should understand is this it rewards time served, not performance. 90% of life is just showing up. less than one-quarter of the money spent on federal pay increases is geared toward performance. the rest is either automatic or almost automatic. as long as they receive a three out of five performance rating, they automatically receive increases. managers who wish to get ratings below three bear the burden of proving that the employee performed poorly. the sense federal employees are adequate and gives them raises. managers rarely give performance ratings below three. it is social promotion for adults. i am surprised that with this system federal employees receive raises and promotions more rapidly than private-sector workers do.

that is why federal employees receive better than market paid. thank you. i appreciate the opportunity to talk to you about the federal pay system. >> thank you. dr. biggs, you're recognized for five minutes. >> process for and by to me to testify in regards to a federal employee compensation. my testimony is based on joint research at the heritage foundation and a copy of our working paper has been enclosed in my testimony. the federal employees on average received greater compensation than these individuals could receive in the private sector? our answer, which is consistent with economic research, is yes. your doubtless aware of the page that requires federal jobs pay 25% less. most economists are skeptical of the pay agent approach. the most important reason is

because the pay agent approached compares apples to oranges. it does not compare similar workers. it does not account for the fact that the federal government hires workers at higher pay grades and promotes them faster than does the private sector. . accountant in the federal government, may only have the education of the junior accountant in the private sector. in 1997, academic studies had a larger gap up three-quarters of a pay grade. a 2003 study shows "federal workers have significantly fewer years of education and experience the private sector workers with the same level of responsibility." once this is accounted for, the supposed pay penalty disappears.

labor economist began by controlling for help individual workers differ in regards of earnings related factors such as experience, geographic location, and so forth. let me reiterate, despite what we heard the loud the director's testimony, the study i have conducted controls for differences between education between federal employees and private-sector employees. they do control for that. by controlling for these differences, you can isolate the effects on plate with working for the federal or the private sector. we found that federal employees receive average salaries 14% higher than similar workers employed by large, private sector firms. this is a conservative comparison. large firms offer the best salaries and benefits. if we compare to all private sector workers, it rises to 22%.

some argue this argues -- this ignores relevant differences between workers. it looks at your degree, not your gpa or quality of the school you attended. we followed workers overtime, tracking how they're paid changed as they move into or out of the government. workers to switch between private and public sector, occurred about 8% more when employed by the federal government. we examined at their workers at the same points in time and all of these same workers overtime. it is clear most federal employees would earn lower salaries in the private sector. benefits or an appointment component -- benefits are an important component. we calculated the well -- the value of a wide range of federal benefits. on average, federal employees receive total benefits equal to

around 66% of their salary and large private sector firms, benefits averaged 50% of salary. federal employees receive a benefit of 33% over federal -- over private sector employees. economists noted that positions of greater job security should pay lower salaries. the bls reports that in any given year federal workers or one-third less likely to be fired or laid off. we estimate the value of job security by calculating the production a private-sector worker would willingly accept to have the increase job security of federal employees. we find a federal worker's job security is equivalent to an extra 11% of pay.

when properly valued, the total federal compensation package is worth upward 39% more than private-sector workers. the total federal pay premium could top $60 billion per year. i did it by the premium is easier than fixing it. -- finding the premium is easier than fixing it. fundamental reforms will work consistently into the future. thank you. >> you are recognized for five minutes. >> it is a pleasure being here. i appreciate the opportunity to testify. i suggest that we are asking the wrong question. it is not whether federal workers are underpaid or underpaid, but how do we move to a more market system -- market sensitive system. in any group of public service, you'll find some that are

underpaid, some that are overpaid, and some that are paid just right. we need the best talent for the best price. we have core principles to look at and think about where we go from here. we need a pay system based on the market for talent. we need to make sure we have competitive salaries set not just by geography, but by occupation and the relevant factors discussed already. second, we need to account for benefits posthumously. job security is not a cross- support benefit. the fact that a job might have more security may be a turn off. you have to understand your talent and global appeal to them. third, we need better data. right now we are looking at across the board comparisons. if you look biography -- if elected geography. we are not looking at what -- we

need to do a lot better in order to get that information. fourth, we need to look at the quality of the hires we are looking at. this is a balance. you think about what you are paying, but he that to think about what you are paying for. we do not understand what quality talent is and how to retain it. we will never be able to design the right system so we will not know whether we are getting the right value for the money that is being spent. we need to make sure agencies are recruiting the talent -- the right talent. number five, we need to reform the federal classification system. the classification and pay system is at decline. the classification system was not designed for the world we live in today. a gsl is someone who performs work of marked responsibility. it does not make any sense. gsl 12 engineers, budget analyst

