Federal employees continue to earn significantly less than their private-sector counterparts, with the Federal Salary Council reporting an average pay gap of 24.72%. This represents a modest improvement from the 27.54% disparity recorded in 2023, largely attributed to the 5.2% federal pay raise that took effect in early 2024; the largest increase in more than 40 years.
Keeping Federal Pay Competitive
These figures fuel ongoing debates about the need for competitive federal pay. Advocacy groups and supportive lawmakers argue for substantial raises to attract and retain skilled workers in government roles. Earlier this year, they called for an 8.7% increase following the 2024 adjustment. However, the upcoming 2025 raise is expected to average just 2%, consisting of a 1.7% across-the-board increase and 0.3% allocated for locality-based adjustments, with actual raises varying by region.
Locality Concerns
The council’s report also highlighted disparities across geographic areas, which play a key role in determining locality-based raises under the General Schedule (GS) pay system. Recommendations include expanding locality boundaries; potentially boosting pay for approximately 15,000 employees by moving them into higher-paying metropolitan zones. Additionally, new locality areas, Kennewick-Richland-Walla Walla, Washington, and Syracuse-Auburn, New York, are being proposed, which could increase salaries for about 4,400 workers, though these changes are unlikely to take effect before 2026.
Despite these incremental adjustments, the pay gap remains a persistent issue. Under the original design of the GS locality system, raises sufficient to close the pay gap should have been implemented by now. However, budget constraints and doubts about the accuracy of these calculations have delayed such actions.
Sliding Scale
Interestingly, alternative analyses, such as the Congressional Budget Office’s (CBO) 2024 report, present a different perspective. The CBO found that federal workers, on average, face a 10% pay disadvantage compared to private-sector employees. However, this disadvantage varies widely based on education level. Federal workers with less education tend to earn more, while those with advanced degrees, such as master’s or professional doctorates, experience pronounced disadvantages, reaching as high as 29%.
The issue of federal pay continues to raise questions about fairness, competitiveness, and the government’s ability to attract top talent while navigating fiscal challenges. However, the unique benefits package offered to federal employees is a major recruiting tool that could offset the pay gap.
