG, and it's by the stimulus oversight chairman and so 
on that this is, in fact, the most fraud-ridden program. And 
we're talking not about necessarily bad doctors. In some cases, 
we're talking about organizations who pretend to be doctors and 
the system doesn't catch them.
    So the last point I want to ask a specific question on is, 
we just finished, just in your seat a couple of days ago, the 
GAO report being presented to us shows $100 billion in savings 
by consolidation, elimination of duplicative programs. Many of 
those are within the purview of the administration. They 
weren't created by a unique act of Congress.
    Have you looked at whether or not the Federal work force 
can be more efficient, take advantage of some of that $100 
billion, simply by some consolidation within the 
recommendations of that report? And if you haven't read the 
report, would you commit to read it?
    Mr. Berry. Oh, absolutely. I'm aware of report, Mr. 
Chairman, and I think--in fact, I have just a summary, sort of 
a one-page summary of the highest risk items that they mention. 
And what I would note is that three-quarters of those items 
have a human capital connection. And whether or not we are 
successful in addressing these issues are going to be incumbent 
on us, whether we have good people in the jobs to handle these 
issues. And so recruiting and retaining an outstanding work 
force----
    Mr. Issa. I see you've circled back to the same answer, and 
I appreciate that.
    Earlier, you commented that the AEI and Heritage reports 
did not include an adjustment or a recognition of education 
experience and so on. In fact, I reviewed them; and they do. So 
would you look at them again and commit, for the record, to 
give us an answer on why you think there are flaws in their 
process?
    Because this committee's at a point of going back to the 
GAO and doing one more study to try to find out whether or not 
these organizations are correct in their assessments. Because 
if they're correct in their assessments, clearly we're probably 
paying some people too little and we're clearly paying, 
according to them, some people quite a bit more than would be 
necessary to recruit and retain.
    So if you'd give us your comments within, let's say, 2 
weeks, that would allow us to make a decision going forward on 
action from here.
    Mr. Berry. Yes, sir. Mr. Chairman, I'll be happy to do 
that.
    [The information referred to follows:]
    [Note.--No insert/information provided.]
    Mr. Issa. Thank you. I yield back.
    Mr. Ross. Thank you, Mr. Chairman.
    We'll now recognize the distinguished gentleman from 
Illinois, Mr. Davis, for 5 minutes.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Mr. Berry, it's good to see you again; and thank you for 
being here.
    Let me, first of all, commend you for some movement that I 
have seen in promotions, especially as it relates to women and 
other members of minority groups; and I appreciate that 
movement that I have observed.
    Let me ask you exactly what was the President doing when he 
initiated a freeze? What was he accomplishing?
    Mr. Berry. I think it's an important point, Congressman, 
that you've hit on, because it goes to some of the back and 
forth that we've had at the hearing here today, is the 
employment cost index reflects the cost of labor increase that 
is determined by what is happening in the private sector.
    The department, what we do is we get that data, and the law 
provides that Federal employees would get that, minus half a 
percent. That is not built into the budget every year. It has 
to be added or projected in terms of budgets, and it is an 
overarching number because it affects every employee of the 
Federal Government. All 2.1 million get that adjustment.
    The within grades that we were talking about here, not 
every employee gets that on an annual basis. Those are 
experience based. So you need--some people get them every year; 
some people get them every 3 years. So there are some people 
who don't get any for a 2-year period, and those numbers are 
not additive to the budget. They're built into the agency's 
baseline. There are always people leaving and coming, and as 
senior people leave, higher salary waged folks leave, younger 
folks come in at lower pay, and so that balances out within the 
agency budget.
    And so the reason why I would have argument with the 
numbers that were being thrown around is that those are within 
the overall budget, and what the President has done is to 
direct those downward. The President has a 5-year domestic 
spending freeze, which will take our budget to what it was when 
Eisenhower was in the White House.
    Now, that is, you know, a $400 billion savings. That's the 
way to approach reducing the Federal Government, not by across-
the-board cuts, not by freezing within grades, but by dealing 
with the budget numbers that are real. That's what the 
taxpayers want. That's what the President is trying to deliver.
    Mr. Davis. And at the end of the day you've experienced 
some cost savings and you've reduced budget and you've 
accomplished something.
    Let me go to another area. Many people that I encounter 
take the position or they believe that somehow or another the 
public work force is not as efficient, not as productive, and 
ultimately not worth as much as private sector employees; and 
almost no matter what kind of information you give to them, 
they still maintain that feeling. Have you ever encountered any 
studies, any reports, any information that would validate that 
kind of thinking?
    Mr. Berry. There aren't any, sir. In fact, I can give you 
sort of two things that I think address your point.
    The first is my own experience. I've been in Washington, 
DC, since 1985 and sat in the chairs where many of your staff 
are sitting today and would regularly hear members of the 
Reagan administration and the Bush administration come in and 
variance or under testimony was what do you think of Federal 
employees? And to a person, to a person, every one of them 
said, I have been so impressed with the quality, the integrity, 
the work ethic, the dedication, and the skill that I've 
encountered. And, in fact, many of them will list it as the 
biggest surprise they encounter in Washington.
    Now, I was with Clay Johnson last Friday night. He says the 
exact same thing. So I think anecdotally people who are around 
Federal employees, who see what they do, come away very 
impressed.
    But the other thing, if I could just very quickly, is we 
survey our employees every year with questions. The most recent 
employee survey showed that 97 percent of respondents answered 
positively to the question, when needed, I am willing to put in 
extra effort to get the job done. Whether it means staying 
late, whether it means working over a weekend, whatever, I will 
work to get it done. It matters to America.
    Our Federal employees are committed. They understand the 
criticality of their mission. They are defending us from 
terrorists. They are protecting our interests. And I'm here to 
tell you, I have never seen a study that would question their 
work ethic.
    Mr. Davis. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Ross. Thank you.
    Mr. Cummings, the distinguished ranking member of the 
Oversight Committee. Mr. Cummings. Thank you.
    Mr. Cummings. Thank you.
    One of my concerns is that, Mr. Berry, is that--Director 
Berry, is that so often Federal employees are getting a bad 
rap. We all up here work with Federal employees every day, and 
we see what they go through. On this side of the aisle, every 
single one of our employees had to take a 5 percent cut. Their 
salaries weren't frozen. They took a cut. In a time when milk 
is going up, gas is going up, rent is going up, they took a 
cut. And a lot of times I think we forget that public employees 
carry out very important functions until they're not present. 
And we take so much for granted; and part of the reason why we 
take so much for granted, Director Berry, is because they are 
dependable.
    And you said something a little bit earlier, and I want you 
to elaborate on this. I look at the people who work for me--
work with me, rather--and I look at their education levels and 
I know without a doubt that they could be making a whole lot 
more money than working on this hill. I know that they could be 
working a lot less hours, some of them working till 2 and 3 
a.m. And they don't get a whole lot of money. And I know that 
they get certain benefits, but you've gone over those benefits.
    And I just want you to go back--because I'm tired of these 
public employees being beaten up on. It pains me tremendously. 
And so I just want you to go back----
    And you said something about education. Because I see--and, 
by the way, when you talk about education, a lot of them are 
struggling trying to pay back loans because they wanted to be 
the best that they could be. They wanted to take advantage of 
opportunity. They wanted to come. And then, after they got an 
education, they didn't go to Wall Street. They didn't go 
looking for the big bonuses. They came because they wanted to 
serve the public; and they have shed blood, sweat, and tears, 
simply trying to lift us up to make this Congress better, to 
make sure our airports are safe, even cleaning the airport 
bathrooms, cleaning these places, cafeterias. So talk about 
that education thing again, because I think we lose sight of 
that.
    Everywhere else, by the way, you get elevated because you 
get an education. A lot of these folks have an education and 
they just stay level, pretty much level funded. And now I know 
over the next 2 years the President has said they're going to 
be level funded.
    But, anyway, talk to me about that.
    Mr. Berry. Well, Mr. Cummings, the President is, as are all 
Americans, grateful for the sacrifice that Federal employees 
are enduring. The pay freeze for 2 years is a real sacrifice. 
As you mentioned, especially those who have families, who have 
to deal with the inflationary costs and pressures on a family, 
the cost of milk, the cost of gas, they still have to commute. 
And they still have to deal with those costs. And the President 
is clearly aware of their sacrifice and is grateful for it and 
recognized that they were the first ones asked to step up to 
the plate to help the country address the deficit.
    Mr. Cummings. And, by the way, let me just interject 
something. When I had to ask the employees, when I took over 
this committee, the Democratic side, I had to ask every single 
employee, I asked them, would you take at least a 5 percent 
cut? And listen to me, Director, not one of them, not one 
objected. And I asked them why. You know, I said, I know you're 
going to have tough times. They said, because we want to serve 
the public.
