This report presents the results of our review of the methodologies underlying various
estimates of the differences between federal white-collar pay and the salaries of similar workers
in private industry. This report was prepared pursuant to our basic statutory authority. We are
sending it to you because of your committee's responsibility for federal personnel matters.

We are sending copies of this report to other interested Members of Congress, as well as the
President's Pay Agent (the Secretary of Labor and the Directors of the Office of Personnel
Management and of the Office of Management and Budget). Copies will also be made available
to other interested parties upon request.

Appendix VIII lists the major contributors to this report. Please contact me at (202) 512-6209 if you have any questions concerning this report.

James R. Write

James R. White
Acting Chief Economist

Purpose

Background

The federal government's official surveys of the pay-wages and
salaries of federal and private sector employees have indicated that
federal pay has lagged behind prevailing levels for comparable jobs in
private enterprise and that the pay gap has grown over the last 2 decades.

However, these official estimates of the pay gap have been subjected to
criticism in both academic studies and media accounts. Critics argue that
the official methodology for performing pay comparisons is defective.
They claim that data from sources other than the official surveys, when
analyzed using different methodologies, lead to a different conclusion: that
federal pay levels are higher than prevailing levels for employees with
comparable characteristics, such as education and work experience, in
private enterprises.

In view of these opposing conclusions, GAO identified and analyzed possible explanations for the discrepancy between official estimates of the federal private pay gap and those of the critics. Because federal personnel management policy includes factors that are beyond the scope of this report, such as the level of fringe benefits and judgments concerning the desired quality of the federal workforce, GAO did not reach conclusions about the appropriateness of comparability estimates or the level of federal pay.

GAO analyzed data from 1978 through 1987, the most recent period for
which suitable data were available. For that period, applicable federal
laws required that federal pay be comparable with pay of private
enterprise for the same level of work. The National Survey of Professional,
Administrative, Technical, and Clerical Pay (PATC), which was conducted
by the Bureau of Labor Statistics (BLS), collected data on annual pay for
jobs in private enterprise, which were then compared with pay data for
corresponding jobs in each grade of the general schedule in the federal
civil service (a position comparison approach). PATC data formed the basis
for official estimates of the pay gap. Over the years, pay gap estimates
based on PATC data have consistently shown that employees in the federal
government are paid less than those in the private sector.

In distinct contrast to the PATC-based results, a set of academic studies based on a human capital approach (which compares the earnings of individuals with similar personal characteristics, such as years of education, rather than similar occupations) has consistently shown that federal employees are paid more than their private sector counterparts.