Federal employees have recently been granted a raise from President Joe Biden as inflationary pressures and labor shortages crash through the bureaucracy.
As explained in the executive order that is slated to take effect on the 1st of January, all federal employees are slated to get a pay rise to the tune of 4.1%, along with an average locality-based pay raise of 0.5%, marking that some 2.1 million federal employees will get on average a raise of about 4.6%. Biden spoke out about the raise roughly four months ago via a letter addressed to House Speaker Nancy Pelosi (D-CA) and Vice President Kamala Harris, which spoke about retention and recruitment problems.
“Multiple years of lower pay raises for Federal civilian employees than called for under regular law have resulted in a substantial pay gap for Federal employees compared to the private sector,” stated Biden. “This alternative pay plan decision will allow the Federal Government to better compete in the labor market to attract and retain a well‑qualified Federal workforce.”
This raise from the president falls just below the current 7.1% year-over-year inflation rate that was seen last month. Real average hourly earnings, which consider the impact of inflation, decreased 1.9% year-over-year as of last month, as expressed in data made public by the Bureau of Labor Statistics. At the same time, a 1.1% drop in the length of the average workweek equates out to a 3% drop in real wages.
The federal government spent almost $215 billion in the fiscal year for 2016 in an effort to compensate federal civilian employees, as expressed in a report coming from the Congressional Budget Office. A periodic pay increase is normally issued to federal employees based on key factors such as performance, longevity, and changes in private sector pay.
Any president seeking to issue an increase to federal salaries is allowed to put forth a plan to Congress by the first of September of the previous year, including any reasons for putting forth the idea for such a raise. When speaking about any wage increases, the commander-in-chief needs to take into account “pertinent economic measures” such as current inflation and economic output.
Jerome Powell, the Chair of the Federal Reserve, expressed that the workforce “participation gap” is a result of “excess retirements” that took place beyond “what would have been expected from population aging alone,” even as younger people were able to get jobs back. “In the labor market, demand for workers far exceeds the supply of available workers,” he stated while talking about the recent efforts from the central bank to go back on any monetary stimulus. “Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market.”