    And I think we have to be very careful in these 
conversations that we have because we need to encourage the 
best and the brightest to come to government. We don't want to 
be caught up in a culture of mediocrity. We want the best.
    But, anyway, I cut you off. What were you saying?
    Mr. Berry. Well, Mr. Cummings, I think it goes to what you 
were saying also about our benefit comparisons. And you're 
going to hear a lot that somehow our benefits are out of whack 
with the private sector. I would argue they're very much in 
line, especially when you account for that we don't have profit 
sharing or we don't have stock options in the Federal 
Government. And so most of my work force is comparable with the 
large companies in the private sector, so it is not fair to 
compare Federal employees to the entire civilian labor force. I 
don't have retail clerks. I don't have short order cooks. I 
don't have waitresses. God bless all of those, and they should 
be paid as they should be paid.
    But to say the Federal employees should be paid based on 
that is not appropriate. You need to compare like to like, 
apples to apples. The Fortune 500 companies are a much better 
comparison when you're looking at who we are competing for in 
terms of recruitment and retention.
    But going to your original question, sir, you asked--the 
current data from the current population survey shows that half 
of Federal workers work in the nine highest-paying occupations 
such as judges, engineers, scientists, nuclear plant 
inspectors. By comparison, only a third of the private sector, 
the civilian labor force, work in those nine categories.
    And then look at the opposite end of that spectrum. In 
contrast to a fifth of private sector workers in the four 
lowest-paying occupations, the ones that have high turnover, 
only 1 in 13 of Federal employees are in that category.
    So when you look at these gross averages, you can see how--
you know, for example, that comparison there, it is looking at 
the total civilian labor force, not at like to like. And, as 
you see, what you mentioned when you come into education, or 
comparing these things, we need to reflect that the Federal 
work force is a highly skilled, highly challenged work force.
    Mr. Cummings. Thank you very much. I see my time has 
expired. Thank you, Mr. Chairman.
    Mr. Ross. Yes, sir. Thank you, Mr. Cummings.
    I now yield to the distinguished gentleman from Virginia, 
Mr. Connolly, for 5 minutes.
    Mr. Connolly. I thank the chairman.
    And if I could pick up where Mr. Cummings was just leaving 
off, Mr. Berry, if I understand your testimony, what you're 
saying is that the skill set mix of the public sector, Federal 
work force, is quite different than the private sector skill 
set of the work force at large in the country.
    Mr. Berry. Of the total civilian labor force, absolutely, 
Mr. Connolly. That's my core point. And we really need to 
compare--we're running, if you will, a company of 2 million 
employees that is dealing with challenges that rival anything--
really doesn't have a comparison in the private sector, because 
it's bigger than the Fortune 500, if you will. But to compare 
it to the total civilian labor force, I can see why, 
politically, that might be a popular thing to do if you had a 
certain ideological perspective, but it unfairly compares 
wages, and it is not an apple-to-apple comparison.
    Mr. Connolly. With respect to the size of the Federal work 
force, is the current Federal work force significantly larger 
than it was when President George H.W. Bush was in the White 
House in 1991?
    Mr. Berry. Mr. Connolly and Mr. Ross, I can leave this or 
give this to you for the record. This is from GAO, so I did not 
make up these numbers, but it shows you the civilian labor 
force from 1950 to the present. It is this red line. As you can 
see, it is pretty flat. Federal expenditures are the blue line, 
Federal outlays. So outlays have gone up, absolutely, over that 
time period, but the work force has remained largely stable. 
And so these are GAO numbers.
    Mr. Connolly. In absolute numbers?
    Mr. Berry. Yes. Yes, sir.
    Mr. Connolly. So, despite the sign behind Mr. Lynch's head, 
which I'm sure the ranking member would prefer not be put 
there, I hope our Republican friends remember this when we're 
back in the majority. There will be all kinds of signs. You may 
not like them. Or we could be civil to one another and actually 
respect the fact that the ranking member sits there and there 
shouldn't be a sign behind his head that he doesn't want. But 
that would be a different issue.
    Where were we, Mr. Berry? Oh, yes, so, despite the 
hysterics, actually, work force hasn't grown that much, but the 
missions have. Is that correct, Mr. Berry?
    Mr. Berry. There's no question.
    Mr. Connolly. Can you think of some missions that have 
expanded since 1991 even though the work force has not?
    Mr. Berry. Absolutely. And in fact the majority of that 
increase is in what would either be in----
    Mr. Connolly. Mr. Berry, I'm going to ask you not to point 
to a sign that we're going to pretend does not exist.
    All right, go ahead.
    Mr. Berry. It would be either Homeland Security, dealing 
with the very issue you're talking about since 9/11. We have 
obviously had to stand up a significant counterterrorism force 
in the country. Both parties are in agreement that is something 
we need to do. We need to protect our borders well. Both 
parties agree to that. So we need to be careful and we need to 
protect our vets when they come home with serious injuries, and 
we need more nurses and doctors to care for them.
    Mr. Connolly. So let me understand. For example, since 
President H.W. Bush, George H.W. Bush, was in the White House 
in 1991 and the work force he had, which is roughly the work 
force we have, we created a whole new agency of Federal 
Government, Homeland Security; is that correct?
    Mr. Berry. Yes, sir.
    Mr. Connolly. In response to the terrorist attacks of 9/11; 
is that correct?
    Mr. Berry. Yes, sir.
    Mr. Connolly. We beefed up FEMA after its utter collapse 
and fecklessness in responding to Hurricane Katrina New Orleans 
and the Gulf Coast; is that correct?
    Mr. Berry. I would have to check my budget numbers to 
answer that one, sir.
    Mr. Connolly. I think the answer is yes.
    Of course, since President H.W. Bush was in the White 
House, we are fighting two wars right now, Iraq and 
Afghanistan; is that correct?
    Mr. Berry. Yes, sir.
    Mr. Connolly. And all of the attendant costs associated 
with that, including, as you say, caring for the wounded 
veteran when he or she returns home.
    Mr. Berry. And increasing the hand-off in Iraq. There is a 
stand-up, an increase, as Mr. Lynch knows, who has been there 
many times. As the military mission is drawing down, the State 
Department employees are drawing up. So there is an increase of 
people going into a very highly dangerous area, serving their 
country and putting their lives at risk. That's a civilian 
increase. And so we need to recognize that, and that number is 
folded into this number as well.
    Mr. Connolly. Good point, and I'm going to end on that.
    So, in other words, there are civilian Federal employees 
putting their lives at risk next to uniformed military in both 
Iraq and Afghanistan; is that correct, Mr. Berry?
    Mr. Berry. Absolutely. And Mr. Lynch has invited me--and I 
look forward to being able to attend with him--to one of his 
visits to Iraq or Afghanistan where we can honor the service of 
both our military and our civilian work force that both put 
their lives at great danger to serve our country.
    Mr. Connolly. Thank you. Thank you.
    I see my time is up. Thank you, Mr. Chairman.
    [The prepared statement of Hon. Gerald E. Connolly 
follows:]
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    Mr. Ross. Thank you, Mr. Connolly.
    That being the last of our questioners, we'll recess now. 
Thank you, Mr. Berry, very much for being here; and we'll take 
a few minutes to have our clerks prepare for the next panel.
    Mr. Berry. Thank you, sir. It is an honor.
    Mr. Ross. Thank you.
    Welcome to our second panel. We'll now begin the second 
part of our hearing today.
    Today we have with us Mr. James Sherk, who is a senior 
policy analyst in labor economics at the Heritage Foundation. 
We also have Dr. Andrew Biggs, a resident scholar at the 
American Enterprise Institute. Mr. Max Stier is the president 
and CEO for the Partnership for Public Service; and Ms. Colleen 
Kelley is the national president of the National Treasury 
Employees Union.
    If you all wouldn't mind, please stand to be sworn in. 
Pursuant to committee rules, all witnesses must be sworn in.
    Please raise your right hands.
    [Witnesses sworn.]
    Mr. Ross. Thank you. Let the record reflect that all 
witnesses answered in the affirmative. Please be seated.
    I will now recognize each of you for 5 minutes to summarize 
your testimony. The transcript, of course, has been submitted 
for the record.
    Mr. Sherk, we will start off with you. You have 5 minutes, 
thank you.

