A Stern Glance

The federal government employs 2.3 million civilian workers, or 1.7 percent of the U.S. workforce, in over 700 occupations and spent about $200 billion in fiscal year 2011 to compensate them. Recently, concern about the federal budget and about equity between the public and private sectors has focused greater attention on the costs that the federal government incurs to compensate its employees.

Today CBO released a study—prepared at the request of the Ranking Member of the Senate Budget Committee—that addresses the question:  How does the compensation of federal employees compare with that of workers in the private sector?

CBO’s Key Findings

Differences between the average compensation of employees of the federal government and that of private-sector employees varied significantly by level of education. As shown in the table below:

• Among people with a high school diploma or less education, or whose education culminated in a bachelor’s degree, the total cost of compensation, on average, was higher for federal workers than for similar workers in the private sector, after accounting for differences in demographic factors and in certain characteristics of their jobs.
• By contrast, among people with a professional degree or Ph.D., total compensation costs were lower for federal employees than for similar private-sector employees, on average.
• Differences between the government and the private sector in the average costs of benefits were much greater than the differences in the average wages.

However, even within groups of workers who have similar characteristics, the average differences in compensation between federal and private-sector employees do not indicate whether particular federal employees would receive more or less compensation in the private sector.

CBO’s Analysis

Answering the study’s main question was complicated: The federal and private-sector workforces differ in characteristics that can affect compensation, such as education, experience, and occupation. Federal workers tend to be older, more educated, and more concentrated in professional occupations than private-sector workers.

To account for such differences, CBO has used data from 2005 through 2010 reported by a sample of households and employers to estimate differences in the cost of wages and benefits for federal employees and private-sector employees with a similar set of observable characteristics. CBO sought to account for differences in individuals’ level of education, years of work experience, occupation, employer’s size, geographic location (region of the country and urban or rural location), and various demographic characteristics (age, sex, race, ethnicity, marital, status, immigration status, and citizenship).

There are other factors that may affect employees’ compensation but that are not available from surveys and thus were not considered. For example, even among workers with similar observable characteristics, employees of the federal government and the private sector may differ in characteristics such as motivation or effort that are not easily measured but which can matter a great deal for individuals’ compensation.

A key issue in compensation policy is the ability to recruit and retain a highly qualified workforce. An assessment of how changes in the way the government compensates its employees would affect its ability to recruit and retain the personnel it needs is beyond the scope of this analysis.

Characteristics of Federal Employees

The federal civilian workforce differs in some significant ways from the private-sector workforce. For example, thirty-three percent of federal employees work in professional occupations, such as the sciences or engineering, compared with only 18 percent of private-sector employees; in contrast, 26 percent of private-sector employees work in occupations such as retail sales, production, or construction, compared with only 7 percent of federal employees. Professional occupations generally require more formal training or experience than do the occupations more common in the private sector.

Partly because of that difference, the average age of federal employees is four years higher than that of private-sector employees (45 versus 41). The greater concentration of federal workers in professional occupations also means that they are more likely to have a bachelor’s degree: 51 percent of the federal workforce has at least that much education, compared with 31 percent of the private-sector workforce. Likewise, 21 percent of federal employees have a master’s, professional, or doctoral degree, compared with 9 percent of private-sector employees.

Wages

After accounting for the differences in job-related and demographic characteristics described above, workers whose highest level of education was a bachelor’s degree earned roughly the same hourly wages, on average, in both the federal government and the private sector. However, federal civilian workers with no more than a high school education earned about 21 percent more, on average, than similar workers in the private sector, whereas federal workers with a professional degree or doctorate earned about 23 percent less, on average, than their private-sector counterparts.

Overall, the federal government paid 2 percent more in total wages than it would have if average wages had been comparable with those in the private sector, after accounting for certain observable characteristics of workers.

