Providing for Federal Pay Adminstration

Background

Executive Order 12748 had distinct impacts on federal pay administration when it was issued in 1991. It established mechanisms for adjusting federal pay scales annually in line with the Federal Employees Pay Comparability Act of 1990 (FEPCA). This included the designation of agencies such as the Office of Personnel Management (OPM), the Department of State, and the Department of Veterans Affairs to manage and implement pay schedules for diverse federal employment categories, including the General Schedule and those unique to Veterans Affairs. By centralizing this responsibility, the order provided a uniform framework for federal pay adjustments, mitigating disparities that previously existed between different departments and agencies.

Additionally, the directive played a significant role in laying down the groundwork for locality-based comparability payments. By appointing the Secretary of Labor, the Director of the Office of Management and Budget, and the OPM Director as the President's Pay Agent, it ensured concerted efforts in implementing locality pay. The requirement for executive agencies to supply necessary data allowed better-informed decisions regarding federal employees' locality pay adjustments, creating a more equitable compensation system in geographically varied regions across the U.S. This mechanism aimed to make federal salaries competitive with local private-sector wages, addressing recruitment and retention challenges in high-cost areas.

The order also empowered OPM with special pay authority, allowing for adjustments to higher pay rates for certain employees beyond the General Schedule. This flexibility enabled the government to be competitive in hiring and retaining specialized and high-demand workers who might otherwise seek employment in the private sector. Other features, such as providing advance payments for new appointees and extending cash awards, recruitment bonuses, and retention allowances, underscored a broader initiative to align federal employment benefits with private sector practices. This approach reinforced personnel policies encouraging performance-based rewards and strategic hiring strategies, reflecting a significant shift towards modernizing federal workforce management.

Reason for Revocation

When George W. Bush rescinded Executive Order 12748 in December 2006, it was part of an evolving policy framework focused on efficiency and reform in federal operations. Throughout his administration, Bush emphasized reducing government size and expenditure, consistent with a broader conservative ideology advocating for a streamlined federal apparatus. The decision to revoke this order reflected a commitment to these principles by seeking alternatives to more flexible, market-driven compensation policies rather than maintaining a structured federal pay-scale system.

The rescission may have also been influenced by the desire to cater to complexities in a rapidly changing labor market, where rigid federal pay systems lagged in responsiveness to real-time economic conditions. By removing some of these structured central mechanisms, the federal government aimed to decentralize pay administration, potentially enabling individual departments and agencies to craft pay strategies tailored to their specific workforce needs. This change resonated with a broader ideological trend during Bush's tenure, which favored granting more decision-making authority to agency heads over centralized systems.

This step might have been considered a corrective measure to address perceived ineffectiveness of FEPCA's mandates as they had evolved over the preceding fifteen years. Arguments for inefficiency or inflexibility of the original system could have driven the reassessment and eventual annulment. As labor market conditions shifted and new needs emerged, an overarching need to recalibrate federal employment practices to contemporary standards likely influenced this decision.

Furthermore, pressure to reduce federal expenditure undoubtedly influenced the decision to eliminate structured mechanisms that could perpetuate rising payroll costs. As the federal government faced increasing fiscal challenges, a reevaluation of existing policies became critical. Such legislative movements proposed a reduction in constraints and an interest in a flexible federal pay structure that could dynamically adapt to fiscal realities without legislative or executive bottlenecks might have contributed to this shift.

Winners

Agencies and departments within the federal government capable of independently crafting salary strategies stood to gain from the revocation of Executive Order 12748. By decentralizing pay decision-making authority, these entities could implement pay structures that more accurately aligned with their specific needs and operational contexts. They could negotiate compensation packages swiftly and effectively, capitalizing on market shifts and employment trends without being bound by stringent federal schedules.

Additionally, the private sector could have viewed the rescission positively as it likely reduced the competitive pressure that a structured, localized federal pay system created in high-demand job markets. Private companies, particularly in technology, engineering, and specialty sectors that overlap with federal employment demands, might have found it easier to attract talent that previously would have considered federal positions favorable due to locality pay adjustments and special rates. This could potentially reduce wage inflation and labor market constraints encountered by private enterprises.

The deregulated environment encouraged innovation in public sector human resources management, fostering creative approaches to attracting and retaining top talent. This shift aligned with initiatives promoting government agility, allowing federal employers to experiment with compensation and employee welfare to enhance productivity and workforce satisfaction. The strategy allowed for optimization and real-time responsiveness that had previously been challenging under strict regulatory frameworks.

Losers

Federal employees, particularly those in regions with a high cost of living, stood to lose from the withdrawal of Executive Order 12748. The elimination of structured locality pay adjustments may have risked compensation levels failing to keep pace with inflationary pressures and disparities present in private sector pay for the same locales. Employees serving in high-demand occupations faced heightened challenges in negotiating competitive federal salaries, which could have affected job satisfaction and retention rates negatively.

The Office of Personnel Management, which had been empowered with expansive authority under the original order, saw a reduction in its strategic role in pay administration and oversight. Centralized decision-making and consistency across agencies, one of OPM's crucial roles, were diminished, potentially leading to fragmented policies and practices across federal employment. OPM's influence and capacity to implement overarching personnel management strategies across government tiers was potentially weakened.

Certain communities benefiting from federal presence, notably regions with significant federal employment bases, might have experienced economic downturns. Reduced locality pay pressures could lessen the financial commitment of federal agencies to equitably fund salaries in these areas, potentially leading to economic disparities and an underground trend of talent migration towards better packages. This could result in both direct and ripple economic impacts, influencing housing markets, local businesses, and broader community stability, as the federals' ability to act as a bulwark in regional economies waned.