   STATEMENTS OF JAMES SHERK, SENIOR POLICY ANALYST IN LABOR 
   ECONOMICS, THE HERITAGE FOUNDATION; ANDREW BIGGS, PH.D., 
  RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE; MAX STIER, 
PRESIDENT AND CEO, PARTNERSHIP FOR PUBLIC SERVICE; AND COLLEEN 
 KELLEY, NATIONAL PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION

                    STATEMENT OF JAMES SHERK

    Mr. Sherk. Chairman Ross, Ranking Member Lynch, and members 
of the subcommittee, thank you for inviting me to testify.
    My name is James Sherk, and I'm a senior policy analyst at 
the Heritage Foundation. The views I express in this testimony 
are my own and should not be construed as representing an 
official position of The Heritage Foundation.
    I want to explain to you this afternoon that the Federal 
pay system is broken. As a consequence of its failings, the 
average Federal employee earns significantly more than they 
would in the private sector.
    There are three features of the Federal pay system that 
Congress should be aware of. The first feature is that it does 
a poor job of approximating market pay. The General Schedule 
places heavy emphasis on internal equity so the job's similar 
level of work receive the same pay. An engineer, an IT 
specialist, and a budget analyst at the same GS grade all 
receive the same pay.
    The law requires the President's Pay Agent to set Federal 
pay by determining what level of work a private sector job 
entails and what General Schedule grade that would translate 
into. The Pay Agent then sets the Federal pay by averaging pay 
across different jobs it determines belongs in each grade. This 
effectively superimposes the General Schedule system onto 
private sector payrolls. However, private sector employers do 
not base pay on anything remotely resembling the General 
Schedule. Market forces such as relative supply and demand for 
different skills, specialties, and occupations determine 
private pay.
    Employees in different occupations performing similar, 
``levels of work,'' often earn very different salaries. As a 
result, Federal pay often looks nothing like market rates in 
both directions. Some Federal employees have wildly inflated 
salaries, 40 to 50 percent above what they would earn in the 
private sector. Other Federal employees do not receive a cash 
wage premium at all and may receive slightly below market 
rates. Typically, highly skilled workers such as scientists and 
lawyers do not receive premium wages in the government.
    The second feature of the Federal pay system that Congress 
should understand is that, on average, it overpays Federal 
employees. My research using data from Bureau of Labor 
Statistics shows that, after you account for education, 
experience, and occupations so that you can make an apples-to-
apples comparison, once do you that the average Federal 
employee makes 22 percent more an hour than they would if they 
were in the private sector. Including the value of their 
benefits raises the Federal compensation premium to between 30 
and 40 percent. The average Federal employee earns more than 
they would then if they were in the private sector, and paying 
this premium will cost taxpayers almost $50 billion this year.
    Many other economists with views that span the political 
spectrum have come to this view. Dr. Alan Krueger served as the 
Chief Economist at the Treasury Department in the Obama 
administration. He found that--and I'm quoting him--``The 
Federal Government appears to consistently pay higher wages 
than the private sector for comparable employees. Economists do 
not debate whether the Federal Government overpays its 
employees. The research consistently shows that they are.''
    It is important to emphasize, however, that this average 
Federal premium is only part of the total variation between 
Federal and market pay. It is simultaneously true that many 
Federal employees are not overpaid and that the Federal 
Government pays private sector employees more on average.
    The only major study to disagree with this conclusion is 
the President's Pay Agent Report, which uses the flawed 
methodology I described. No administration has ever found the 
results of the Pay Agent Report credible or acted on them. The 
Pay Agent itself frequently expresses concerns with the 
methodology that the law requires it to use.
    This is for good reason. If Federal employees were 
underpaid, then the Federal Government would have severe 
retention problems. Just the opposite occurs. Federal employees 
quit their jobs just one-third as often as private sector 
workers. This happens because they know they are getting a 
better deal in the Federal Government than they could get in 
the private sector.
    The third feature of the Federal pay system that Congress 
should understand is that it rewards time served, not 
performance. Woody Allen once observed that 90 percent of life 
is just showing up. For Federal employees, 75 percent of life 
is just showing up. Less than one-quarter of the money spent on 
Federal pay increases is meaningfully tied to performance. The 
rest is either automatic or essentially automatic.
    Employees on the General Schedule start at the first step 
of their assigned job grade. As long as they receive a 3 out of 
5 performance rating, they automatically receive step increases 
until they advance to step 10. Managers who wish to give 
ratings below 3, however, bear the burden of proving that the 
employee performs poorly. The system assumes the Federal 
employees are adequate and gives them raises. Consequently, 
Federal managers rarely use performance ratings below 3; and, 
like I said, most Federal employees receive step increases. It 
is social promotion for adults.
    Unsurprisingly then with this system, Federal employees 
receive raises and promotions more rapidly than private sector 
workers do. My research shows that this is one of the major 
reasons Federal employees receive above-market pay.
    Thank you, and I appreciate the opportunity to talk to you 
about the Federal pay system and how its flaws inflate Federal 
compensation.
    [The prepared statement of Mr. Sherk follows:]
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    Mr. Ross. Thank you, Mr. Sherk.
    Dr. Biggs, you're recognized for 5 minutes.

                   STATEMENT OF ANDREW BIGGS

    Mr. Biggs. Chairman Ross, Ranking Member Lynch, and members 
of the committee, thank you for inviting me to testify with 
regard to Federal employment compensation.
    My testimony today is based upon joint research with Jason 
Richwine of The Heritage Foundation, and a copy of our working 
paper has been enclosed with my testimony.
    We limit our analysis to one question: Do Federal employees 
on average receive greater compensation than these individuals 
could receive in the private sector? Our answer, which is 
consistent with several decades of economic research, yes.
    To begin, you're doubtless aware of the President's Pay 
Agent, which reports that Federal jobs pay over 20 percent less 
than comparable private sector positions. You should also be 
aware of why most economists are skeptical of the Pay Agent 
approach. The most important reason is simply that the Pay 
Agent's approach compares apples and oranges.
    While the Pay Agent claims to compare similar Federal and 
private sector jobs, it does not compare similar workers. That 
is, it does not account for the fact that the Federal 
Government hires workers at higher pay grades and promotes them 
faster than does the private sector. For instance, a person 
working as a senior accountant in the Federal Government may 
have the experience and education of only a junior accountant 
in the private sector.
    A 1984 Congressional Budget Office study concluded that the 
average Federal worker resides two-thirds of the pay grade 
above the similar private sector employee. A 1997 academic 
study found a larger gap of three-quarters of a pay grade. A 
2002 study using BLS occupational data showed, ``That Federal 
workers have significantly fewer years of education and 
experience than private sector workers in the same level of 
responsibility in an occupation.'' Once this study accounted 
for differences in experience and education, the supposed pay 
penalty disappeared.
    So how do economists study public-private pay differences? 
Labor economists begin by controlling for how individual 
workers differ with regard to earnings-related factors such as 
experience, education, geographic location, and so forth.
    Let me reiterate here that, despite what we heard 
throughout Director Berry's testimony and in some of the 
questions, the study I've conducted and that Mr. Sherk has 
conducted do control for differences in education between 
Federal employees and private sector employees. They do control 
for that. By controlling for these differences, you can isolate 
the effects on pay of working in the Federal or the private 
sector.
    Using Census data from 2006 through 2010, we found that 
Federal employees received average salaries 14 percent higher 
than similar workers employed by large private sector firms. 
This is actually a conservative comparison, since large firms 
offer the best salaries and benefits. If we compare to all 
private sector workers, the Federal salary premium rises to 22 
percent.
    Some argue, however, that this method ignores relevant 
differences between workers. For instance, our educational data 
tells us only if you have a certain degree, not your GPA or the 
quality of the school you attended.
    As an alternative, we followed individual workers' salaries 
over time, tracking how their pay changed as they moved into or 
out of the government. Workers who switched between the Federal 
and private sectors earned 8 percent more when employed by the 
Federal Government, and this is just the initial premium upon 
switching. Whether we examine different workers at the same 
point in time or follow the same workers over time, it is clear 
that most Federal employees would earn lower salaries in the 
private sector.
    Benefits are an important component of overall 
compensation, but comprehensive data on Federal benefits must 
be assembled by hand. Using OMB and OPM data, we calculated the 
value of a wide range of Federal benefits, from pensions and 
health coverage to vacation time and employee awards. On 
average, Federal employees receive total benefits equal to 
around 66 percent of their salaries. In large private sector 
firms, benefits average 50 percent of salaries. In other words, 
Federal workers receive a benefit premium of around 33 percent 
over similar private sector employees. Combined Federal 
salaries and benefits are roughly 25 percent above what similar 
private sector employees would receive.