The span between the wages of high- and low-paid workers was narrower in the federal government than in the private sector, even when employees’ education and other observable traits were accounted for. The narrower dispersion of wages in the federal sector may reflect the constraints of federal pay systems, which make it harder for managers to reward the best performers or to limit the pay of poor performers.

Benefits

The cost of providing benefits—including health insurance, retirement benefits, and paid vacation—for public and private-sector employees differed much more than wages.

Average benefits for federal employees were 72 percent higher for those with no more than a high school education and were 46 percent higher for those with just a bachelor’s degree. Among employees with a doctorate or professional degree, by contrast, average benefits were  about the same in the two sectors.

On average for workers at all levels of education, the cost of hourly benefits was 48 percent higher for federal civilian employees than for private-sector employees with certain similar observable characteristics, CBO estimates.

The most important factor contributing to differences between the two sectors in the costs of benefits is the defined-benefit pension plan that is available to most federal employees. Such plans are becoming less common in the private sector. CBO’s estimates of the costs of benefits are much more uncertain than its estimates of wages, however, primarily because the cost of defined-benefit pensions that will be paid in the future is more difficult to quantify and because less-detailed data are available about benefits than about wages.

Total Compensation

Among employees with a high school diploma or less education, total compensation (wages and benefits) costs averaged 36 percent more in the federal sector. Among people whose education culminated in a bachelor’s degree, the cost of total compensation averaged 15 percent more for federal workers than for similar workers in the private sector. By contrast, among people with a professional degree or doctorate, total compensation costs were 18 percent lower for federal employees, than for similar private-sector employees, on average.

Overall, the federal government paid 16 percent more in total compensation than it would have if average compensation had been comparable with that in the private sector, after accounting for certain observable characteristics of workers.

Stern And Company
Strategic Communications
http://www.sdsternpr.com
info @ sdsternpr.com

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Compensation costs for civilian workers increased 0.4 percent, seasonally adjusted, for the 3-month period ending December 2011, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) also increased 0.4 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.6 percent.

Civilian Workers

Compensation costs for civilian workers increased 2.0 percent for the 12-month period ending December 2011, the same as the increase a year earlier in December 2010. Wages and salaries increased 1.4 percent for the current 12-month period. In December 2010 the increase was 1.6 percent. Benefit costs increased 3.2 percent for the 12-month period ending December 2011. In December 2010, the increase was 2.9 percent.

Private Industry Workers

Compensation costs for private industry workers increased 2.2 percent over the year, compared to the 2.1 percent increase for the previous 12-month period. Wages and salaries increased 1.6 percent for the current 12-month period.  The increase for the 12-month period ending December 2010 was 1.8 percent. The increase in the cost of benefits was 3.6 percent for the 12-month period ending December 2011, higher than the December 2010 increase of 2.9 percent. Employer costs for health benefits increased 3.5 percent for the 12-month period ending December 2011, lower than the December 2010 increase of 5.0 percent.

Among occupational groups, compensation cost increases for private industry workers for the 12-month period ending December 2011 ranged from 1.7 percent for service occupations to 2.4 percent for production, transportation, and material moving occupations. Among industry supersectors, compensation cost increases for private industry workers for the current 12-month period ranged from 1.0 percent for leisure and hospitality to 2.8 percent for manufacturing.

State and Local Government Workers

Compensation costs for state and local government workers decelerated over the year. In December 2011, the increase for the 12-month period was 1.3 percent. In December 2010, the increase for the 12-month period was 1.8 percent. Values for this series—which began in June 1982—have ranged from the current period’s 1.3 percent to 9.6 percent. Wages and salaries increased 1.0 percent for the 12-month period ending December 2011. A year earlier the increase was 1.2 percent. Prior values for this series, which also began in June 1982, ranged from 1.0 percent to 8.5 percent. Benefit costs increased 2.1 percent in December 2011, down from the December 2010 increase of 2.9 percent. Prior values for this series, which began in June 1990, ranged from 1.2 percent to 8.3 percent.

