THE NATIONAL CONSTITUTION PROTOTYPE PROJECT

Public Service Compensation

The compensation of a federal government employee in a large nation with many economically diverse regions typically consists of two parts: a base wage and a locality adjustment.

The base wage for a public servant, whether federal or state, is typically a function of an employee’s “job series”, “rank” and number of years of service. For federal service, the base wage formula is typically the same throughout a nation.

Locality adjustments are widely recognized as an essential component of federal service compensation. Such locality adjustments are necessary because the cost of living in different regions of a nation can vary considerably, particularly when comparing urban and rural areas. A "locality blind" compensation plan for federal employees lacking such adjustments could lead to labor shortages in some regions and/or excessive compensation in others.

Note that, if one ignores the federal-state dichotomy, all public servants, regardless of who employs them, could in theory be compensated under a national public service compensation plan consisting of a base wage combined with locality adjustments. And that idea, of a national compensation plan for all public servants, presents some rather interesting opportunities and potential benefits.

One thing to note immediately is that per capita tax revenues tend to scale with a region’s cost of living. A region where the cost of living and wages are high tends to generate more tax revenue per capita than a region where the cost of living and wages are low. Thus, different regions could, in theory, offer their own locality pay adjustment to federal and state employees to attract workers to fill public service positions within their region, and the cost of such locality pay adjustment could be borne by the state or region offering it rather than the federal government.

A second thing to note if a national compensation plan for all public servants was instituted is that the federal government could, in theory, pay a significant portion (e.g., 80%) of the base salary for every state and local public servant. Given that the federal government does not face the same fiscal constraints that state or local governments face, state and local governments in general could benefit financially if the cost of their public service workforce was substantially subsidized by the federal government.

In addition to helping to improve the finances of state and local governments, one other potential benefit of the federal government paying a large portion of the base wage of state and local government employees would be that it provides a way for the federal government to discourage misconduct by local and state employees, particularly in relation to local and state law enforcement.

As a condition of funding a public service position created by a state or local government, the federal government could require that the position be held by someone licensed by the federal government. And the threat of losing federal funding for a position (specifically, as a byproduct of an employee losing their federally issued license) would provide a strong incentive for local and state governments to ensure that their employees strictly observe any codes of conduct required by their federal licenses.

Finally, note that, while the federal government could provide the entire base salary for state and local government employees, it would be advisable to require that state and local governments pay a portion of the base wage of any public service position they create to discourage the creation of an excessive number of such positions. The federal government could also be selective about which types of state and local positions (as defined by job series and/or rank) it would subsidize. A locality adjustment floor could be established for different regions based on the median wage within each region. And the locality adjustment could depend on the region a public servant lives in rather than the region where they are employed.