Wednesday, October 10, 2012

How to Cut Federal Employees' Pay

When you think of cutting pay, you immediately think of cutting wages or remunerative benefits (such as healthcare), which is what every cost-cutting proposal comes up with.  The problem with cutting pay in this way is that people react very strongly to losses of nominal wages--you're likely to lose in productivity what you gain in cuts.  Another way to cut pay is to make employees work more for the same pay.  In terms of raising productivity per hour, this is also not an easy feat, since you have a management team already devoted to that very prospect.

However, it is possible to raise productivity without cutting either compensation per hour or raising productivity per hour: get rid of a holiday.  On a holiday you already bear the cost of compensating the employees without the benefits of them actually working.  I know some Libertarians among us would argue that Federal employees working is actually harmful to society and we should prevent it at all costs, but that's another issue.

Normally, you would expect to receive some push-back for cutting holiday hours.  However, there is one Federal holiday that is so devoid of meaning that there would be little than ritual griping if it was removed: Columbus day.  Employees from the private sector are often surprised that they get Columbus Day off--the most they get out of Columbus Day is a Columbus Day sale.

If, however, the average Federal employee works 230 days a year (30 days of holidays, vacation, and sick leave), removing Columbus day from the holiday calendar would be equivalent to a 0.435% increase in productivity at no extra cost.  I guarantee you'd get much more push-back from a 0.435% wage cut than you would from eliminating Columbus "Meaningless Three-Day-Weekend" Day.

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