    Economists since Adam Smith have noted that positions with 
greater job security should pay lower salaries, just as safe 
investments like bonds pay lower returns than stocks. The BLS 
reports that in any given year Federal workers are less than 
one-third as likely as private sector employees to be fired or 
laid off.
    We estimated the value of job security using the tools of 
financial economics to calculate the pay reduction a private 
sector worker would willingly accept to have the increased job 
security of Federal employees. Using conservative assumptions, 
we find that Federal workers' job security is equivalent to an 
extra 11 percent of pay. When salaries, benefits, and job 
security are properly valued, the total Federal compensation 
package is worth upwards of 39 percent more than is paid to 
similar private sector workers. The total Federal pay premium 
could top $60 billion per year.
    Identifying the pay premium is far easier than fixing it. 
Simple pay freezes or furloughs are blunt instruments that will 
not get to the heart of the issue. Federal pay must be made to 
reflect market conditions not with a one-time adjustment but 
with fundamental reforms that work consistently into the 
future.
    Thank you.
    [The prepared statement of Mr. Biggs follows:]
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    Mr. Ross. Thank you, Dr. Biggs.
    Mr. Stier, you are recognized for 5 minutes.

                     STATEMENT OF MAX STIER

    Mr. Stier. Thank you very much, Chairman Ross, Ranking 
Member Lynch, and members of the subcommittee. It is a pleasure 
being here, and I appreciate the opportunity to testify.
    I respectfully suggest that we're asking the wrong question 
here. It is not whether Federal workers are underpaid or 
overpaid, but rather how do we move the system to a more market 
sensitive system? John O'Leary at Harvard said it is a 
Goldilocks truth. In any group of public servants you are going 
to find some that are underpaid, some that are overpaid, and 
some that are paid just right. Our challenge is to make sure 
that our government has the best talent for the best price.
    I would propose then we have seven core principals that you 
look at in thinking about where we go from here:
    First, No. 1, obviously, we need a pay system based on the 
market for needed talent. We need to make sure that, again, we 
have competitive salaries set not just by geography but also by 
occupation and the relevant factors that have been set already.
    Second, we need to account for benefits cautiously. So, 
yes, benefits do matter, but I don't think you can look, for 
example, at job security and see that as an across the board 
benefit. If you are trying to hire the very critical 
cybersecurity talent coming out of school today, the fact that 
a job may have more security isn't going to be really relevant 
for them. In fact, that may be a turnoff. You have to 
understand your talent, you've got to understand what appeals 
to them, and you've got to be specific to the jobs, the talents 
that you actually need.
    Third, we need to get better data. Right now, we are 
looking at, again, across-the-board comparisons. If you look by 
geography, we're not looking at the very concrete specific 
surveys that most companies do when they are trying to analyze 
what they ought to pay for the talent that they need, and in 
government we need to do a lot better in order to get that 
information.
    Fourth, we also need to look at the quality of the hires we 
are looking at. This is actually a balance here. You think 
about what you're paying, but you have to think about what 
you're paying for. And, right now, in government we don't do a 
very good job of understanding what quality talent is and how 
to retain it. And unless we have those quality measurements 
then in fact we're not going to ever be able to design the 
right system. So we're not going to know whether we're getting 
the right value for the money that is being spent. So we need 
to make sure that agencies are recruiting the right talent and 
we know what right talent looks like.
    No. 5, we need to make sure that we reform the Federal 
classification system. The pay system, the classification 
system are intertwined. The classification system wasn't 
designed for the world that we live in today, and we need to 
make sure that's aligned with today's job market.
    An example, a GS-11 is someone who performs work, ``of 
marked difficulty and responsibility,'' while a GS-12 is 
someone who performs work of, ``a very high order of difficulty 
and responsibility.'' It doesn't make any sense. If you're a 
GS-12, engineer, HR professional, budget analyst, whatever it 
may be, you get paid the same. A lot of internal equity, but 
what that means is that you're really not actually matching the 
market for talent.
    No. 6, we need to make sure we have good work force 
planning. We need to make sure that we actually know what 
talent we need. Today, we don't actually have a governmentwide 
plan on the human capital that we need to make sure the 
government runs right, and we need that. In fact, we're not 
forecasting enterprise-wide the sorts of skills that we need to 
be able to succeed in the world we're going into; and that's a 
component piece of what we ought to be looking at here.
    And then, No. 7, we need real flexibility. If you look at 
the government today, you in fact have a lot of agencies that 
have already been given different authority to create different 
systems. For example, the VA, they were finding that they 
couldn't actually recruit the doctors and nurses that they 
need, so they were given authority. Financial regulatory 
institutions. You have a diverse set of agencies all trying to 
do different things. We need to make sure that whatever is done 
with this system that it permits for the flexibility to allow 
for the different needs of these organizations to recruit the 
talent that they need.
    What about going forward here? I propose that there are 
four key recommendations:
    No. 1, this has to be a collective effort. We need the best 
minds. We need to make sure everyone is at the table. That 
includes employee groups. It includes, obviously, the best 
minds that know about compensation that can help design the 
right thing.
    Second, we need to design from where we are today. This is 
not a blank paper exercise. We have to design something that 
takes us from where we are today to where we need to go; and 
that may mean there are populations, for example, that may be 
viewed as being overpaid. Well, how do you make sure that they 
are treated fairly in the process of moving them to the new 
system? That's an extra challenge.
    No. 3, we need to build off of what's worked. We've had 
experiments in government before. We've had demonstration 
project authority for 30 years. There are organizations that 
have tried different things. I had mentioned earlier the 
agencies that have already been given different authority, 
whether it's financial organizations or many, many others, GAO 
being another example; and we have to be looking at what's 
worked with them.
    And then, finally, we need to take a step back and 
understand what success looks like. We need accountability on 
our end to make sure that we're actually driving toward the 
right outcomes. And, again, that ought to be getting the right 
talent at the most cost-effective fashion.
    So Steve Colby said it best. He said, the main thing is to 
keep the main thing the main thing. And that ought to be----
    Again, outcome is for the American people which requires 
the best talent at the most cost-effective mechanism and price. 
So we have to avoid the distraction, I believe, of thinking 
underpaid, overpaid, and focus on that key issue.
    I appreciate the opportunity to be before you and hope I 
can answer some questions later.
    [The prepared statement of Mr. Stier follows:]
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    Mr. Ross. Thank you, Mr. Stier.
    Ms. Kelley, you're recognized for 5 minutes. Thank you.

                  STATEMENT OF COLLEEN KELLEY

    Ms. Kelley. Thank you very much, Chairman Ross, Ranking 
Member Lynch, and members of the subcommittee for the 
opportunity to testify today.
    The pay system for the large majority of white collar 
Federal employees is known as the General Schedule. Its main 
thesis is that Federal pay should be comparable to pay for 
similar work in the private sector.
    In 1990, Congress enacted the Federal Employees Pay 
Comparability Act [FEPCA], which introduced the concept of 
locality adjustments to make the pay system even more sensitive 
to geographic market forces. FEPCA requires the Bureau of Labor 
Statistics to conduct surveys of the 32 separate localities and 
then provide that information to the President's Pay Agent, 
which, as we've heard today, consists of the Secretary of 
Labor, the Director of OMB, and the Director of OPM, who then 
have the statutory responsibility of submitting a report to the 
President each year that lists pay gaps in the 32 areas as well 
as a national average gap. The Pay Agent reports showing lower 
pay for Federal employees have been consistent in Democratic as 
well Republican administrations.
    The reasons that the data from BLS and The Heritage 
Foundation differ are many. Most importantly, BLS compares 
actual job duties, not just job titles but job duties. And, as 
we've heard, more than 54 percent of Federal workers work in 
the nine highest-paying occupation groups. Federal employees 
are more experienced, they are older, and they have many more 
years of education, as we've already heard, than private sector 
workers.
    With regard to benefits, Federal employees as well as 
Members of Congress are covered by the Federal Employees Health 
Benefit Program. Enrollees pay, on average, 30 percent of the 
total premium cost. According to Mr. Sherk, in the private 
sector workers pay 18 percent of their premiums for single 
plans and 29 percent for family plans.
    In the 1980's, the Federal Employees Retirement System was 
created to replace a defined benefit system. There has been 
discussion about that today, also. The earlier plan had serious 
and growing unfunded liability problems that are similar to 
those faced by many States today. But the first system today is 
fully funded and financially sound with no unfunded liability. 
And Federal retirement pensions are not overly generous. Close 
to 70 percent of Federal retirees receive annuities of less 
than $3,000 a month.
