Compensation in Public Organizations

Deciding how much to pay employees is a difficult and occasionally controversial task confronting any government personnel system. There are several key considerations in determining a reasonable level of compensation. One is the necessity of paying employees enough to fulfill their minimum economic needs.

Closely related is the question of compensation in proportion to the work done in terms of its importance, quality, and quantity. These can be highly subjective measures, permitting considerable disagreement about what is appropriate. Another dimension of pay comparability is the variable cost of living throughout the nation, and even within many states and even the wage and salary levels paid in business and industry. There has been a concerted effort to align government salaries with them on a truly comparable basis and to changes in the cost of living.

The pay gap for national government civil servants also has narrowed and ranges from 20 percent to nearly 50 percent, depending on grade and geographic location. This is not a new problem. Locality pay is adjustments to federal pay scales that make allowances for higher- or lower-cost areas where employees live.

National government employees are substantially better paid and receive more generous benefits than their state and local counterparts. Within that overall comparison, there are other variations. One is the high proportion of state and local government employees working in education, transportation, and healthcare services. In recent years, state and local employees have fallen behind in compensation, compared with their private-sector counterparts and federal workers.