STATEMENT OF HONORABLE FREDERICK H. MUELLER, SECRETARY OF COMMERCE, BEFORE THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE OF THE HOUSE OF REPRESENTATIVES RESPECTING PROPOSED FEDERAL EMPLOYEE PAY INCREASES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00965R000400110015-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 15, 2016
• Document Release Date: January 9, 2004
• Sequence Number: 15
• Publication Date: April 27, 1960
• Content Type: STATEMENT

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STATEMENT OF H?ONORABI:.,E FREDERICK H. MUELLER,
SECRETARY OF COMMERCE, BEFORE THE COMMITTEE
ON POST OFFICE AND CIVIL SERVICE OF THE HOUSE OF
REPRESENTATIVES RESPECTING PROPOSED FEDERAL
EMPLOYEE PAY INCREASES
April 27, 1960
Mr. Chairman and Members of the Committee:
You have asked me to appear today to .discuss the general
question of pending legislation to increase the pay of federal employees.
I wish to discuss the general question of federal compensation in relation
to its fiscal consequences and in terms of abound principles for employee
compensation, rather than to go into detail About any particular bill.
It is extremely difficult to speak on a question of this type
because it is so closely bound up with human emotions, with the basic
desire to earn more, to have more of the material things of life, more
leisure, or perhaps more security. In addition, most of us are inclined
to develop the opinion that we are underpaid. Moreover, my years of
public service, first in Michigan and more recently in Washington, have
-convinced me as to the basically high quality of public employees and the
propriety of entirely adequate and systematic pay systems. In other words,
I favor a truly adequate level of compensation for public employees as well
as one that can be referred to as being a truly modern system.
The easy approach would be to favor substantial boosts and
thereby gratify many persons in the f ederal government. But under current
conditions such a position would be a failure in duty both to the people of the
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United States and to federal workers themselves. The hug sums that
would be necessary to finance the proposals not only would impose a
heavy burden on taxpayers at a time all expenses of federal, state and
local governments are high, but the action would be inflationary in itself
and would trigger even worse inflation,
It is my understanding that the various proposals pending before
you call for pay raises ranging from 12 percent to 23 percent and would
produce in general another horizontal increase in existing pay scales with
little in the way of internal adjustments as between the grades. It is also
my understanding that the Bureau of the Budget estimate suggests an annual
increase of about $1, 6 billion in the cost of federal compensation. I am
opposed to increases of such amounts and types, first because of their
fiscal and economic consequences and second, because they fail to solve
some of the basic difficulties existing within the federal pay system. I
will try to explain my reasons for this position briefly.
Every employer in determining his wage policies finds it
necessary to give consideration to two limiting factors, On the one hand,
he must pay the going rate in his area or he must be content with inex-
perienced and inefficient employees if indeed he is able to obtain an
adequate work force at all. On the other hand9 he is unable to pay more
than the employee produces within the organization. Any pay made in
excess of productivity will cut into operating profits or lead to increased
prices for the goods or services, Whenever general pay levels are
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increa-s?ed more than warranted by improvements in employee productivity,
the result-must take the form of higher prices.
Most of the operations of government are service operations.
With a few exceptions, government services are essential facilitating
services which are incapable of evaluation in terms of productivity. As
is true in industry generally, government has been improving its efficiency
over the years through better selection and training of employees and
through more efficient use of these employees.
It is doubtful, however, if this improving federal efficiency or
greater productivity exceeds that experienced by industry generally and,
since it deals with a nonmarketed product, it is necessary to turn to some
other standard of determining the worth of, or the proper pay levels for,
the federal employee. This standard can best be one of reasonable com-
parability with the pay scales of private employment. We must pay amounts
about equal to the pay of private employees if we are to obtain a continuing
supply of high quality people for the government service. By doing this we
can assure the federal employee that he will share in the progress of in-
dustry. We can assure the taxpayer that he is paying the going rate for the
government services he demands.
I do not believe that either government efficiency or private labor
productivity has increased in the past two years sufficiently to warrant pay
increases anywhere in the range of increases proposed by pending legisla-
tion. Moreover, experience has shown that where a large segment of our
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--.econorny is.-gra..nt-ed.an-.s,.eross--the-beard increase, a like demand for wage
increa-s-e.s s,vpieced by other -s-egrnente of the ec onomy. This whip-:saw
effect can only result in further inflation as each group strives to improve
--its position relative to the other segments. Therefore, I believe tkiat such
increases would be inflationary in their consequences both directly and as
a result of creating a budget deficit,
A far greater difficulty with pending legislation, which calls for
general increases, is that the various disparities or distortions introduced
in recent years would remain. During the past twenty years there have
been seven general increases in the federal pay scale with only the last
increase being horizontal in character. All of the others have served to
compress the prewar pay scale through fairly substantial increases at the
lowest level and very small increases at the upper levels. Today, the
GS-l receives $2, 960 vs. $1, 260 twenty years ago, while the GS-15 receives
$12, 770 vs. $8, 000, or increases of 135 percent and 60 percent respectively.
Moreover, none of these adjustments can be truly said to have given adequate
consideration to the prevailing scales paid in industry and it has become a
widely held belief that most of the lower grade positions are paid reasonably
well in relation to private employment and that many of the middle and upper
levels are paid relatively poorly. The addition of a limited number of super
grades has provided only a partial solution to this phase of the problem.
What should be considered in the federal service is a regular
systematic reporting of rates paid under competitive pay systems in all of
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the areas where employment is reasonably comparable between industry
and government. We must be sure that the government employee will not
-suffer any monetary loss or sacrifice for having chosen the public service,
and we must give the public administrator assurance that he can obtain at
all times his fair share of the available working force. We must avoid the
situation where graduate engineers are paid less than the skilled craftsman
whom they may be asked to supervise. We must be in a position to compete
each year at the colleges and universities with the employment officers of
large corporations. We must compete both in terms of entering wages and
prospects for advancements Finally, having established such a system,
there must be some organized basis for continuing joint study by the ad-
ministration and the legislative committees to assure that the system is
maintained on a reasonably competitive basis.
The information necessary for this competitive wage system is
now being gathered by the Bureau of Labor Statistics and will be available
late this summer. Out of this study I think we will be able to evolve an.
equitable system which will result in compensation exceeding that currently
prevailing in certain classifications and we will be able to do this without
reducing the pay rate of any of the present employees. We will be in a far
better position to afford, the costs of a pay scale that is fair and equitable
at all levels if we defer general horizontal pay increase at this times
I believe that we can afford the cost of an adequate pay system.
I do not believe we can afford the cost or inflationary consequences of
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