What the Proposed Pay Freeze Would Mean for the Federal Workforce

(National Federation of Federal Employees)

Monday, the White House announced its proposal to freeze the pay of all civilian federal employees for two years. The freeze will impact annual cost of living adjustments, rendering increases to 0% for fiscal years 2011 and 2012. Fortunately for federal employees, the freeze will not impact workers’ step increases or bonuses, leaving some potential for professional advancement in the coming years. Unfortunately, this is where the silver lining ends.  

This pay freeze proposal, if adopted by Congress, would significantly impact the bottom line of federal workers in both the short and long term. A two-year pay freeze will set back your bottom line right away, while diminishing your retirement annuities in the long run. It will also diminish the government’s ability to recruit and retain top talent at the federal agencies that protect our borders, care for our veterans, support our armed forces abroad, and provide countless other essential services to the American people.

The short term impact of this proposal is to reduce the pay of federal workers. Though this policy was packaged as a pay freeze it is in fact a pay cut. When accounting for inflation, soaring healthcare costs, and plummeting home values, your salary will buy you far less two years from now than it does today. In an economy where many federal workers’ spouses and partners are losing their jobs, and many more are living paycheck to paycheck, two years of stagnant wages will make it far more difficult to make ends meet.

In the long term, federal workers’ retirement annuities will be smaller than they would have been absent a freeze. When retirement annuities are calculated, two primary figures are used to arrive at an annuity amount: a workers years of service, and their ‘high three’ salary. The ‘high three’ figure refers to the average amount a federal employee makes during their three highest paid years. For most federal workers, these three years come at the end of their career. The impact of a two-year federal pay freeze, then, is to reduce the ‘high three’ average of federal employees looking to retire in the next few years. Even for those who are a long way from retirement, the legacy of this pay freeze represents an opportunity cost that will lessen your annuity when compared to what it could have been.

Another long term impact of the freeze is to diminish the federal government’s ability to recruit and retain the best and brightest workers. With a two-year pay freeze in place, there is little incentive for highly skilled workers to join or remain with the civil service. This will hurt both the quantity and quality of the government services that the American people count on.

Taken together, the immediate and future impact of this pay freeze will hurt federal employees, their families, and the American public they serve. We cannot accept this future for ourselves and for our country. We understand that sacrifices will have to be made to reduce our deficit, but we cannot be led to believe that we can balance our budget exclusively on the backs of federal employees. Everyone will have to sacrifice. National President Dougan has been in touch with the White House on the matter and will continue to express our opposition to this draconian proposal. He will also be issuing a letter this week to key leaders in Congress and the Administration calling for a new way forward.