Stern And Company
Strategic Communications
http://www.sdsternpr.com
info @ sdsternpr.com

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• Home prices in the U.S. expected to decline 3.6 percent into mid-2012, and then rebound 2.4 percent in second half 2012 through first half 2013
• Price declines and low mortgage rates have resulted in dramatic improvement in housing affordability
• Ratio of monthly mortgage payment to median family income lowest on record; Monthly mortgage payment for a median-priced single-family home nearly 40 percent lower than at peak

Fiserv, Inc. today released an analysis of home price trends in more than 380 U.S. markets based on the Fiserv®Case-Shiller Indexes®. The indexes are owned and generated by Fiserv, a leading global provider of financial services technology solutions, and data from the Federal Housing Finance Agency (FHFA).

The double-dip in home prices that started in 2010 continued to take home prices lower this spring and summer. Single-family home prices dropped 5.9 percent in 2011 second quarter compared to a year ago, according to the national Fiserv Case-Shiller home price indexes. Prices fell in 340 out of 384 metro areas, with 302 metros hitting new home price lows. Fiserv projects that home prices across the U.S. will decline another 3.6 percent by the second quarter of 2012, before rising by 2.4 percent by the second quarter of 2013.

“Housing affordability has improved dramatically because of declines in both prices and mortgage interest rates,” said David Stiff, chief economist at Fiserv. “The monthly mortgage payment for a median-priced single-family home is now $700, compared to $1,140 in 2006 — a decline of nearly 40 percent. Nationally, purchase mortgage payments now account for only 13 percent of monthly median family income, the lowest percentage on record (since 1971), and compared to 23 percent in the first quarter of 2006.”

Elaborating on the reasons for continued weakness in the housing market, Stiff continued, “Although homes have become much less expensive, housing demand remains depressed with existing home sales back to 1998 levels, averaging 4.3 million units per year since June. Many households cannot finance first-time or trade-up home purchases to take advantage of lower home prices because of much stricter mortgage lending standards. But even households with access to mortgage credit are hesitant to buy homes while job growth is weak and consumer confidence is low.”

Stiff pointed to several factors that can help the market find a bottom and begin a gradual and cautious recovery. “If economic growth picks up in the second half of 2011, then home prices should stabilize early next year. New housing construction is at an all-time low and inventories of foreclosed properties are starting to shrink. Lower levels of housing supply and more steady demand next year will reduce downward pressure on prices. As homebuyers become more confident, many who are sitting on the sidelines will begin to enter the market and prices will start to increase. But we should not expect a rapid rebound in home prices. Very large inventories of foreclosed properties must be liquidated and absorbed before the healthy functioning of housing markets is restored.”

“Potential buyers must be convinced that the economic recovery is back on track and that the double-dip in home prices is nearly over before housing demand will begin to rise,” Stiff concluded.

Other highlights from the latest Fiserv Case-Shiller Indexes include:

• Prices dropped by double-digits in 30 metro areas, while 25 metro areas had small price increases of 1 percent or more.
• Between 2011 second quarter and 2012 second quarter, prices are projected to rise by double digits in only two metros (Madera-Chowchilla, Calif. and Carson City, Nev.) and decline by double digits in 16 metro areas (Naples-Marco Island, Fla.; Las Vegas-Paradise, Nev.; Riverside-San Bernardino-Ontario, Calif.; Miami-Miami Beach-Kendall, Fla.; Salinas, Calif.; Cape Coral-Fort Myers, Fla.; Crestview-Fort Walton Beach-Destin, Fla.; Orlando-Kissimmee-Sanford, Fla.; Bethesda-Rockville-Frederick, MD; Merced, Calif.; Detroit-Livonia-Dearborn, Mich.; Jacksonville, Fla.; Ocean City, N.J.; Port St. Lucie, Fla.; Phoenix-Mesa-Glendale, Ariz.; Palm Coast, Fla.)
• Projections for the following 12 months, i.e. the 2012 second quarter to 2013 second quarter period, illustrate why the housing market is poised to stabilize next year: home prices in 372 of the 384 markets are projected to rise in that time period, with only 12 markets expected to experience declines.
• California and Florida have borne the brunt of the worst declines in home prices. Of the 33 markets where homes have lost at least 50 percent of their value since peak, 28 are in the Sunshine and Golden States.
• In markets with the largest home price bubbles and crashes, improvements in housing affordability have been even larger. For example, the ratio of monthly mortgage payment to family income dropped from 32 percent (2006:Q1) to 11 percent in Las Vegas, from 42 percent (2007:Q1) to 19 percent in Miami, and from 59 percent (2007:Q2) to 27 percent in Los Angeles.

