This column was originally published on Jeff Neal’s blog, ChiefHRO.com and was republished here with permission from the author.

“Feds Are Overpaid – Or Not” generated a lot of questions, comments and complaints from people on all sides of the federal pay issue. Pay is one of those issues that causes people to get emotional, but because we are talking about the pay of people who work for The People, it is a fair subject to discuss. In fact, federal pay and bonuses are public information. If you go to a Fedsmith’s Feds Datacenter, you can even search by name for pay and bonus information for individuals.

Job Security. Last week I said “Feds have more job security and that has value, but it is difficult, if not impossible, to place a realistic dollar value on it.” Clearly for many employees job security is one of the most appealing aspects of a federal job. The problem with putting a value on it is that the value is subjective and varies greatly depending on who you ask. Some people would be willing to trade job security for a 5% pay raise, others would give up a significant part of their pay to have more job security. In a federal workforce of more than 2 million people with hundreds of occupations, assigning a particular value to job security is not very useful.

Job Classification. Last week I said “If the job description is bogus (and many are) so is the comparison.” That one was challenged by people who say the accuracy of individual job classifications is not important, while others said many federal jobs are under-graded. If the number of over-graded jobs was small, it would be of little importance. But my observation of the evolution of job grading over the past 37 years that I have been in or around government is that, for a variety of reasons, grade inflation is real, it is widespread, and it makes comparisons of General Schedule jobs to jobs in the private sector much less meaningful. The other problem with job classification is that we try to pay people in more than 400 job series using the the same General Schedule grades and pay. How do we expect to have meaningful pay discussions when everyone is lumped into an antiquated and limited system such as the General Schedule? The idea that many federal job are under-graded is one I heard from quite a few folks, but there is little evidence to back it up. In fact, when people appeal their job classification they rarely see the job upgraded.

Some people say the answer to the federal pay question is a new pay system for federal employees that bases pay on performance. I would support that 100% if I had any confidence that (a) it could be done without the gender, racial and ethnic bias we have seen in some pay-for-performance programs and (b) someone could devise a performance management process that actually works. Nothing I have seen so far gives me that confidence.

What might work is a system that is more responsive to the conditions in local labor markets for various occupations. A true market-based pay system that recognizes the wide variations among pay levels for different occupations and in different localities might actually work. Locales would have to be far smaller than today (for example, the DC locality includes jobs in rural WV and PA) and occupation-specific. Moving to market-based pay raises a lot of public policy questions that would have to be addressed. What happens when pay for an occupation goes up 25% in a year due to competition in the labor market? Would the government be willing to raise an employee’s pay that much? What happens when pay goes down? What happens when pay for the same occupation goes down in one location and up in another? How do we respond to the preceding question when we replace “location” with “congressional district?” Would the government follow the typical private sector practice and not cut the pay of existing employees (while bringing new employees in at a lower rate of pay)? Given that experience doing a job adds value (at least for a few years), does it include pay increases based on longevity? How do we deal with federal jobs that have no private sector equivalent?

It is certainly possible to design a pay system that works, is based on market realities, and is fair to employees. The problem is that politics and ideology are also part of the equation. That is why I am not optimistic that we will see real pay reform in government any time soon. The General Schedule is an antique, it is clearly not a good pay system, and it is so inflexible that it drives a lot of very bad behavior. That said, it is better than almost any option that could result from a reform effort that is driven by politics.

Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency

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