Strange Incentives in Federal Employment

Jordan Weissman has an interesting article in this month's Atlantic Magazine. Drawing on a new Congressional Budget Office study, Weissman notes that federal employees in general do slightly better than those in the private sector in wages and much better in benefits. The standard response to this type of finding is that the federal workers do better because they are more highly qualified.  But Weissman's evidence indicates that the least educated federal employees do best, relative to private sector workers with similar characteristics.

Federal workers with high school or less and with some college do better in both wages and benefits than other equivalent workers.  In other words, the federal government rewards people who don't have much formal education.  But it also penalizes people with high levels of education. Those with professional degrees or doctorates had about 18% less in overall compensation. If you had a college degree, your salary was about the same as in the private sector, but your benefits were much better. The government may be competing with better benefits for its average office workers, then, but it offers few incentives for those most likely to be in highly specialized kinds of work.

At best, this kind of pay structure seems like it is specifically designed to produce mediocrity.  But I think the real question is with the high rewards at the lower end. Because those with educations below the bachelors level do generally pay taxes, it would seem that federal jobs don't just redistribute income from high earners in private employment. They also apparently subsidize the least educated public workers at the expense of the private sector peers.