Driving Federal Government Employees Into Retirement

My family and I went to the VA hospital for Christmas services, during which the kindly chaplain said goodbye to the veterans to whom he had been ministering. Like a record number of federal government employees, he has decided to retire this year.

Because the federal workforce is older than the general population, a certain number of retirements are to be expected. Yet according to the actuaries at the federal Office of Personal Management, workforce age isn’t enough to account for the surge in federal retirements. It’s not hard to see what other factors are driving federal government employees to the exits.

Federal employees have received no cost-of-living increases for two years running, and a freeze of one to three more years is possible. Federal pensions are also on the Washington chopping block. Add to that the increasing demonization of civil servants and red tape within the government, and it’s easy to see why many feds are calling it quits.

Cui Bono?

Unambiguous Losers: States. A wave of federal employee retirements hurts states in two ways. When a federal employee moves from a salary to a federal pension supplemented by social security payments, his or her contribution to state tax revenue drops (most states exempt social security from income tax). Also, the loss of federally funded and provided services increases burden on state-provided services. For example, when VA medical centers lose staff, the demand for care at state Medicaid funded clinics increases.

Both Winners and Losers: Federal employees and federal taxpayers. Many federal employees will miss some aspects of their jobs, but they will escape the increasingly constrained federal workplace and have more time to pursue other activities that bring them fulfillment in life. Federal taxpayers win financially in the sense that the budget appropriation for federal payroll will shrink. However, most of the federal employees moving prematurely into retirement will draw more on other federal programs as a result, converting some of the “cost savings” into mere cost shifting. Further, taxpayers who rely on federally-provided services will get slower and lower quality service as agencies are shorn of their most experienced and knowledgeable employees.

Unambiguous Winners: Government haters. Government employee morale will sink further as pay and benefits decline. The most talented employees, who return value to the taxpayer well in excess of their salaries, will pursue other careers. Sapped of quality employees, federal agencies will provide fewer services and do so in a more inept manner, thereby stoking more popular and political rage at the government.

[Cross-posted at The Reality-Based Community]

Keith Humphreys

Keith Humphreys is a professor of psychiatry at Stanford University. He served as a senior policy advisor at the White House Office of National Drug Control Policy from 2009 to 2010.