    Mr. Chairman, in a recent interview you were quoted as 
indicating your support for instituting so-called pay for 
performance in the Federal Government. And I'm a big believer 
in setting goals, meaningful goals, and then figuring out how 
to reach those goals. With regard to pay for performance I 
believe that past conversations have proven that the goals are 
very often glossed over with statements like we want 
flexibility or it needs to be more modern.
    It seems to me that a pay system should have a couple of 
major goals attached it: No. 1, does it help to recruit and 
retain the best people for the jobs; and, No. 2, does it help 
to motivate employees to better achieve the agency mission? I 
don't know of a single pay-for-performance system that is 
showing progress in either of these goals today in the Federal 
Government.
    I discuss the serious problems with several of these 
systems in my written statement, including those at the TSA and 
the repealed NSPS system at the Department of Defense.
    The Treasury Inspector General for Tax Administration has 
gone so far as to say of the IRS managers pay banding system 
that the IRS risks reducing its ability to provide quality 
service to taxpayers because the Internal Revenue pay-for-
performance system potentially hinders the IRS's ability to 
recruit, retain, and motivate highly skilled leaders.
    The Government Accountability Office has found that the 
flexibilities that are most effective in managing the Federal 
work force include things like time-off awards and flexible 
work schedules that allow employees to better balance the 
demands of career and family life. These and other existing 
flexibilities need to be used more widely.
    Suggestions have also been made that contracting out more 
Federal work will lead to more cost efficiency. We have had 
recent experience with this notion, and it has not proven true. 
According to OMB, excessive reliance on contractors has eroded 
the in-house capacity of agencies to perform many critical 
functions and has undermined their ability to accomplish their 
missions.
    The Obama administration has begun to reform this out-of-
control contracting by requiring agencies to cut wasteful 
contracting practices and to improve oversight and 
accountability. These efforts are expected to result in $40 
billion in annual savings beginning in 2011.
    Mr. Chairman, some of the hardest-working people I 
represent make less than $30,000 a year, yet they are facing a 
2-year pay freeze; and retirees are in the second year without 
a cost of living increase. NTEU members understand that the 
country faces challenges; and although they did not cause the 
fiscal crisis, they are willing to work to help solve it.
    Thank you for the opportunity to testify here today, and I 
will be glad to answer any questions.
    [The prepared statement of Ms. Kelley follows:]
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    Mr. Ross. Thank you, Ms. Kelley; and I will yield to myself 
5 minutes.
    Interesting in reading each transcript and then listening 
to both sides of the dais here is that I think we all believe 
that we need to recruit and retain and reward good employees in 
Federal employment, and I think that's a good common ground to 
begin with.
    I also note in the last panel there was testimony given 
about how the Federal work force has remained almost stable in 
terms of numbers since President George H.W. Bush until today, 
but yet there seems to be a correlation also that, inversely, 
we have seen an increase in debt significantly since George 
H.W. Bush, well over 60 percent.
    And, Mr. Sherk, my question to you is, if you were a 
businessman and you had a work force and yet you maintained 
your same work force but you've increased your debt by 60 
percent, would that be indicative of something that needed to 
be done with your personnel management?
    Mr. Sherk. I think it would be a sign that you have some 
pretty serious problems.
    Mr. Ross. You mentioned also--you talked briefly about 
Federal benefits, benefits from Federal employees, what impact 
does it have on total compensation, the value of Federal 
employee benefits?
    Mr. Sherk. It increases it fairly substantially. If you 
take a look at only the wage premium, the cash pay that shows 
up in your pay stub, Federal employees, again, on average, when 
you're making that apples-to-apples comparison are making 22 
percent more an hour. But if you then add in the value of those 
benefits like the pension benefits, both the defined benefit 
and the defined contribution pension they receive, and add in 
the value of those remaining benefits, that compensation 
premium increases between 30 and 40 percent. So they get 
generous pay and even more generous benefits.
    Mr. Ross. Dr. Biggs, you've discussed that lowering wages 
would only slightly reduce the quality of the Federal job 
applicants. Could you discuss any of your work that led to that 
conclusion?
    Mr. Biggs. Well, in our working paper we actually cited 
some research by Professor Steven Venti of Dartmouth College in 
New Hampshire. And the research he looked at are what are 
called queues for government jobs. Research tries to look at is 
there more demand for government jobs than private sector jobs? 
Are there people waiting out there who would like to get 
government jobs who cannot?
    What Professor Venti found was that three to six times as 
many people would be willing to accept Federal employment as 
are actually offered jobs, implying that Federal jobs offer 
significantly more attractive overall compensation package than 
private sector employees.
    Because you have such a large queue for Federal jobs, Venti 
found that you could cut salaries significantly without hurting 
the quality of applicants. Venti found that even a 16 percent 
reduction in salaries would only slightly reduce the 
educational qualifications of Federal job applicants.
    I would add that Professor Krueger of Princeton took on an 
even simpler approach. He measured the number of qualified 
applicants that Federal job openings received relative to 
private sector job openings. He found that Federal jobs, on 
average, received 25 to 30 percent more applicants than private 
sector positions. Again, this is another indication of demand 
for Federal jobs, which means that if the salary were reduced 
you would not see a large reduction in the quality of 
applicants for Federal position.
    Mr. Ross. Thank you.
    Mr. Stier, I want to go to you real quickly. Because the 
General Schedule which has been around since 1949 doesn't take 
into consideration any market forces, does it?
    Mr. Stier. It doesn't. It takes----
    Mr. Ross. Locality.
    Mr. Stier. Locality, correct.
    Mr. Ross. But in terms of incentivizing somebody to do 
well, as opposed to somebody just to show up and get a 
paycheck, it really doesn't make that distinction, does it?
    Mr. Stier. From a recruiting perspective, it's not market 
sensitive. On the performance side, there are opportunities to 
give performance bonuses to people, to have increased step 
increases. So there are performance mechanisms that are 
currently in the system.
    Mr. Ross. And you've talked about--to be quick here, you've 
talked about pay-for-performance programs.
    Mr. Stier. Yes.
    Mr. Ross. And I'd like to know quickly, do you feel that 
there is an adequate pay-for-performance system out there that 
would adequately compensate those in the Federal work force 
based on outcomes?
    Mr. Stier. I think that the data is clear, which is 
employees don't believe that they are currently being rewarded 
for doing better work. So I think the answer is, no, the system 
is not working in the way it ought to. Otherwise, employees 
would be saying something different.
    Mr. Ross. But do you think there could be one implemented, 
a pay for performance?
    Mr. Stier. I think that there could be. But I think the 
work that needs to be done first is to get a handle on how to 
make sure we know what good performance is and to be able to 
reward it accordingly.
    Mr. Ross. OK. Ms. Kelley, what I would like to do is I want 
to just have you step aside from your role with the Treasury 
Union right now and assume, if you will, that you were in 
charge of making decisions of a corporation that was showing a 
significant decline in revenue, so much so that their debt has 
increased by 60 percent over a 10-year period of time and you 
have to make a decision about personnel. Would you rather 
pursue a decision about personnel that you would have to let 
people go or have to reduce their salaries?
    Ms. Kelley. Well, the first thing I want to know is what 
caused the decline in revenue and what caused the debt.
    Mr. Ross. But assume that it is. It is what it is, so now 
you have to make a decision.
    Ms. Kelley. If the work force didn't cause it, then I need 
to get to the root cause of what did. And in this case I think 
there are a lot of other things to look at, like----
    Mr. Ross. So you can't say one way or the other what you 
would do.
    Ms. Kelley. Well, as I said, the work force didn't cause 
the debt. If they didn't cause the debt, then I think that 
working with them and figuring out what can be done and my bet 
is they are going to have some suggestions of how to change and 
do the work better and to not do things, for example, like cut 
taxes on the wealthiest Americans that is probably impacting 
the revenues coming in.
    Mr. Ross. My time's up.
    I now yield to the distinguished Member from Massachusetts 
and the ranking member, Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    President Kelley, you can put your union hat back on.
    Look, 60 percent of Federal employees work in basically 
three departments, one being DOD; and we've already had a 
number of Members talk about the fact that we're in two wars. 
My wife says I spend way too much time in Iraq and Afghanistan. 
She's probably right. The rest of the employees in that large 
group work at the VA, and they work at DHS.
    I know from my own experience when we look at what's going 
on in Iraq and Afghanistan, I know we have about 10 million--10 
million private contractors across our government. It is sort 
of a shadow government. And more and more responsibilities are 
being contracted out, and I don't see any reduction in cost.
    You know, we had a dilemma early on in Afghanistan where we 
were trying to decide whether embassy personnel, congressional 
codels should be guarded by Blackwater. I've been under the 
care and protection of Blackwater. They do an amazing job. But 
let's just look at the cost here for a minute, though.
