Driving Federal Government Employees Into Retirement

My family and I went to the VA hospital for Christmas services, during which the kindly chaplain said goodbye to the veterans to whom he had been ministering. Like a record number of federal government employees, he has decided to retire this year.

Because the federal workforce is older than the general population, a certain number of retirements are to be expected. Yet according to the actuaries at the federal Office of Personal Management, workforce age isn’t enough to account for the surge in federal retirements. It’s not hard to see what other factors are driving federal government employees to the exits.

Federal employees have received no cost-of-living increases for two years running, and a freeze of one to three more years is possible. Federal pensions are also on the Washington chopping block. Add to that the increasing demonization of civil servants and red tape within the government, and it’s easy to see why many feds are calling it quits.

Cui Bono?

Unambiguous Losers: States. A wave of federal employee retirements hurts states in two ways. When a federal employee moves from a salary to a federal pension supplemented by social security payments, his or her contribution to state tax revenue drops (most states exempt social security from income tax). Also, the loss of federally funded and provided services increases burden on state-provided services. For example, when VA medical centers lose staff, the demand for care at state Medicaid funded clinics increases.

Both Winners and Losers: Federal employees and federal taxpayers. Many federal employees will miss some aspects of their jobs, but they will escape the increasingly constrained federal workplace and have more time to pursue other activities that bring them fulfillment in life. Federal taxpayers win financially in the sense that the budget appropriation for federal payroll will shrink. However, most of the federal employees moving prematurely into retirement will draw more on other federal programs as a result, converting some of the “cost savings” into mere cost shifting. Further, taxpayers who rely on federally-provided services will get slower and lower quality service as agencies are shorn of their most experienced and knowledgeable employees.

Unambiguous Winners: Government haters. Government employee morale will sink further as pay and benefits decline. The most talented employees, who return value to the taxpayer well in excess of their salaries, will pursue other careers. Sapped of quality employees, federal agencies will provide fewer services and do so in a more inept manner, thereby stoking more popular and political rage at the government.

Author: Keith Humphreys

Keith Humphreys is the Esther Ting Memorial Professor of Psychiatry at Stanford University and an Honorary Professor of Psychiatry at Kings College Lonon. His research, teaching and writing have focused on addictive disorders, self-help organizations (e.g., breast cancer support groups, Alcoholics Anonymous), evaluation research methods, and public policy related to health care, mental illness, veterans, drugs, crime and correctional systems. Professor Humphreys' over 300 scholarly articles, monographs and books have been cited over ten thousand times by scientific colleagues. He is a regular contributor to Washington Post and has also written for the New York Times, Wall Street Journal, Washington Monthly, San Francisco Chronicle, The Guardian (UK), The Telegraph (UK), Times Higher Education (UK), Crossbow (UK) and other media outlets.

14 thoughts on “Driving Federal Government Employees Into Retirement”

  1. Federal employees have received no cost-of-living increases for two years running, and a freeze of one to three more years is possible.

    Welcome to the real world. I’ve worked for private employers all my life. Cost-of-living increases seem to be a thing of the past. I haven’t seen a raise in four years and I don’t see much hope for one on the horizon either. I had to switch jobs two years ago just to avoid a 20% pay cut. The last time I switched jobs ten years before that, I got a nice 40% pay increase out of the deal. Times have changed.

    1. Freeman: I am sorry to hear about the financial hard knocks you have undergone. But “times have changed” only for some, massive year end checks are a staple of life for those working in the banking sector. You may be resenting the wrong people.

  2. Also on your winners list should be young people seeking work. I am in EPA – we are a Nixon agency, and there were HUGE hires in the 70s and 80s, then a very long dry spell. So our age structure is now very heavy on near-retirees, who are considering how long to stay, and there’ve been a LOT of retirement parties lately. I like my work, and think I am useful, and you are right that the freezes make my pension less valuable with each passing year; I am thinking how long to stay. But with retirements we have been hiring a number of young people lately – the ones I have seen are energetic and talented. So I’m not convinced that we’re heading into some quality collapse maelstrom, here. Commenter Freeman is exactly right that the private sector working conditions have not been all that lush lately, either: we’re not competing for employees with 2007 Microsoft, we are competing with 2012 Cisco.

    1. Yes and no Dave. The number of new jobs is likely to be smaller than the pool of existing jobs, and the lifetime pay and benefits for those young people will probably be substantially less than what the people now retiring received.

  3. I have worked in the private sector my whole life and have never received a “cost of living” increase. Those rare years when I get an increase at all, it is far less than inflation. I’ve been getting top performance reviews but have become steadily poorer, although I’m still far from poor. In fact, in the private sector, the only increases anyone gets are, “We want to retain you and hear our competitors are paying more” increases.

