The 21st century workforce consists of highly specialized knowledge workers who work for many different employers over the course of a career.
In November, CEC's second panel of experts tackled fundamental reform to the federal General Schedule system (GS). If the GS does need reform, how would that happen and what would a new system look like?
The panel included moderator Steve Watkins, editor of Federal Times; Howard Risher, pay and performance consultant; Jacque Simon, public policy director at American Federation of Government Employees (AFGE); and Doris Hausser, former senior policy advisor to the director of the Office of Personnel Management (OPM).
Citing an April 2002 OPM whitepaper, "A Fresh Start for Federal Pay: The Case for Modernization," Watkins called the GS a "system whose time has come and gone." While various alternative pay systems have sprung up and demonstration projects have been tried, the GS system is disintegrating, according to Watkins. The paper described the system as still wedded to the 1949 Classification Act, when 70 percent of the federal white-collar workers performed clerical work, jobs were largely undifferentiated, and employees could expect long, stable careers.
In contrast, the paper argued that in the 21st century of e-government, the workforce consists of highly specialized knowledge workers; employees expect to work for many different employers; and a one-size pay system no longer fits all. Hausser was the principal author of the paper, and Risher and Simon contributed.
While Hausser "believes in merit pay," the General Schedule doesn't work that way. "Qualification standards and competencies are based on merit and psychometric studies," she said. "The definitions in the General Schedule are out of date and make it hard to distinguish grade levels. The definitions were written when workers tended to consistently perform work in a given grade. However, today workers regularly perform work at various grade levels."
Hausser further explained that "updated definitions, used with psychometric studies and job analysis, would better link pay to performance and more accurately pay employees for the work performed. The human capital model, however, does not compare pay from job to job, and would not work for actually setting pay levels for work performed."
She added that the Office of Management and Budget sees the GS as a great cost-control mechanism because it can project costs. Employees tend to like the system because it gives them statutory pay guarantees. Alternative pay systems tried by the government have sought to better link pay to performance, but funding for such systems has been limited. Bigger companies pay more than small companies. Government pay should be compared to that of other large employers and occupations.
Risher also said that "government pay should be compared to that of large employers. Government pay data compiled by the Bureau of Labor Statistics was changed over the years to include many small, mom and pop businesses." He added that "the General Schedule pay system should be scrapped. It lacks meaningful rewards for good performance. Few employees are denied step increases, and the locality pay system is not creditable."
Demonstration Projects and Minority Workers
Simon took a different point of view. She argued that "the General Schedule pay system has been changed many times over the years, generally for the better," noting that a locality pay feature had been added.
She voiced particular concern that pay demonstration projects were viewed by employees as "suspect" and that employees have tended to vote against participation in them. She criticized demonstration projects as efforts to take pay away from predominantly minority employees in lower grades and transfer it to predominantly white employees in higher grades.
She defended the system's use of job analysis as less discriminatory approach to pay comparison than the human capital approach of comparing multiple personal characteristics such as education, age, race, and sex. Simon defended the relatively higher benefits paid by the federal government. She added that large employees generally pay better benefits than smaller ones and that large employers, particularly unionized employers, generally have objective standards and pay systems with similarities to the GS.
However, she cautioned that large private-sector employers tend to be nonunion and argued that government pay should be compared to pay of large unionized employers.
Can Pay Be Better Linked to Performance?
Pay for performance requires a "culture change," Risher said. "It's not easy, and we have not done it very well." Simon noted that it requires a lot of analysis to adjust only one half to 1 percent of pay. The GS does reward performance in the form of step increases and bonuses.
"The performance issue is the dilemma of pay systems," added Hauser. "It requires measurement and communication. We need better results measures, which is happening. A continuous communication effort is required for pay for performance, and manager performance is often overlooked."
She suggested that OPM establish a classification for managers with real performance management competencies. "Standards for performance for most employees are way too low and this needs to be fixed before the government can move to a pay-for-performance system," she explained. She also suggested that "the GS system could be amended to include occupational categories to deal with fact that the government overpays employees in some occupations and underpays others in other occupations."
Obama to Study Reform
President Obama's budget proposal for Fiscal Year 2013 recommended that Congress establish a Commission on Federal Public Service Reform to develop a modernized personnel system that reflects the reality of the 21st century, in which, according to Watkins, "agencies offer compensation that reflects market competition for employees, facilitate career-development mobility across agencies and with the private sector, address poor performers consistently and fairly, develop staff, and motivate better performance using the best evidenced-based public and private sector practices."
Risher supports the idea of a commission on federal pay. "The classification system first needs to be audited; it hasn't been done in 20 years. We need to understand how the pay system works now and whether we are hiring and retaining the employees we need."
Simon cautioned that "labor unions are not fond of commissions since the "pay and benefits cuts proposed by Obama's Simpson-Bowles Commission were not good for everyone." However, she added that "AFGE could be interested in a pay commission that identified more money to make some employees better off and nobody worse off." She added further that "pay for performance is more of a political issue than an operating issue."
Hausser was not optimistic that proposals to reform federal pay were likely to move forward at this time. "Current pressures continue to support the status quo," she said. "Variable lump-sum pay might be possible for some, and splitting the GS into occupational groups would help. The current pay system is very oriented to internal equity, rather than to external equity."
Hausser added that "changes to the GS need not take pay away, but simply provide less pay for some in the future. Unless more money can be provided for pay for performance, it may be more trouble than it is worth. Measurement and communication are central issues that we all can and must do better on."
Despite their differing views on an appropriate pay system for government employees, all three panelists agreed that any government pay system should be based on the merit system principles in Section 2301, Title 5, United States Code.
The CEC hopes that these panel discussions will generate interest in ideas for meaningful reform of the federal government's complex, multiple pay systems.
CEC chair Roz Kleeman is confident that the coalition will support initiatives to reform the federal pay system. She invites The Public Manager readers to share their ideas for pay reform by sending an email to [email protected].