Close to 15,000 blue-collar federal employees working in trade, craft and manual labor jobs are likely to see their federal pay rates increase by as much as 12%, once a new proposed rule from the Office of Personnel Management becomes finalized.

The proposed regulations, which OPM released on Monday, aim to improve overall pay parity for roughly 168,000 blue-collar federal workers who are paid hourly through the Federal Wage System (FWS). In practice, OPM’s proposal would align the map of FWS wage areas more closely with the General Schedule’s locality pay map.

“This would lead to greater equity across federal pay systems, with FWS workers’ pay more aligned with GS workers who work in the same geographic area,” OPM wrote in a press release Monday.

As a result of the proposed re-mapping, around 15,000 blue-collar federal employees would begin receiving higher pay rates once OPM’s regulations become final — as long as there are no major changes to how the proposed regulations are currently written.

“For too long, workers hired under the Federal Wage System were paid less money than their counterparts hired under a different pay system to work in the same area,” President Joe Biden said Monday about the new regulations. “My administration is working to change that.”

Under the proposed regulations, another 2,000 or so employees would be covered by OPM’s rules for “pay retention,” which would maintain federal pay rates for feds who would otherwise see a pay decrease.

The American Federation of Government Employees, a long-time advocate of updating the FWS map, expressed support for the new proposed regulations from OPM.

“In far too many locations, employees working side by side in the exact same building are, for purposes of pay, treated as though they are in different places,” AFGE National President Everett Kelley said in a statement Monday. “This regulation, once finalized, will correct these inconsistencies and ensure all employees are treated equally regardless of which pay system they fall under.”

Who would the changes impact?

The regulations impact only appropriated fund employees, while non-appropriated fund workers will remain unaffected. Once finalized, the proposed changes will mainly impact federal pay rates for employees working for the Department of Defense, the Department of Veterans Affairs and the Bureau of Prisons.

Geographically, based on the proposal, OPM’s regulations would give federal pay increases mainly to FWS employees working in Alabama, California, Maine, Maryland and Pennsylvania. In particular, the proposed regulations would most prominently impact federal employees working at three major military installations: Tobyhanna, Letterkenny and Anniston Army Depots.

The challenges leading to the persistent federal pay disparities are two-fold. In some cases, there are differences between blue-collar FWS employees and white-collar GS employees. In other cases, there are pay disparities among FWS employees working within the same wage area, OPM explained.

The disparities stem from complex differences between the two maps that have grown over time. While the GS map has 58 total locality pay areas, the FWS has 248 wage areas. Certain GS locality pay region contain as many as six different FWS wage areas on the current maps. But other areas may have a single FWS wage area that stretches across multiple GS locality regions.

Many blue-collar employees have been pushing for years for changes to the FWS map, citing long-standing federal pay disparities between the two systems. At Tobyhanna Army Depot, for example, the creation of a new GS pay area in 2005 led to an immediate 12% locality-based pay raise for workers on the GS system. Although employees on both federal pay systems worked “in close proximity,” blue-collar employees on the FWS did not receive a raise.

“This led to a deep sense of unfairness on the part of FWS employees at Tobyhanna, which continues to this day,” OPM wrote.

OPM said the new regulations, however, “would address most of the differences in pay among FWS employees within the same wage area and between FWS employees and GS employees working at the same location.”

History of the Federal Wage System

When the Federal Wage System was first established, the intention was to align the pay rates for blue-collar federal workers with the “prevailing” pay rates for private sector workers with similar jobs in the same geographic area.

But over time, the FWS has deviated significantly from its original intent. Since 1979, annual appropriations bills have maintained a pay cap on blue-collar annual raises. The cap was meant to keep FWS raises generally in line with those for GS employees. But as a result of nearly 50 years of the annual caps, wages for blue-collar feds in 75% of FWS localities no longer align with local pay rates for similar jobs.

The Federal Prevailing Rate Advisory Committee (FPRAC) has been considering different FWS reforms for at least 15 years. OPM’s new proposed regulations stem from a more recent 2022 request from Congress for OPM consider ways to align the locality pay maps for FWS and GS employees.

Some FPRAC members, however, have also raised concerns about potential complications of implementing FWS map changes. For instance, a few committee members have said agencies may find it challenging to work within their current budgets to implement the pay adjustments, rather than receiving additional funding.

OPM reviewed the proposal that FPRAC initially approved in December 2023. In July 2024, OPM then sent its plans over to the Office of Information and Regulatory Affairs, an arm of the Office of Management and Budget, to begin the rulemaking process. The proposed rule will officially publish to the Federal Register on Friday. After that, the regulations will remain open to comments from the public for the next 60 days.

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