    Right now, Blackwater charges us or Xe or Triple Canopy 
charges about $1,500 a day--$1,500 a day for one security 
officer. Whereas if I have a U.S. Marine or Army solider do it, 
we're talking about $54,000 a year for the average. So $54,000 
a year versus $450,000 a year.
    And I see in my own district--you know, that goes the same 
for USAID. USAID does wonderful work in Afghanistan and Iraq, 
but when that goes over to the contractor's side the price goes 
right through the roof.
    And so it just troubles me greatly that people are saying 
we'll privatize this stuff, and we'll save money. That has not 
been my experience.
    As well in my own district, I spend a lot of time at the 
VA. I have a VA hospital in Brockton and one in west Roxbury 
and one in Jamaica Plain. And, quite frankly, the nurses 
there--the biggest problem I have is nurses and therapists 
being stolen away by the private hospitals in the area. And, 
quite frankly, the one thing that keep my VA nurses and docs 
and staff and therapists in place at the VA is that they are so 
proud to serve veterans. It is their commitment to veterans. 
They love their job because they are caring for the U.S. 
uniformed veterans. That's what keeping them there. They are 
working at lower rates, and the private sector hospitals are 
stealing them away. That's one of my biggest problems, to 
encourage young nurses to go work at the VA.
    And, you know, I just see a lot of this acrimony and 
attacks on Federal employees are just not borne out under the 
facts.
    Mr. Stier, you do raise a good point about how we can do 
this better going forward. But, President Kelley, I want to ask 
you, in terms of the folks that you're seeing at NTEU, you 
know, we're asking you to oversee--in many cases, we're asking 
your folks to oversee tremendous responsibilities. They could 
make a ton of money in the private sector. You mention in your 
testimony there are some gaps and differences in what you see 
these studies providing and what you see actually in practice 
at Treasury. Could you talk a little bit about that?
    Ms. Kelley. Well, if you look at--if you ever were a 
Federal employee and you know the work that they do, it is not 
work that you can just measure on a piece of paper. I was an 
IRS revenue agent for almost 15 years, and as an accountant and 
a CPA I know the kinds of Wall Street representatives that the 
IRS agents have to go up against and be knowledgeable on in 
order to find the financial schemes and scams that are 
happening. That's the kind of talent and skill that you need, 
and you have to be willing to pay for it.
    And I also think that in this economy there has been a lot 
of talk about how many applications and how willing people are 
to come work for the government. In this economy, it is one 
world. I think when the economy turns--and it's obviously 
taking longer than we all hoped--but when it does, I'm very 
worried about the talent that the Federal Government has been 
able to recruit and whether or not they will be able to keep 
them when you look at the compensation and the gaps that are 
very well known by the employees.
    They make a conscious decision--as you said, they make a 
conscious decision every day. Many of them want to work, they 
have a desire to serve, they have a desire to work for our 
country, and they are willing to give up some of the extras. 
But, in the long run and on most days, they want to be treated 
fairly; and that's really what this conversation is about.
    Mr. Lynch. Thank you very much.
    I see my time has expired. Thank you, Mr. Chairman. I yield 
back.
    Mr. Ross. Thank you, Mr. Lynch.
    I now recognize the ranking member of the Committee on 
Oversight and Government Reform, the distinguished gentleman 
from Maryland--on second thought, I'm going to recognize the 
distinguished gentlewoman from Washington, DC, Ms. Norton.
    Ms. Norton. Thank you very much, Mr. Chairman.
    Ms. Kelley, you and I have sat in this very room when it 
was less rehabilitated, I must say, in any number of hearings, 
including joint hearings from Senate and House committees 
concerned about the state of the Federal work force, 
particularly the retiring of the so-called baby boomers. You 
testified that 90 percent of the SES, senior service, could 
retire within the next 10 years. This, of course, is considered 
by everybody to be the creme de la creme of the work force of 
the United States, the people who were apparently drawn for a 
number of reasons, the post-Kennedy folks.
    There has been a lot of discussion here about Federal 
employees but little discussion about a return on investment 
that any employer will understand. When you hire an employee--
let's take people in this very room. If you see one of your 
employees in whom have you invested time and energy walk out 
the door, you're seeing your investment in that employee walk 
out of the door as well. And so the return on your investment 
becomes important if that is a high-quality employee.
    The others on the panel have apparently agreed that there 
is a greater return on experience in the Federal work force, 
and that may account for some of the promotions. We know this. 
Rapid turnover takes investment, of course, out of the door. I 
wish you would describe--and of course the notion of promotion 
from within encourages people to stay, and you want to 
encourage competition. If you want people to compete for these 
employees, you at least want to keep your investment in the 
Federal sector. So you'd like the investment to occur among 
Federal agencies, rather than have the private sector benefit 
from the investment of the taxpayers in the Federal employee. I 
wish you would describe that in places like the IRS and the 
other agencies you represent.
    Ms. Kelley. There are many employees who begin their work 
for the Federal Government in an entry level position in 
whatever their agency is, and what they hope is that they will 
see opportunities to move into new positions, to be promoted, 
to learn, to enhance their skills, to receive training, and to 
move up within the agency so they can do more complex and more 
important work for the agency. In agencies where those 
promotional opportunities do not exist you will tend to see 
people leave more. Because, obviously, people want to know that 
they have some opportunity in the future.
    But I also have to believe that happens in the private 
sector. Most people do not go into a job and want to stay in 
that specific job and that occupation for their entire career. 
They are looking for opportunities to grow. And in the Federal 
Government the idea that there are so many different jobs and 
so much important work across agencies gives employees the 
opportunity to do just that, and they take----
    Ms. Norton. And, of course, the Federal Government has made 
a decision. It wants career employees. It is a career service. 
It is a civil service.
    I wish you would describe--there have been some 
inflammatory statements made by others on the panel about the 
collective bargaining in Wisconsin and the rest. There seems to 
be very little understanding of the role that unions can play 
when there needs to be reductions in the work force, when there 
needs to be give-backs of some kind in the work force, as 
opposed to when you have to do that and nobody is there to make 
the employers understand how it occurred.
    The President has had a management workers council. I 
wonder if you'd describe how that works.
    Ms. Kelley. Well, about a year ago, labor management forums 
were created under an executive order that the President 
signed; and that executive order has as its underpinning the 
idea of collaboration and that working together we can figure 
out some of the most difficult problems that we face. And that 
has included situations as you describe, Congresswoman Norton, 
where the work force has to change because the work of the 
agency changes and either work goes away and therefore there 
needs to be a smaller work force.
    And it is the unions working side by side with management 
to deal with these very, very difficult issues to try to do two 
things: one, insure that the agency is able to continue to be 
successful in whatever its mission is, but, at the same time, 
to do all they can to have employees have opportunities to be 
placed somewhere else, to make sure that those skills, those 
experiences are not lost.
    But when there have had to be those kind of situations, the 
only way that it happens in a way that's successful for the 
agency and for the work force, in my view, is if the unions are 
working with management and if management has the unions in 
every conversation so that it is something that we can craft 
the best solution to.
    Ms. Norton. That's how you get a labor piece. Thank you 
very much, Ms. Kelley.
    Mr. Ross. Thank you, Ms. Norton.
    I now recognize the distinguished gentleman from Illinois, 
Mr. Davis, for 5 minutes.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Mr. Sherk, let me ask you, are you a fan of pay for 
performance.
    Mr. Sherk. I think it is a good idea. It needs to be done 
correctly, but the general principle, yes.
    Mr. Davis. Do you think it can be broadly used, can be 
broadly used in, say, the Federal Government?
    Mr. Sherk. Broadly speaking, yes.
    Mr. Davis. OK. And we would expect better results than what 
we get in terms of productivity as well as how we compensate 
our employees?
    Mr. Sherk. If it is designed correctly, you should.
    Mr. Davis. Dr. Biggs, let me ask you, you were here when 
Mr. Barry was testifying and you heard him talk about comparing 
apples with apples and oranges with oranges. And to arrive at 
the conclusion that you made relative to the comparability of 
public versus private sector pay, is that the methodology that 
you used?
    Mr. Biggs. I'll pick my words carefully here and say that 
Director Barry did not correctly describe the methodology that 
I have used in this study or that other academics have used.
    The claim he made was that Federal employees are better 
educated on average than private sector employees, and that's a 
correct claim. He also claimed, though, that the pay studies 
that I have done and others have done do not correctly account 
for that. They were comparing apples and oranges. In fact, 
that's totally untrue. The studies we have done control for 
differences between the education and other characteristics of 
the Federal work force and private sector work force. In other 
words, we compare apples to apples. We control for these 
differences.