-- they get paid the same. it is internal equity, but you are not marching -- you're not matching the market for talent. we need to make sure what talent we need. we do not have a government-wide plan on the human capital we need to make sure the government runs right. we need that. we are not forecasting that enterprise-wide. it is a component of what we should be looking at. we need real flexibility. if you look at the government to date, you have a lot of agencies that have been given different authority to create different systems. the v.a. were given authority. financial regulatory institutions -- they are all try to do different things. we need to make sure it permits for the flexibility to allow all

the different needs of these organizations to recruit the talent they need. there are four key recommendations. this has to be a collective effort. we need the best minds. we need to make sure everyone is at the table. we need people to design the right thing. secondly, we need to design from where we are today. this is not an exercise. we need to design something that takes us where we need to get. that may mean that there is a population viewed as being overpaid. that is an extra challenge. number three, we need to build off of what works. we have had these experiments in government before. we had a profit for 30 years. there are organizations that have tried different things. different agencies have been given different authorities whether it be financial organizations or others. the gao is another example.

finally, we need to step back and see what success much light. when the accountability to make sure we are driving towards the right outcome. that means getting the right talent at the most cost- effective fashion. the main thing is to jeep the main thing the main thing. -- the main thing is to keep the main think the main thing. we have to avoid the distractions and focused on the key issues. i appreciate the opportunity to be before you enter i can answer questions later. >> thank you, chairman ross. the pay system for the large majority of white-collar federal employees is known as the general schedule. it maintains that federal pay should be comparable to pay for similar work in the private sector. in 1990, congress enacted a

federal pay comparability act to make the pay system more sensitive to geographic market forces. the bureau of labor is required to conduct surveys in 32 separate localities and provide that information to the president's pay agent that consist of the secretary of labor and the director of o.p.m. they had the responsibility of submitting a report to the president each year that looks at pay gaps in the 32 areas. the pay agent reports showing lower pay for federal employees have been consistent in democratic as well as republican administrations. the reasons the numbers and defer or many. b.l.s. compares actual job duties, not just job titles. more than a 54% of federal workers work in the ninth

highest paying occupation groups. federal workers are more experienced, they are older, and they have many more years of education than private sector workers. federal employees are covered by the federal employees health benefits program. they pay 30% of the total premium costs. in the private sector, workers pay 18% of their premiums for single plants and 29% for family plans. federal980's, the employees accounting system was created. there has been discussion about that today. the earlier plan has serious unfunded liability programs -- problems that are similar to those faced by many states today. today, it is fully funded and financially sound with no unfunded liabilities. close to 70% of federal retirees receive annuities of less than

$3,000 per month. in a recent interview, mr. chairman, a few inches stated your support -- you indicated your support or a paper performance -- you indicated you r support for "pay for performance." is saying to me a pay system should have a couple of things attach to it. number one, does it help recruit and retain the best people for the job and, number two, does it better motivate employees? i do not know of a single pay for performance system that is showing progress for either of these goals today in the federal government. i discussed these systems in my written statement including those at the t.s.a.

the inspector general has gone so far is to say that the irs managers system -- it reduces the risk of developing -- of giving quality system to taxpayers because the irs's ability to recruit and maintained a highly skilled leaders is diminished. time off all wars and flexible work schedules allow employees to better balance careers and family life. these need to be used more widely. suggestions have also been used to contracting out more federal work. we have had recent experience with this notion. it has not proven true. excessive reliance on contractors has eroded the capacity of agencies to perform

many critical conscience and has undermined their ability to accomplish their mission. the obama administration has begun to reform this by requiring agencies to cut wasteful contracting practices and improve oversight and accountability. this result in $40 billion in annual savings beginning in 2011. some of the hardest working people i represent make less than $30,000 a year yet they are facing a two-year pay freeze and retirees are in a second year without cost-of-living increases. the country faces challenges. although they did not cause the prices, they are willing to work to help solve them. thank you for the opportunity to testify here today. >> it is interesting in reading each transcript and listening to both sides, we all believe that we need to recruit and retain and reward good employees in

