July 09, 2006
Turnover of High Level Public Employees-BECKER
Quit rates of secretaries and other lower-level federal government employees are considerably below those of comparable workers in the private sector, while government officials quit at much higher rates than their civilian counterparts. What explains this difference, and is it good or bad?
The first part of the question is easy to answer: differences in quit rates are due to differences in the ratio of federal compensation to compensation in the private sector at low and high lob levels. Federal employees at lower level jobs may not make more than their civilian counterparts, but their economic situation is quite good when all other characteristics are taken into account. Government workers at these levels have great job security since they cannot be fired after a short probationary period, except for the grossest forms of misbehavior, such as frequent absences from work, racial or sexual remarks, etc. In addition, they get many holidays, good vacations, generous pensions and health benefits, and are usually not under much pressure at work. The full set of characteristics offered to these federal employees is very attractive, which is why lower level jobs attract many applicants, and the jobs must be rationed through tests and in other ways.
By contrast, federal employees at higher-level jobs-including senior executives in the Department of Homeland Security that Posner discusses- are paid considerably below that of comparable private sector executives. In order to attract and keep high quality employees, the federal government must provide enough compensating advantages in the form of prestige, power, working conditions, and in other ways. There is little turnover of federal judges presumably for that reason since most of these judges could earn much more as practicing lawyers, even judges who, unlike Judge Posner, are not particularly energetic.
For many high-level federal officials, government service is a short-term option that may provide interesting experiences, including learning about various policy issues. But after a while the much higher compensation in the private sector becomes too tempting-of course, their short stay in the government may have been anticipated- and many officials quit the federal government after only a few years (or less).
It would be possible to reduce turnover of federal officials by significantly raising their pay, so that it becomes closer to what they could receive in the private sector. As with federal judges, turnover might be low even with pay that remained considerable below that in the private sector, but not as much below as at present. Some talented men and women like working on public problems of great importance, the security of job tenure would appeal to some, and so on.
Members of Congress currently receive salaries of $165,200 per year-leaders in the House and Senate receives a little more- plus generous retirement and health benefits. That is a lot relative to the pay of most employees in the private sector, and there does not seem to be a shortage of men and women who want to be elected to Congress. Under present rules, it is not possible to pay senior officials in Homeland Security or other agencies more than members of Congress receive, even when higher pay is necessary to fight off the appeal of employment in the private sector. To pay top public officials much more than they already get would require a change in these rules, which would not be politically easy.
Yet for the sake of this discussion, suppose it were possible to cut down the turnover of federal officials in the Department of Homeland Security and elsewhere. Would that be desirable? I believe that having more experienced employees is as valuable to the federal government as it obviously is to the private sector. Turnover of executives with years of experience at the same private company is low- clearly much below that among federal employees- because these companies value that experience. Long time executives accumulate useful knowledge about the organization and practices of the firms they have worked for over the years-what economists call firm-specific capital. I see no reason why such knowledge should be much less important in the federal government. As Posner indicates, Great Britain and some other countries do manage to retain high-level officials of good quality over much of their working lives.
Turnover of federal officials is undesirable for another reason that is not really applicable to the private sector. There is much "rent-seeking" by private companies that try to get special treatment and subsidies from the federal government as it spends huge resources. Hiring of former federal employees to top executive positions at private companies helps them improve their rent-seeking position vies a vies competitors. In particular, if competitors all hire former top executives of the Department of Homeland Security, that may simply offset their rent-seeking positions without adding social value. At the same time losing many top executives weakens this department.
So I favor higher pay for top federal officials in sectors that experience heavy turnover. However, without major changes in pay scales, I am skeptical about the advantages of developing much more stringent rules that prevent federal officials from going to work for suppliers of services or products to the agencies that employed them. The risk of such rules is that they eliminate one of the major present attractions of federal employment at high-level jobs. Adding such rules to the low pay would then make it even more difficult for federal agencies to attract able and honest top-level executives.
Posted by Gary Becker at 09:34 PM | Comments (10) | TrackBack (0)
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Government employees in high demand (by private sector) departments should be paid an opportunity cost salary increment. Federal government needs to create a non pay grade system so highly skilled people can be hired in government for five or ten year stints.
Posted by Arun Khanna at July 10, 2006 08:49 AM | direct link
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Posted by wetwe at July 10, 2006 08:52 AM | direct link
Seems you guys have this exactly backwards.
Any lumpen political hack can get a job in the government, serve a few years, then get a million dollar a year job securing pork for their new employer.
The government needs to start charging a tuition fee to anyone who wants to work in the Defense Dept. or Homeland Security.
To maximize their take, the government should auction off these jobs each year to the highest bidder.
Posted by monkyboy at July 10, 2006 02:07 PM | direct link
Retention in federal government employment is also a function of age. Government employment can be a nice way to end one's career, if you already have a nest egg put away. Naturally, you have to put up with bureaucratic inefficiencies exceeding those in the private sector (although the point is arguable). But one can make a serious contribution to the public, and get better-than-average retiree health benefits. And even after the shift away from a defined benefit retirement scheme some 20 years ago, to a defined contribution scheme, a government pension is still pretty good. Maybe not, if you have truly lavish appetites, but not everyone does. (Federal judges have really great, constitutionally guaranteed, retirement benefits, as Judge Posner knows -- and deservedly so.)
My point is that a 50-something or 60-something federal official probably views the calculus of the revolving door differently than a 30-something or 40-something federal official. If the federal official is an immoral opportunist, then all bets are off, of course.
Posted by Jake at July 10, 2006 09:10 PM | direct link
"I am skeptical about the advantages of developing much more stringent rules that prevent federal officials from going to work for suppliers of services or products to the agencies that employed them."
more on this please, GB. Are the rules all that stringent? is it because you don't believe the potential conflicts of interest are worth worrying about or that they just can't be prevented with such measures? either way, it is still not pleasant watching less civic minded colleagues using a public position to further a private career. is there a case for preventing the use of sensitive data acquired for a public interest being used for a private one by such individuals? if so, how can it be done without limiting the career path of those who have had access to such data?
Posted by oop at July 11, 2006 09:14 AM | direct link
There is a comment above that got by the spam filter.
"More stringent rules," if they included an extension from one to two years or more during which former employees of a department could not lobby officials of that department, would more likely discourage Posner's "birds of passage" than it would genuinely able and valuable people from joining, and staying in, the federal government. For one thing it would reduce the time in which former officials of a department could lobby during the tenure of the administration they served. Former officials could be expected to lose much of their "pull" once administrations change, especially if they change from Republican to Democratic or vice versa.
Posted by Zathras at July 11, 2006 10:11 PM | direct link
Sometimes it is important to look at what makes a revolving door opportunity attractive and address that problem directly. Specifically, one should make government procurement practices very transparent, and work to introduce competition in procurement through various auction mechanisms that will reduce the value of prior relationships and inside information from being used to procure contracts. Sunlight and transparency--some bacteria cannot survive in the light of day.
Posted by Bill at July 12, 2006 10:53 AM | direct link
i should have added in my earlier post that i don't believe equalizing pay across senior level public and private jobs is realistic without changing the character of a public enterprise to "for profit"
Posted by oop at July 12, 2006 01:26 PM | direct link
Those who take the job to enable them to peddle influence later are best not hired in the first place. Their true cost includes the unfavorable contracts that will result in the future. Best raise salaries and hope things work out.
Good hireing practices (no cronies)might help.
Posted by Edward Bernstein at July 13, 2006 06:46 PM | direct link
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