    The Federal Pay Agent's analysis, which finds a pay penalty 
of 20 to almost 25 percent by contrast, that doesn't take 
education into account. It looks at a job but does not account 
for the fact that private sector employers tend to put more 
educated and more experienced individuals into those jobs than 
public sector employers do. And we know that the value coming 
out of a job is a culmination of the job and the inputs of the 
individual himself. So I would say he miscorrectly 
characterized the study that I did.
    Mr. Davis. Well, let me ask you, based upon your 
description, would a clerk at Wal-Mart be the same as a clerk 
in one of our agencies if you were looking at the two?
    Mr. Biggs. In general, no. In general, we don't categorize 
people by job types. We categorize them by what's called the 
human capital they are bringing to the game. A clerk in the 
Federal Government would generally have at least a high school 
education, a bachelors degree; and so we're counting the 
educational experience, the other experiences they may have, 
which will partly account for them getting better pay.
    Our study doesn't say Federal employees shouldn't be higher 
paid on average than private sector employees. The question is 
how much higher should they be paid. By controlling for 
differences in education, experience, and other factors, we can 
find the effect of working in the Federal Government or outside 
in the private sector. And what we find and our studies 
consistently have found in peer-reviewed research over the past 
three decades is, if you take the same individual and put them 
in the Federal Government versus the private sector, that 
individual will get a significant salary premium in the Federal 
Government. That's not just what we're saying. That's what 
peer-reviewed research consistently says.
    Mr. Davis. Let me ask you, you began your testimony by 
suggesting that maybe we were asking the wrong questions or 
exploring the wrong possibilities and options and that what we 
really ought to be looking at is how do we get the best work 
force that we possibly can for the price that we are prepared 
to pay? Could you rearticulate that for me?
    Mr. Stier. I may have this wrong, but in listening to 
everybody here, I thought I heard everyone agree to the 
proposition that, at some point in looking at the totality of 
the Federal work force, there are going to be some folks that 
are underpaid, some that are overpaid, and there are some that 
are paid just right. There may be differences about what the 
proportions are amongst the panel, but that general proposition 
is one that appears to have been accepted by everybody here.
    I think then the next question that has to be asked is how 
do we design a system that does a better job of actually 
insuring that we are being as cost effective as possible to get 
the right talent, the best talent for government. And my 
proposition would be that is the conversation we should be 
having, and I've proposed a set of principals that I hope can 
help push that conversation forward.
    Mr. Davis. Thank you very much.
    Thank you, Mr. Chairman; and I yield back.
    Mr. Ross. Thank you, Mr. Davis.
    The chair now recognizes the ranking member of the 
Oversight Committee, the distinguished gentleman from Maryland, 
Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Dr. Biggs, let me make sure I understand this right. You're 
saying that--in answer to one of the chairman's questions, 
you're saying that there is a great demand for these Federal 
jobs; is that right?
    Mr. Biggs. That's what research has indicated, yes.
    Mr. Cummings. And because there's a great demand, what does 
that have to do with pay? Remind us.
    Mr. Biggs. A higher demand for Federal jobs does not prove 
that they are overpaid. It is an indicator that individuals in 
the marketplace judge the package they are going to get from 
Federal employment which includes salaries, benefits, other 
characteristics of the work more attractive than they would 
find private sector work.
    You find similar indicators in things like quit rates. For 
Federal employees, those are consistently lower than the 
private sector. There could be other reasons for low quit 
rates. That is indicative in general. It offers people an 
attractive compensation package, yeah.
    Mr. Cummings. So most Members of Congress spend and collect 
millions of dollars to come here, and most could make a lot 
more money than what they're making. Apparently, there's 
something that Members want that comes from this public service 
that we do.
    By the way, we are Federal employees, public servants. And 
I'm just wondering, is that one of those other things that you 
just talked about? That is, the desire--when I talk to nurses, 
for example, and I talk to people who are in that kind of 
profession, they will tell you in a minute in most instances I 
love my job because I'm able to help people. This is what I 
always wanted to be, ever since I was a little boy or girl. 
This is something that really means something to me. And you 
ask them, you know, does it bother you to have to be cleaning 
up blood and all that kind of stuff? And they say, no, because 
it is what they really, really want to do.
    When I talk to the people up here on the Hill, a lot of 
them will come--and I have seen this many times, and I'm sure 
everybody up here can tell you similar stories. They want to 
come not so much for the pay. As a matter of fact, a lot of 
them are making a lot less pay.
    I really just interviewed a few minutes ago somebody 
willing to take a 15 percent cut because he wants to be a part 
of government, of helping people. So how much does that play? 
And, Ms. Kelley, I want you to be thinking about that too. Is 
that part of that formula you just gave us?
    Mr. Biggs. No, I would not in any way deny that a desire 
for public service and desire to serve your country is an 
attraction for many people for serving the Federal Government. 
For myself, it has been where I served as congressional 
staffer.
    Mr. Cummings. Oh, you were a public employee? OK.
    Mr. Biggs. I know it's very hard to believe.
    Mr. Cummings. No, no.
    Mr. Biggs. The desire for public service is strong and 
legitimate. The question would be if what we had was simply a 
queue for Federal jobs or low quit rates, that could be 
entirely attributable to a desire for public service. The 
results you find from pay studies, though, which control for 
education, experience, and the rest, and they find that the 
same person would earn a higher salary on average in the 
Federal Government from the private sector, that is something 
which tends toward the view that there's overcompensation.
    One of the aspects of the study we did was not simply 
controlling for differences in education and so forth. We 
followed the same people over time, using Census Bureau data. 
When those individuals switched from private sector employment 
to Federal employment, on average, they got a pay increase. 
That does not mean every person gets a pay increase in the 
Federal Government. It does not mean that the highest, best-
qualified Federal employees couldn't earn any more in the 
private sector. It does mean that, on average, the same person 
would earn a higher salary and much more generous benefits in 
the Federal Government than they would outside.
    Mr. Cummings. Well, let me put it like--now you really just 
said something very interesting. Because a lot of people are 
constantly trying to move forward, right? Hello. I assume that 
when you moved from public servant you apparently made, I 
guess, more money, did you?
    Mr. Biggs. Well, I make less money now than I did.
    Mr. Cummings. OK, well, you're making my case. In other 
words, what you just said--I mean, usually, if somebody is 
going to move from one job to another, in many instances they 
are going to move to more pay. So if they are going to move 
from public to private--I mean private to public and they are 
moving on a normal course, it's logical, I guess, that they are 
going to make more money.
    Mr. Biggs. It is, but we control for that difference. Most 
people get a pay increase when they switch jobs. That's 
natural. Getting a pay increase is one of the main reasons why 
people do switch jobs. What we found was private sector workers 
who found a new job in the Federal Government received pay 
around 8 percent higher than private sector workers who found a 
new job in the private sector. So the same person getting 
different jobs--and this has been replicated in other studies 
as well. So we're not simply saying do you get a pay increase 
when you find a new job, because most people do. We're saying 
if you get a larger pay increase if you find a new Federal job 
than if you find a new private sector job, and the answer to 
that is yes.
    Mr. Cummings. I see my time has expired.
    Thank you, Mr. Chairman.
    Mr. Ross. Thank you, Mr. Cummings.
    Now recognizing the distinguished gentleman from Virginia, 
Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mr. Stier, is turnover in certain categories of jobs in the 
Federal Government a problem?
    Mr. Stier. Yes, it is. And if I might just take 2 seconds, 
the name is Stier. It looks like steer, but parents decide 
pronunciation so----
    Mr. Connolly. Mr. Stier.
    Mr. Stier. Thank you.
    Mr. Connolly. Thank you.
    Mr. Stier. Thank you.
    The answer is, yes, absolutely. If you look at the overall 
attrition number relative to the overall private sector number, 
it is lower. But in the critical areas, new employees first 2 
years is actually about 25 percent. You heard already nursing 
is close to 18 percent.
    My favorite distressing example of the Department of 
Homeland Security between 2003 and 2007, the first 4 years, 
three-quarters of the SES left. And what's amazing is no one 
was paying attention. No one did exit interviews to find out 
why. But the point is what we really ought to be looking at is 
not generic attrition but attrition for the people we need to 
keep that are really vital.
    Mr. Connolly. Exactly. So when we actually look at certain 
categories of employees, actually, the attrition may be 
considerably higher than in the private sector.
    Mr. Stier. Absolutely.
    Mr. Connolly. And your point, we have not bothered to find 
out why.
    Mr. Stier. Correct.
    Mr. Connolly. Which most private sector firms I know do 
exit interviews.
    Mr. Stier. The good ones do.