Stern And Company
Strategic Communications
http://www.sdsternpr.com
info @ sdsternpr.com

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Despite what many public relations firms and companies appear to think, news simply is not anything and everything that happens everywhere.

News is what the media believes to be news.

Peddling news that’s not news serves neither the interest of the client, nor that of the journalist or the corporate media relations function, internal or external.

The competition for relatively small amount of space allotted by the print media and on air time by the electronic media is keen.  Consequently, there is, as one can imagine, a preponderance of news that never reaches the public through these traditional channels.

The astute media relations practitioner understands that it is critical to ensure that what is disseminated has not only a salable angle, but at least minimally qualifies as “hard news.”  While the client’s objectives must be foremost and  served, the core strategy of media relations is to develop news with a compelling angle that serves the reporter’s agenda.

In order to develop that angle, a target audience must be discerned. There are countless numbers of publications; each with a clearly defined audience. Virtually every news item has its own media receptacle.    While many public relations firms will pitch “the development of target audiences,” most simply gather large lists of virtually all media outlets that are at least marginally relevant to an organization’s business.

A comprehensive list is critical; however, more critical is the discernment of specific targets for each release.

Before issuing a news release, in addition to addressing the developments at hand, the ramifications of the release, the questions it might drive, must be addressed.

At Stern And Company, we try to answer the most challenging questions that might arise from a news development in the news release. The result is “asked and answered;” more importantly, it’s cast on paper, making the reporter’s job easier and reducing his margin for error.

It isn’t possible, of course, to incorporate every answer to every reporter’s question in a release, it is possible to have the most challenging points covered. That which isn’t covered in the news release, must be anticipated so the follow up queries can be answered with alacrity.

If the story is clearly unique, whether positive or negative it is often advantageous to encourage interviews, or break the story in one media outlet, as an exclusive, with broader dissemination following publication.

If this tactic is selected, it is critical for the corporate spokesperson, the CEO, CFO, etc., to be fully prepared. Stern And Company’s preparation comprises, among other elements, a bio of the reporter, recent stories he or she has written, an assessment of the thrust the reporter’s likely to take and of course, an anticipated list of questions with associated answers.

We also try to background the reporter prior  to ensure that all the information required is available to conduct a comprehensive interview.  Despite the best efforts to background the principal and the reporter, at the end of the day, news cannot be controlled. At best, it can be managed in the sense the whatever is given the media is under the company’s control.

But what about third party sources? A good reporter will look for other angles to or elements of the story, whether it be from analysts, customers, former employees or any other constituency. We always counsel clients to provide, if necessary to the story, at least one third party source who fully understands the issue at hand and, equally important, will be perceived as credible and unbiased.

The significance of major news publications is obvious. Too often, however, media specialists tend to overlook another important media outlet — the trade press. Or, if they do target this channel, it is done in a “shotgun” fashion.

If properly and religiously cultivated, the impact of the trade media can be every bit as powerful as the national media.

As the competition for space and air time becomes increasingly intense, the trade press and special interest publications have become even more valuable in helping to advance a company’s objectives.   Moreover, it is not unusual for a well and nationally respected trade or special interest publication to be viewed by the national media as a “lead steer” and ultimately provide “legs” for the story on a second and third day basis.

