STATEMENT OF THE HONORABLE CHARLES C. FINUCANE, ASSISTANT SECRETARY OF DEFENSE (MANPOWER, PERSONNEL AND RESERVE), BEFORE THE HOUSE POST OFFICE AND CIVIL SERVICE COMMITTEE ON FEDERAL PAY LEGISLATION, THURSDAY, APRIL 21, 1960.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00965R000400110004-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 15, 2016
• Document Release Date: January 9, 2004
• Sequence Number: 4
• Publication Date: April 21, 1960
• Content Type: STATEMENT

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STATEMENT OF THE HONORABLE CHARLES C. FINUCANE, ASSISTANT
SECRETARY OF DEFENSE (MANPOWER, PERSONNEL AND RESERVE),
BEFORE THE HOUSE POST OFFICE AND CIVIL SERVICE COMMITTEE
ON FEDERAL PAY LEGISLATION, THURSDAY, APRIL 21, 1960.
MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE:
I appreciate this opportunity to discuss with you the matter of Federal
pay legislation as it relates to employees compensated under the Classifica-
tion Act of 1949, as amended.
This is a matter of great importance to the Department of Defense which
employs better than fifty percent of the total number of employees in the
Executive Branch whose pay is fixed under this Act.
These employees, who constitute almost one-half of the Department's
total civilian employment, include not only supervisors and skilled techni-
cians, but also the key executives and many of the top engineers and scientists
upon whom the Department must depend for the effective execution of its vital
programs. Adequate and equitable compensation for these employees is quite
naturally a matter of primary concern to us.
This subject is also important to the Department of Defense from the
standpoint of costs. I understand that the annual costs of the bills before
this Committee to increase salary rates under the Classification Act have
been estimated at $936 million. Roughly one-half this cost, or somewhere in
the neighborhood of $470 million dollars, would have to be borne by the
Department of Defense.
This constitutes a sizeable amount of money to be financed out of the
Defense budget. To support increased costs of this magnitude it would be
necessary for the Department to assure itself that the proposed salary
increases are necessary, that they are equitable, and that they can be
defended in comparison with other defense requirements competing for the
dollars involved.
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The Department of Defense would not hesitate to support appropriate
salary increases for these employees which it considered meet these tests.
It does not, however, believe that the bills currently before this Committee
meet these tests, nor can it substantiate at this time the need for any
general salary increase for employees at all levels under the Classification
Act.
One of the factors properly to be considered as an indication of the
necessity for any over-all increase in Classification Act pay schedules is
the effect of existing schedules upon ability to recruit and retain competent
employees. Examination of turnover rates in Defense indicates that, while
the Department has some difficulty with recruitment and retention of qualified
civilian personnel for specialized categories of positions, these difficulties
are not of a general nature and would not be resolved in the most efficient
way by a general increase in Classification Act pay schedules.
The over-all situation on attraction and retention of personnel has
remained relatively stable since the last general Classification Act pay
increase enacted in July 1958. Separation and accession rates have not
shown any general increase over-all and they have been consistently less
than half the rates for all manufacturing industry in the United States.
This pattern of general stability includes positions that are considered
critical shortage categories, such as scientists, engineers, mathematicians
and medical personnel.
This can be briefly illustrated by comparing turnover in these critical
positions in the Department of the Navy for the six month period August 1958
to January 1959, a period which immediately followed the last Classification
Act pay increase, with the latest comparable period of August 1959 to January
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1960. This comparison shows that the accession rate for these critical series
for the last half of 1958 was 5.5% and for 1959 it was 5.4%; the separation
rates, respectively, were 10.1% and 11%.
I do not wish to imply from these over-all statistics that there are
no problems of recruitment and retention of qualified employees, especially
scientists and engineers, in the Department of Defense. Rather, the point
to be made is that the problems of recruitment and retention are not across-
the-board in nature, nor of the type that are particularly susceptible to
solution by an across-the-board pay increase for all employees. They are
in large measure problems which stem from current inadequacies and inequities
in the Classification Act compensation system itself.
The Director of the Bureau of the Budget has presented these deficiencies
very clearly, and has pointed out the difficulties of maintaining equitable
salary rates under the existing machinery for adjusting the salary scale.
The Department of Defense strongly supports the views expressed by Mr. Stans,
and has urged for the past several years that appropriate steps be taken
for a thorough overhaul of the present Classification Act compensation system.
Deficiencies in that system have been brought out clearly in the
several studies to which Mr. Stans referred. They were highlighted in the
report of the Cordiner Committee, established by the Secretary of Defense
in 1956 to advise him concerning adjustments that might be needed in present
provisions for compensation in order to attract and retain the competent
personnel required by our defense activities. In 1958 the Congress sub-
stantially accomplished the interim salary adjustment recommended by the
Cordiner Committee but most of the flaws in the compensation system pointed
out by that Committee remain uncorrected.
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It is in this area that action is urgently needed. The Department of
Defense has found that those measures which the Congress has enacted to
provide a greater measure of flexibility in fixing and adjusting pay under
the Classification Act have been most beneficial.
One outstanding example is the authority given to the Civil Service
Commission to establish a rate higher than the minimum rate of a grade for
inhiring purposes, in order to assist in recruiting. This has proven
invaluable in meeting recruiting requirements for scarce categories of per-
sonnel. Another example is the removal of the restriction which required
that all college graduates without experience be hired at GS-5. This
liberalization has also aided the Defense Department in recruiting excep-
tional young college graduates with potential for development in its many
occupational fields.
Many of the problems which confront us today in the administration of
the civilian salary structure parallel those which the Career Compensation
Act of 1958 sought to correct for military personnel. These included lack
of adequate career incentives, failure to sufficiently reward outstanding
performance and advanced skills, and lack of flexibility in adapting the
pay system to changing conditions.
It is pertinent to note that after long study in the Executive and
Legislative branches it was determined that these problems could not be
resolved through a general across-the-board pay increase for military per-
sonnel. Rather, a bill was enacted which was tailored to meet specific
needs, to bolster reenlistment rates in the more advanced skills, to create
incentives for capable personnel to stay in the service, and to reward
superior achievement and performance.
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Similarly, a solution tailored to meet the specific needs of the
Federal civilian employee career system should also be developed. The
Department of Defense urges that this Committee take steps to provide this
solution. It is our sincere belief that a general pay raise at this time
would not afford the required relief to our civilian pay problems, and would
delay the improvements which are so urgent.
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