federal appointments. i think that is good, ground to begin with. in the last panel, there was testimony given about how the federal work force has remained almost able sense president george h. w. bush until today. there seems to be a correlation that inversely we have seen an increase in debt significantly cents george h. w. bush -- well over 60%. if you had a work force and you maintain your same work force but increase our debt by 60%, would that be indicative of something that needed to be done with your personnel management? >> it would be a sign that you have problems. >> you talked briefly about benefits for federal employees. what affect is that have on total compensation? >> it increases it fairly

substantially. if you look at only the wage premiums, federal employees on average when you are making that apples to apples comparison are making 22% more an hour. if you add in the benefits, that compensation premium increases to between 30% and 40%. it is generous pay and even more generous benefits. >> you said that lowering wages would only slightly reduce the quality of the federal job applicants. what led you to that conclusion? >> we decided from our research by a dartmouth professor -- he looked at used for government jobs. is there more demand for government jobs than private sector jobs? are people waiting out there who

would like to get government jobs? what the professor found is that many people would be willing to accept federal employment. it offers significantly more attractive compensation packages than the private sector. they found if you cut salaries significantly you would not hurt the quality of applicants. it would only slightly reduce the education qualifications of federal job applicants. someone else to a simpler approach. the measured the number of applicants for federal job openings relative to private- sector job openings. he felt federal job openings receive more applicants than private-sector job openings. if a salary were reduced, but would not be a large reduction

in the quality of applicants for federal positions. >> the general schedule has been around since 1949. it does not take market forces into consideration. >> it takes locality into consideration. >> in terms of incentivizing someone to do well as opposed to someone just to show up and get a paycheck, it does not make that distinction does it not? >> on the performance side, there are opportunities to get performance bonuses. there are performance mechanisms currently in the system. >> you talked about paid for performance programs. -- pay for performance programs. do you believe there is an adequate system that would adequately compensate those in the federal work force based on an outcome? >> employees do not believe they are currently being rewarded for doing better work. i think the answer is new.

the system is not working in the way it ought to. >> if you think there could be one implemented? >> i'd think there could be, but what needs to be done first is to make sure we have a hand of what good work is and make sure we reward it accordingly. >> i want to have you step aside from your role with the treasury union. he were in charge of making -- assume you were in charge of making decisions for a company whose debt has increased 60% over a period of time and you have to make a decision about personnel. which you have to let people go or reduce their salary? >> first i want to know what caused the decline in revenue. >> it is what it is. not yet to make a decision. >> if the war cost -- work force

did not cause it, i had to get down to the root cause of what did it. i think there are other things to look at. >> you cannot say what you do? >> if the work force did not cause the debt, i think working with them and figuring out what can be done -- they will have suggestions on how to change and do the work better and not do things, for example, why cut taxes on the wealthiest americans. >> my time is up. i will yield to the distinguished chairman from massachusetts. >> thank you, mr. chairman. you can put your union hat back on. [laughter] 60% of federal employees working in three departments, one being the department of defense. we have already talked about the

fat we are in two wars. my wife says i spent too much time in iraq and afghanistan. a large portion of those employees work at veterans affairs and that the department of human services. i know from my own experience, we look at what is going on in iraq and afghanistan, we have about 10 million private contractors across our government. more and more of the responsibilities are being contracted out. i do not see any reduction in costs. we had a dilemma early on in afghanistan where we were trying to decide whether embassy personnel should be guarded by

blackwater. they did an amazing job, but let's look at the cost for a minute. blackwater charges us about $1,500 a day for one security if i have a u.s. marine corps army soldier do it, we are talking about $54,000 a year for the average soldier. $54,000 a year versus $450,000 per year. that goes the same for usa id. they do wonderful work. but when we get to the contractors' side, the price goes through the roof.

people are saying, "advertised this stuff and we will save money." i spend a lot of time at the v.a. quite frankly, the biggest problem i have is when nurses and therapists are being stolen away by private hospitals in the area. the one thing that keeps my nurses, doctors, and staff in place at the v.a. is that they are so proud to serve veterans. it is their commitment to veterans. they love their job because they are caring for the united states uniformed veterans. they are working at a lower rates than private-sector hospitals. they are stealing them away.

