Study shows AFL-CIO struggles with reading comprehension

Geoffrey Lawrence

I just received a blast email from the AFL-CIO with the headline, “Privatization Doubles Cost of Govt. Work.” The email links to an AFL-CIO website that makes the following claim:

In the past year, congressional Republicans and right-wing extremists have ramped up their long-standing campaign against federal workers, claiming their pay is too high and their benefits too generous compared to private-sector workers. A new study shows how wrong they are.

According to the Project on Government Oversight (POGO), the federal government pays more than twice as much to private contractors than it would cost federal workers to perform the same work.

The claim obviously struck me as alarming and as a topic of interest, so I clicked through to the study itself, where I found some noteworthy comments about the study’s methodology.

POGO purports to compare compensation rates for federal employees to compensation rates received by workers on federally outsourced projects. However, as the authors admit:

There are a number of factors that potentially limit the accuracy of POGO’s findings. For instance, over the course of our investigation, we discovered some disturbing limitations to the federal databases available to us. The most critical limitations are that: 1) the government’s coding, classification, and data collection systems are inconsistent and do not allow for reliable cost analyses; 2) government websites do not provide access to agency documents that detail cost estimates and the justifications for outsourcing decisions; 3) the government does not publish information on the number of actual contractor employees holding a specific occupational position under any given contract; 4) the government only lists the ceiling prices that it can be billed by contractors for the specific occupational positions-the government is at liberty to negotiate prices that are lower than those listed, but it does not publish those negotiated rates; and 5) government websites do not disclose what the expected cost savings for service contracts are, nor the actual savings (or lack of savings) that result from those contracts. These shortcomings prevent government officials, as well as the public, from accurately assessing outsourcing costs.

So…the authors are saying that, for the contracts examined, they cannot know the number of workers employed on the project, the reasons the project was outsourced, nor the what it would have cost the government to perform the task. Given these limitations, it should become virtually impossible to develop a meaningful labor cost comparison.

But wait…it gets better. Since most outsourcing contracts do not itemize expenditures to a high degree, POGO examined only the total dollar value of contracts (including expenditures on materials, facilities, labor, etc.) and compared this to only the labor cost component that would be faced by the federal government. The authors explicitly admit:

POGO is aware that its methodology does not incorporate some governmental cost factors: i.e., non-directly associated overhead (e.g., executive management and administration, information technology, and legal support), material and supplies (e.g., insurance and maintenance), or facilities (e.g., depreciation, rent, insurance, maintenance and repair, utilities, capital improvements).

In other words, POGO admits that it is impossible, based on available data, to compare federal employee compensation to contract employees’ compensation and so they instead compare only federal labor costs to the total expenses faced by contractors. That’s as apples-to-oranges as it gets.

Now, I have no doubt that the folks at the AFL-CIO were willing to overlook these limitations when they decided to trumpet POGO’s report, given that their mission is far more political than academic. However, they might have thought otherwise had they paid more careful attention to the reports’ findings. Specifically, the authors acknowledge in a passing statement:

POGO confirms the results of studies that compared the public with the private sector, finding that federal employees generally make approximately 20 percent more in salary and full compensation than do their counterparts in the private sector.

Oh…so the report actually finds the exact opposite of what the AFL-CIO is claiming! Federal employees are overcompensated relative to their peers performing similar jobs in the private sector…which is also to say that there is a labor cost savings from federal outsourcing. Huh.

Can’t wait to see that in the AFL-CIO’s next blast email!

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.