The Federal Civil Service Workforce: Assessing the Effects on Retention of Pay Freezes, Unpaid Furloughs, and Other Federal-Employee Compensation Changes in the Department of Defense
Oct 2, 2014
Little is known about the effect of compensation changes on the federal civilian workforce in the Department of Defense (DoD) — even as civilian employees experienced three straight years of pay freezes between 2011 and 2013 and a mandated increase in the retirement contribution rate for employees hired after 2012. For civil service managers, a key concern is whether the reduction in pay and benefits is making it more difficult for the federal government to recruit and sustain an adequate workforce, especially in critical skill areas. Understanding civil service retention is particularly important for DoD, given the significant contribution made by the federal civil service workforce to military readiness.
RAND has begun to extend the dynamic retention model to federal civil service employment. This study demonstrates the use of this capability to assess the effect of pay freezes, unpaid furloughs, and changes to civil service retirement on retention in a portion of the federal civil service workforce — specifically General Service workers with at least a bachelor's degree. Our analysis showed that permanent pay freezes decrease the workforce retained by 7.3 percent. There is no discernable change in retention from a six-day unpaid furlough.
The effect on retention of increasing employee contributions to the federal retirement defined-benefit plan, as recently mandated in law, depends on employees' savings behavior — for example, whether employees were already saving enough to cover the higher contribution or whether they might shift contributions from one part of the retirement plan to another, losing matched contributions by the employer by doing so. RAND analyzed a number of cases and found that higher employee contributions could result in as much as an 8.6 percent drop in the number of employees retained over the long run.
In the future, this capability could be used to assess a wide range of compensation policies — in other occupational areas; for demonstration pay systems such as for the STEM workforce; specific demographic groups, such as women and minorities; and specific locations of interest.
A concern for civil service managers is whether pay and benefit reductions are making it more difficult to sustain the federal workforce.
Planners and policymakers in the federal government have little capability to assess how changes in pay will affect federal civil service retention.
RAND has begun extending its Dynamic Retention Model to permit analysis of federal civilian worker decisions to stay or leave federal service in response to changes in compensation.
Compensation changes could have a noticeable effect on retention in the federal civilian workforce.
How important these effects are in terms of defense readiness and cost is unclear and an important area for further investigation.