i see a lot of this acrimony and attacks on federal employees. it is not borne out under the facts. you raise a good point about how we could do this better moving forward. president kelly, i want to ask you -- in terms of the folks you are seeing, we are asking you to oversee in many cases tremendous responsibility. they could make a ton of money in the private sector. you mentioned there were some gaps and differences in what you see these studies providing and what you see actually in practice at the treasury. could you talk a little bit about that? >> if you look at -- if you

ever were a federal employee and you know the work that they do, it is all work you can measure on a piece of paper. i was an irs revenue agent for 15 years as an accountant and a cpa. i met the kind of wall street representatives the irs agents have to go up against an be knowledgeable on in order to find the financial schemes and scams that are happening. that is the kind of talent and skill that you need. you have to be willing to pay for it. in this economy -- and others would like to talk about how many applications and how willing people are to work for the government -- it is one world. when the economy turns, i am very worried about the talent the federal government has not been able to recruit and whether or not they can keep them. when you look at the compensation and the gaps,

employees make a conscious decision. many of them want to work. they have a desire to serve. they have a desire to work for our country. they are willing to give up some of the extras. but, in the long run, they want to be treated fairly. that is what this conversation is about. >> thank you very much. my time is expired. >> thank you. i recognize the distinguished gentleman from maryland. >> i will recognize the distinguished gentleman from washington, d.c. >> thank you very much, mr. chairman. we sat in this very room when it was less rehabilitated. we had joint hearings from

senate and house committees concerned about the state of the federal work force, particularly the retiring of the so-called "baby boomers." you testified that 90% of the senior service could retire in the next 10 years. this is considered by everybody to be the creme de la creme of the work force of the united states to were partly john for a number of reasons. there has been a lot of discussion here about federal employees, but little discussion of out a return on investment that any employer will understand. when you hire an employee, let's take people in this room -- if

you see any of your employees in him you invested time walk out the door, you see your investment in that employee what out of the door as well. -- wall out of the door as well. the rich -- walk out of the door as well. your return on investment bet that is a high-quality employee, there is a greater return on experience in the federal work force. that may account for some of the promotions. we knew this. rapid turnover takes investment out of the door. the notions of promotions from within encourages people to stay. you want to encourage

competition. you at least one to keep you wanted to occur -- to occur in the investment agencies. i wish you would describe that in places like the irs and the other agencies that you represent. >> they hope to enhance their skills and receive training and move up within the agency so they can do more complex and more important work for the agency. agencies were those opportunities denied this, you tend to see people leave more because, obviously, people want to know that they have some opportunity in the future. but i also have to believe that happens in the private sector.

must you cannot go into a job and want to stay in a specific job, in that occupation, for their entire career. they look for opportunities to grow. in the federal government, the idea that there are some a different jobs and so much important work across agencies gives employees opportunities to do just that. >> of course, the federal government has made the decision. it wants career employees. it is a courier service. it is a civil service. i wish you would describe -- there have been statements made by others on the panel about collective bargaining in wisconsin and the rest. there seems to be very little understanding of the role that unions can play when there needs to be reductions in the work force, when there needs to be givebacks of some kind in the work force, as opposed to you have to do that and no one is there to help employees understand how it occurs.

>> about a year ago, labor management forms were created under an executive order. that executive order has, as this underpinnings, that in the idea of collaboration and working together, we can figure out the most typical problems. as you described, were the work force has to change because the work of the agency changes, and the their work goes away and therefore there needs to be a smaller work force and it is the unions working side by side with management to deal with these very difficult issues to try to do two things. one is to ensure that the agency is able to continue to be successful in whatever its mission is. at the same time, do all it can to have employees have opportunities to be placed somewhere else, to make sure

that the skills and experiences are not lost. the only way that it happens is in a way that is special for the agency. if enough management as the unions and each conversation, it is something that we can grab the best solution to. >> thank you very much. >> we now recognize the distinguished gentleman. >> thank you very much, mr. chairman. are you a fan of paid-for- performance? >> i think it is a good idea. it needs to be done correctly. as a general principle, yes. >> do you think it can be broadly used in the federal government? >> broadly speaking, yes. >> and we would expect better

results in what we get in terms of productivity as well as how we compensate our employees? >> if it is designed correctly, you should. doctor, let me ask you -- you were here when there was testifying. you heard talk about comparing apples with apples and oranges with oranges. to a rugged the conclusion you made relative to use it to arrive at the conclusion you made relative to public versus private sector pay, is that the methodology you used? >> i will pick my words carefully. director barry did not correctly described the mythology that i have used in this study are

