Friday, December 18, 2009

Corporate Salaries are under Microscope as Federal Wages Explode

You have seen the headlines, "The Worst Unemployment in 25 years," "First Mark of Double Digit Unemployment in Decades," and more. Unemployment is rampant and the American people are rightly concerned. Many US employees are taking salary cuts, hour cuts, and any other type of cuts necessary to stay employed. We live in very trying times indeed.

We are told that the government is concerned about the disparity between employers and employees and we see additional headlines that reflect this fact. "Retro TAX on AIG Executives," "Corporate Salaries need to be brought to Earth," and "New Czar will Tackle Outrageous Salaries.” The Obama administration has responded by hiring a "pay czar" who wants to put limits on how much CEOs make. What we are not seeing much of in the news is that while millions are unemployed, the government has its own salary issues that have created a scandal of its own.

According to a recent article in USA Today, the number of federal workers earning six-figure salaries has exploded during the last year and a half. Leary taxpayers are not very comfortable with reports such as this in the best economy, it is even more disconcerting as we navigate through one of the worst recessions that we have experienced in a quarter of a century.

The growth in the number of people who work for the government and earn six digits is significant. Federal employees that are earning salaries of $100,000 or more jumped from 14 percent to 19 percent of civil servants during the recession's first 18 months -- and that does not include overtime pay and bonuses. Federal workers are enjoying an extraordinary boost at this time -- in both pay and hiring -- during a recession that has cost 7.3 million jobs in the private sector. Remember, every new job that comes from taxpayer dollars cost significantly higher than one created by the free market. These jobs are always more expensive because the average government salary is virtually always higher than a job in the private sector and they come with bureaucratic and other costs that are not found in the market place.

According to the USA Today article (depending on the Congressional Budget Office), the highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, according to the most recent figures available. When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more; 18 months later and you will find 1,690 employees with salaries above $170,000. The trend towards six-figure salaries is occurring throughout the federal government, in virtually every agency and in virtually every job type. What are the reasons for the huge jump? There have been substantial pay raises and new salary rules.

The growth in six-figure salaries has pushed the average federal worker's pay to $71,206, compared to only $40,331 in the private sector. Each one of these jobs, paid for with taxpayer dollars, would create two truly profit making jobs outside of government. Congressman Jason Chaffetz (R-UT) is quoted by USA Today as noting that "There's no way to justify this to the American people. It's ridiculous." I believe that the vast majority of Americans would agree whole heartedly.

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