      1. Great question, amazing how everyone seems to want to be part of a race to the bottom. 400 families control half the wealth in the US and yet some working people say that the real problem is that another working person got a 2% raise, or health insurance or whatever, so the way to make society more equitable is to drive that person’s benefits down….which will then mean that their own boss can say “You make more than those other working people who just got cut, so don’t complain about the fact that I am cutting your wages this year”. And the next year the cycle can begin anew.

        1. Bingo.

          A leading voice in the move to drive down wages and benefits for public employees is James MacDougald and his “Free Enterprise Nation” lobby-shop.

          Just one of his lies is their widely reported contention that the “average” public employee receives $119k vs. the “average” private employee’s $59k, neglecting to control for education level, experience, and other differences between the two groups. He carries this to other public sector employees, noting that they receive 29% more than private sector workers, again neglecting to control for education, etc.

          Sadly, there are many who fall for MacDougald’s disingenuous comparisons, and it makes them angry at public sector workers in the belief that it’s a fairness issue. And thus the “race to the bottom” proceeds.

          Also sadly, this divisive attack setting worker against worker is succeeding, but will only result in further driving down private sector wages and benefits, as you note.

          When people are frightened, they will lash out at any target they’re provided, apparently. It really does not say much for critical thinking that people are so gullible, and so easy to manipulate into scapegoating. It does, however, do much to explain some otherwise unthinkable historical events.

    1. I was just waiting for this. Andrew doesn’t deserve to have fun poked at him: if he’s been working in the private sector, and not in one of those jobs where if you don’t get a raise for a couple years you start circulating the ol’ resume, he probably *has* been getting screwed.

      It’s like this, Andrew: the people we’re talking about, if they *were* working in the private sector? They’d be getting annual raises, believe me.

  4. I am a former public sector worker who chose early retirement (at lower pension) rather than have my pay cut by about 20 percent.

    The position I left has not been (and will not be) filled, so now there is no one in charge of the health and safety of over 500 people (mostly beginning science students) in the presence of pathogens, autoclaves, open flames, dangerous chemicals, suffocation hazards, etc. and no one overseeing the correct operation of fume hoods, biosafety hoods, ultra-centrifuges, eyewash stations, infection control, chemical spill response, hazardous waste disposal, and the like. The institution has chosen to simply hope for the best, and perhaps the protocols I put into place as part of my work will continue to be followed; perhaps not. It’s out of my hands

    That the institution may be sued if someone is injured is a risk the bean-counters are willing to take, even though a single settlement would cost at least 20x the annual cost of keeping that position filled, in addition to the great moral responsibility for any harm caused.

    I think we will discover that the loss of experienced workers from the public sector will be much like the removal of rivets from a jetliner: you can remove one, or ten, or a hundred, but at some point it will all fall apart, catastrophically.

    1. Anonymous wrote: I think we will discover that the loss of experienced workers from the public sector will be much like the removal of rivets from a jetliner: you can remove one, or ten, or a hundred, but at some point it will all fall apart, catastrophically.


  5. Andrew: Those “top performance reviews” must not be getting you to the “We want to retain you and hear our competitors are paying more” level. Sounds like my world, public and private, where the first thing you learn is that an “excellent” grant application really and truly sucks. “Outstanding” is the only way to go. We all need to work harder. Not that the goalposts won’t be moved. Again. It’s what “they” do.

  6. I expect that the US experience will resemble in some respects the Canadian one, where someone is laid off or retires, and then is often hired back on contract – so the number of employees (the term of art here is “FTE” – full-time equivalent) falls but the taxpayer pays just as much for the same people, possibly doing a bit less work since paid by the hour rather than having unpaid overtime expected, as is usual among government professionals. So it’s a mug’s game, but one that government haters like to play, including governments that like to appear to dislike government. (The province of Ontario’s most recent example of such a government passed statutes called the Fewer Politicians Act and the Fewer School Boards Act, knowing that the contempt for politicians and school boards among the target audience for these political titles would be worth more to them than a critical analysis of the actual effect of the statutes.)

    1. Actually this has been going on already for 20 years at least. I’ve spent much of my career as a contractor doing things that in a healthy society would be being done by civil servants. They would be paid less in $$/annum than me, but they would have pensions and other bennies that in the private sector I don’t get to have.

      Pretty much all of the cuts to Fed headcount since the late ’80s have wound up resulting in hiring contractors to do the work, with various associated inefficiencies.

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