    Mr. Connolly. Ms. Kelley, can you think of some other 
categories of Federal workers where turnover is high?
    Ms. Kelley. The highest rate of turnover for the past few 
years has been at TSA, those who protect our skies. The 
turnover rate up until about a year ago was running at 20 
percent.
    Mr. Connolly. A year?
    Ms. Kelley. Yes.
    Mr. Connolly. So these Federal salaries and cushy jobs and 
wonderful working conditions somehow don't prevent 20 percent 
of the work force from leaving every year.
    Ms. Kelley. These TSA workers all earn less than $30,000 a 
year. There is no way they could be into a category of overpaid 
anything.
    Mr. Connolly. Mr. Stier, a few years ago, when we had a 
much lower unemployment rate--I mean, I'm hearing testimony 
about how actually a lot of people are flocking to Federal 
service or public service. Well, of course, when you've got an 
almost 10 percent unemployment rate, my guess would be 
historically that's a pattern. But when you're looking at, say, 
4 percent unemployment rate, especially in the higher end skill 
sets, my guess would be that the labor market gets real tight 
in being able to recruit and retain skilled workers for the 
Federal work force. Would that be true?
    Mr. Stier. Absolutely. And as you suggested already, even 
with high unemployment, there are certain skill sets that the 
Federal Government is having a very hard time recruiting.
    Mr. Connolly. For example.
    Mr. Stier. Well, the cybersecurity area is one that is, 
obviously, front and center. You've got examples of nursing.
    Mr. Connolly. Well, let's stop with cybersecurity for a 
minute. I happen to represent a high-tech district. Why would 
that be a problem? Why are we having trouble recruiting people 
to work in the area of cybersecurity?
    Mr. Stier. Because there's a lot of competition.
    Mr. Connolly. And it requires a high skill set.
    Mr. Stier. Absolutely.
    Mr. Connolly. Technical skill set.
    Mr. Stier. Yes.
    Mr. Connolly. What percentage of the Federal work force is 
eligible for retirement over this decade?
    Mr. Stier. You know, again, you're looking at--depending 
again on the--you're looking at over half.
    Mr. Connolly. Over half.
    Mr. Stier. Well, a very large portion of the population 
will be eligible to retire. And, again, I think the general 
numbers are less important than looking at the specific 
populations that we should be most concerned about. And there 
you see much higher numbers.
    Mr. Connolly. So if I listen just to what I've heard from 
Mr. Sherk and Dr. Biggs, I would assume that, frankly, we're 
not going to have any trouble at all filling 50 percent of the 
existing Federal slots as people retire over this next decade. 
Is that your view as well, Mr. Stier?
    Mr. Stier. It is my view that there will be no problem 
filling the slots. The question is filling with whom and are 
you getting the right talent.
    Mr. Connolly. Well, now, of course, that's the question.
    Mr. Stier. And I think the answer is that we have to do a 
better job in a lot of different respects if we really want to 
have the right talent in government.
    Mr. Connolly. Ms. Kelley, do you have a view on that 
subject?
    Ms. Kelley. I'm very worried about the ability to fill the 
positions when they're vacated. You know, for years, everyone 
talked about this tsunami that was coming of Federal 
retirement, and it didn't come in large part because of the 
economy. But it will come. It will happen. And agencies are not 
in a position to be able to hire the skill level, the skill set 
to be able to maintain what it is they're trying to do in their 
agencies today.
    Mr. Connolly. And of course, a final note, if I might be 
allowed an observation. The more we debase Federal service, the 
less attractive we make it, and we go to Mr. Stier's point, 
then you have to worry about who you're attracting to Federal 
service, especially in the higher skill set.
    I thank the chair.
    Mr. Connolly. Thank you, Mr. Connolly.
    I now recognize the vice chair of the subcommittee, the 
distinguished gentleman from Michigan, Mr. Amash, for 5 
minutes.
    Mr. Amash. Mr. Sherk and Dr. Biggs and all of you, thank 
you for being here today.
    Mr. Sherk and Dr. Biggs, I have a question. How much would 
the Federal Government save if it equalized benefits with those 
provided in the private sector?
    Mr. Sherk. I took a look at both pay and benefits. I didn't 
take a look at benefits specifically. If you'd like that, I 
could get it later. But if you took pay and benefits together, 
you'd save about $47 billion this year under my accounting.
    Mr. Biggs. I think that's about right, yeah.
    Mr. Amash. OK. Thank you.
    Another question. Ms. Kelley, your union represents a cross 
section of Federal workers who perform many key functions of 
government. Since the pay freeze was enacted, how many of your 
members have left Federal service?
    Ms. Kelley. I couldn't give you an exact number. I can tell 
you that many are talking about leaving, and many who have been 
eligible to retire and were not going to and who planned to 
stay are now talking about leaving. I think that we will see 
real numbers in the foreseeable future. But I could not give 
you a number today.
    Mr. Amash. I have a general question to any of you who can 
answer it. The President has talked about freezing pay for 2 
years. Does this include the within grade step adjustments 
which are 3 percent a year?
    Mr. Sherk. No, it doesn't cover those at all. It's purely 
the cost of living adjustment. But the vast majority of Federal 
employees are going to receive these within grade adjustments 
and will get those 3 percent raises.
    Mr. Amash. When Mr. Berry was here earlier, he testified 
that there should be no place in the Federal Government for 
nonperformers to hide. How would you respond to the fact that 
Federal Government rarely fires employees, and, in the majority 
of cases, pay raises result in length of service rather than 
job performance?
    Mr. Sherk. It's a pretty serious problem. Once they pass 
their probationary year, which is the first year, within that 
first year it's about 20 percent of Federal employees either 
quit or are fired. But, after that, it's very, very rare to see 
a Federal employee get fired.
    And there's also very few rewards for performing above and 
beyond just a mediocre level. Federal managers rarely award 
performance ratings below three because it's a lengthy appeals 
process. The employees basically get to appeal and can 
challenge an adverse decision. Most managers simply don't want 
to go through the hassle. They want to manage the agency and 
not do that kind of work. So they almost always hand out a 
three or higher rating.
    The employees, they qualify for the step increases, but 
very little above and beyond that is there in terms of 
performance pay. So it's simply designed to encourage 
mediocrity but not going above and beyond that and very tough 
to get rid of the bad apples after the first year.
    Mr. Amash. In my opinion, showing an acceptable level of 
competence is not sufficient for raising a person's salary. 
Would you agree that productivity, work ethic, dedication, 
performance, and exceeding expectations are the proper criteria 
for a salary increase?
    Mr. Biggs. Sure. I mean, I don't want to in any way demean 
the work ethic and the dedication of Federal employees. I've 
worked with them over significant periods of time; and, as 
Director Berry said, you are very surprised at how hardworking 
people are.
    At the same time, it does not serve the hardworking, 
dedicated Federal employees when people who are not pulling 
their weight essentially cannot be fired. It's a natural 
process in any business that some people do very, very well and 
are promoted. Others don't do very well and are fired.
    To explain the Federal rates of firing, we would have to 
assume the Federal Government is extremely good at picking 
employees such as it never finds anybody who doesn't work out. 
It's just not plausible. You want to retain good employees. You 
want them to buildup the job-specific skills that really do add 
to productivity. But you also want to have the flexibility to 
move on people who are not working out as well, and I think you 
need to find a strong balance between those two.
    Ms. Kelley. Congressman, can I add to this, though?
    I think that the things that you identified are important, 
but I also think that performance is important. And I think 
that performance is an aspect of the Federal system today. And 
the flaws that are being described and are being grossly 
overstated, that Federal employees can never be fired, because 
they are fired. Federal employees are fired after their 
probationary period.
    And if they are not fired at the rates that somebody thinks 
they shouldn't be, then someone needs to look at the 
implementation of the system within the agencies. And that 
means managers are not being trained on how to deal with poor 
performers. They are not doing what they should be doing to 
either help them correct that performance or to move them out 
of the agency. That's the manager's job. That has nothing to do 
with the system. It's about the managers, and it's about what 
the system supports for them from a training perspective as 
well as implementation perspective.
    Mr. Ross. Thank you, Mr. Amash. That completes our 
questions.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    I ask for unanimous consent to submit for the record the 
statements of the American Federation of Government Employees, 
the National Federation of Federal Employees, and the National 
Active and Retired Federal Employees.
    Mr. Ross. Without objection, so ordered.
    [The information referred to follows:]
    [Note.--No insert/information provided.]
    Mr. Ross. That completes our program. I want to thank our 
panel very much for being here. Appreciate your patience. And 
we stand adjourned. Thank you.
    [Whereupon, at 4:16 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]
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