In selling anything, a product, a service or news, success is tied directly to the existence of a market for the product, knowledge of the market and the product. Selling news is no different.

News is news if there’s a market for it. The media relations function’s success in selling it depends on how well he understands that market and knows his product.

At Stern And Company we have extensive media experience. Each of our professionals have at  least a decade of journalism in their backgrounds and all with major national publications, including The Wall Street Journal, The Los Angeles Times, Reuters and the Dow Jones News Service, among others.

We are successful in serving our clients’ agendas because we know from experience how to serve that of the media.

About Stern And Company

Stern And Company, based in Las Vegas, develops and implements strategic corporate communications, financial relations and marketing programs for public and private companies.

All of our professionals have extensive senior-level experience as financial journalists with major publications or as communications executives at leading major corporations. Our firm’s practice areas include corporate and financial relations, public relations, strategic and product marketing, crisis communications, transaction communications, restructurings, bankruptcies and litigation support.

Stern And Company
Strategic Communications
http://www.sdsternpr.com
info @ sdsternpr.com

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Personal income increased $61.3 billion, or 0.5 percent, and disposable personal income (DPI) increased $47.1 billion, or 0.4 percent, in December, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $2.0 billion, or less than 0.1 percent. In November, personal income increased $7.4 billion, or 0.1 percent, DPI decreased $4.1 billion, or less than 0.1 percent, and PCE increased $11.4 billion, or 0.1 percent, based on revised estimates.

Real disposable income increased 0.3 percent in December, in contrast to a decrease of less than 0.1 percent in November. Real PCE decreased 0.1 percent, in contrast to an increase of 0.1 percent.

Private wage and salary disbursements increased $29.1 billion in December, in contrast to a decrease of $1.4 billion in November. Goods-producing industries’ payrolls increased $10.8 billion, in contrast to a decrease of $6.5 billion; manufacturing payrolls increased $7.4 billion, in contrast to a decrease of $6.2 billion. Services-producing industries’ payrolls increased $18.3 billion, compared with an increase of $5.1 billion. Government wage and salary disbursements increased $0.4 billion in December; government wages and salaries were unchanged in November.

Supplements to wages and salaries increased $3.6 billion in December, compared with an increase of $1.6 billion in November.

Proprietors’ income increased $1.1 billion in December, in contrast to a decrease of $1.2 billion in November. Farm proprietors’ income decreased $4.7 billion in December, the same decrease as in November. Nonfarm proprietors’ income increased $5.8 billion in December, compared with an increase of $3.5 billion in November.

Rental income of persons increased $8.2 billion in December, compared with an increase of $8.6 billion in November. Personal income receipts on assets (personal interest income plus personal dividend income) increased $9.3 billion, in contrast to a decrease of $0.6 billion.

Personal current transfer receipts increased $13.2 billion in December, compared with an increase of $0.4 billion in November. Within personal current transfer receipts, government social benefits to persons were boosted in December by retroactive social security benefit payments of $7.1 billion at an annual rate, resulting from a recalculation of the earnings base underlying the benefits of recent retirees.

Contributions for government social insurance — a subtraction in calculating personal income –increased $3.7 billion in December; contributions for government social insurance were unchanged in November.

Personal current taxes increased $14.1 billion in December, compared with an increase of $11.5 billion in November. Disposable personal income — personal income less personal current taxes –increased $47.1 billion, or 0.4 percent, in December, in contrast to a decrease of $4.1 billion, or less than 0.1 percent in November.

Personal outlays — PCE, personal interest payments, and personal current transfer payments –decreased $5.2 billion in December, in contrast to an increase of $8.2 billion in November. PCE decreased $2.0 billion, in contrast to an increase of $11.4 billion.

Personal saving — DPI less personal outlays — was $460.1 billion in December, compared with $407.8 billion in November. The personal saving rate — personal saving as a percentage of disposable income — was 4.0 percent in December, compared with 3.5 percent in November. For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-Frb.asp.

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