This article was last updated on October 21
In an effort to address growing budget deficit concerns and political pressure, President Obama announced a proposal to freeze federal pay increases. This freeze would affect over two million federal government employees, and with inflation set to rise over the next few years the pay freeze essentially amounts to a pay cut for the next two years in real terms.
The freeze applies to all federal workers, including civilian Defense Department employees, but does not apply to military personnel, government contractors, postal workers, members of Congress, Congressional staffers, or federal court judges and workers. The 2011 pay freeze would take effect on Jan. 1, pending Congressional approval by the end of this year. 2012 pay freezes will be proposed as part of fiscal 2012 budget proposals to be unveiled early next year.
“Getting this deficit under control is going to require some broad sacrifices and that sacrifice must be shared by the employees of the federal government,” Obama said in a speech announcing the pay freeze. He added, “I did not reach this decision easily, this is not a line item on a federal ledger, these are people’s lives……Federal employees are hard-working and dedicated and essential to delivering services to the American people. Today [I am] clearly asking them to make a sacrifice.”
USA Today reported this month that the number of federal workers earning $150,000 or more has doubled since Obama took office, fueling public and political outrage over what federal workers are paid
“A federal pay freeze saves peanuts at best,” John Gage, president of the American Federation of Government Employees, said “The American people didn’t vote to stick it to a Veterans Administration nursing assistant making $28,000 a year or a border patrol agent earning $34,000 per year.”
The pay freeze will not impact bonuses for federal workers or when a federal worker is promoted to a new level of pay, meaning federal workers promoted in the next two years will receive a new level of pay, but not receive any additional annual raises. The decision is expected to save the government about $2 billion for the remainder of fiscal year 2011 and $28 billion over the next five years, the White House said. Federal civil service pay rose 2 percent in 2010 after rising 3.9 percent in 2009 and by 3.5 percent in 2008.
The long-term savings and budget reduction come from lowering the government’s base compensation over the next two years. The administration already has ordered a three-year freeze in non-defense and national security programs in Obama’s budget released Feb. 1, and ordered some agencies to reduce their 2012 budget requests by 5 percent.
The government is projected to spend $457 billion on personnel costs in the 2011 fiscal year, according to the Congressional Research Service. That’s up from $447 billion spent in 2010. Obama made the announcement Monday because Tuesday is the deadline to set federal locality pay, or variations the government makes in pay and benefits based on geographic location.
House Majority Leader Steny Hoyer (D-Md.), whose district is home to thousands of federal workers, said he was pleased Obama instituted only a two-year freeze instead of the three years proposed by the Deficit Commission. But Obama also should have cut pay for some military personnel, Hoyer said in a statement. Obama has already frozen the salaries of top White House officials and top political appointees. But freezing the salaries of all civilian workers is a much bolder step that will result in a big economic hit to the Washington region, which is home to more than 600,000 federal workers and their families.
Republican lawmakers, who support the pay freeze, have already introduced several proposals to cut federal pay and benefits and curtail the size of the federal workforce, including cuts to the government payroll through attrition or firing federal workers who fail to pay taxes.