The Erosion of Compensation for Federal Executives and Judges

A crucial responsibility of the government is to recruit, hire, and retain strong candidates to serve in executive and judicial positions. For better or worse, the experience and talents of key federal officials will determine the government’s success in executing policy and administering justice. The government’s ability to recruit talented executives, scientists, lawyers, and judges depends on the attractions of top government jobs, including the salaries and non-wage benefits offered to the people who serve in these positions. Good candidates rarely accept senior government positions solely, or even mainly, out of a desire for personal wealth. However, many people may be deterred from public service if they are asked to make a large financial sacrifice in order to serve.

Congress is ultimately responsible for establishing pay levels in senior government positions. This obligation makes Congress vulnerable to the charge of self-interest. The problem stems from the practice of linking salaries of top executive and judicial branch officials to those of Members of Congress. This means legislators who vote in favor of good salaries for federal executives and judges are often seen as voting to give themselves a pay raise. Constituent pressure sometimes forces Congress to hold a “yes” or “no” vote on scheduled pay hikes, even when a law has been carefully crafted to allow salary increases to take place without any explicit action by Congress.

Congressional reluctance to vote in favor of pay raises has meant that the salaries of senior federal officials have followed an erratic course over the past century. Measured either in terms of purchasing power or as a ratio of the average wage of private-sector workers, the annual pay of Cabinet officers, sub- Cabinet officials, judges, and senior federal executives has fluctuated widely and trended downward over the past few decades. Federal compensation of top officials is determined by political logic rather than a clear-eyed assessment of the personnel needs of the government. The federal pay structure is not calibrated to achieve rational economic objectives. It nonetheless can have real effects on recruitment and retention.

A variety of benchmarks can be used to assess the adequacy of federal pay. One standard is the purchasing power of salaries. What standard of living can be achieved by an office-holder, assuming the official’s household income while in government employment consists solely of a federal pay check? Of greater relevance are the wages of other workers, especially those who hold private-sector jobs with similar skill requirements and responsibilities. How does federal executive pay stack up against the salaries paid in similar positions outside the federal government?

The simple fact is that real wages in top federal jobs have not kept pace with inflation. In an era of increasing pay for people in key legal, scientific, and management positions, the salaries of top federal jobholders have fallen far behind the pay received by people in the private sector who hold jobs with comparable or lesser responsibility. In the short run, capable scientists, lawyers, and executives may leave public service in order to obtain more comfortable and better paid positions in the private sector. The long-term risk to the federal government is even greater. Many of the most talented and ambitious young university graduates may not consider a career in the public service because of the financial sacrifices associated with such careers.