that others have used. the claim he made was that federal employees are better educated on average than private-sector employees. that is a correct claim. he also claimed that the pace cities that i have done and others have done the -- do not compare them accurately. that is not true. we compare apples to apples. we control the differences. the federal pay agent analysis defines a pay penalty of almost 25% by contrast, that does not take education into account. it looks into a job, but does not account for the fact that private sector employers tend to put more educated individuals --

public-sector employers tend to put more educated individuals into those positions and then private-sector employers. he did not correctly characterize the study that i did. >> with a clerk at wal-mart be the same as the court in one of our agencies if you were looking at the the two. >> in general, no. we do not categorized by job cuts. we categorize them by the human capital they are bringing to the game. you would least have a high school education, a bachelor's degree. accounting for the educational experiences and the other expenses they have will parlay tougher than getting better pay.

our study does not say federal employees should not get paid higher than private-sector employees. the question is how much higher should they be paid? we can find the effect of working in the federal government outside in the public sector -- in the private sector. we have consistently found that, if you take the same individual and put them in the federal government versus the private sector, you have a significant value premium. does not appear-reviewed constantly says. >> you began your testimony by suggesting that maybe we are asking the wrong questions or exploring the wrong possibilities and options. but what we really need to be looking at is how do we get the best work force that we possibly can for the price that we are

prepared to pay. >> could you articulate that began for me? >> in listening to everybody here, i thought everybody agreed to the proposition that, at some point, in looking at the totality of the federal work force, there will be some folks who are underpaid, some who are overpaid, and some who are paid just right. there may be a difference in what the proportions are the panel, but that is a proportion -- a proposition that is accepted. the next question is how do we design a system that does a better job of actually ensuring that we are being as cost- effective as possible to get the right talent, the best talent for government. a proposition would be that that is the conversation we should be having and i proposed a set of principles that i hope can help push that conversation forward. >> thank you. >> the chair know recognizes the

ranking member of your sick committee from marilyn. >> dr. biggs, let me extend this right. you're saying that there is a great demand for federal jobs. is that right? >> that is what research indicates. because there is a great demand, what does that have to do with pay. remind us? >> a higher demand for public sector jobs does not prove that they are overpaid. there are indicators that have more attractive characteristics of the work and in the private sector work. you find things like the quit rate for federal employees. those are consistently lower

than the private sector. there could be other reasons that are indicative in general. it offers people an attractive compensation package, for example. >> most members of congress spend and collect millions of dollars to come here and most could make a lot more money than what they are making. apparently, there is something that members want that comes from this public service review. federalway, we are i employees, public servants. i am wondering. is that one of those "other" things? when i talk to nurses, for example, and a talk with people in that kind of profession, they will tell you any minute that, in most instances, i love my job because i am able to help people. this is what i always wanted to

be. and this is something that really means something to me. you ascham -- you ask them if it bothers them if they have to clean up blood and they say no because it is what they really wanted to do. when i talk to people appear on the hill, a lot of them will come -- i have seen this a lot of times. they want to come not so much for the pair -- as a matter of fact, a lot of them make a lot less pay. i interviewed somebody who was willing to take a 15% cut because he wants to be a part of government. how much does that play? i also want you to be thinking about that. is that part of that little fume -- that little formula you just gave us? >> i would not in any way deny that the desire to work in

public-service is a desire to serve your country. >> you were a public employee? >> yes. i know it is hard to believe. the desire is strong and legitimate. that if we have a queue for federal jobs and look with great, that can be attributable to a desire for public service. the results you find from the cities that control for education experience and the rest, they find that the same person would earn a higher salary on average in the federal government than the private sector. that is something that tends towards the view of higher compensation. one study we did was not simply controlling for differences in education and so forth. we follow the same people over time, using census bureau data. when they switched from private-

sector employment to federal employment, on average, they got a pay increase. that does not mean every person gets a pay increase. it is not that the highest cannot earn more in the private sector. the same person would earn a higher salary than they would outside. >> you said something very interesting. a lot of people are trying to move forward. i assume that when you move from public servant, you probably made more money. did you? >> i make less money now. >> ok. you are making my case. in other words, what you just said -- usually, if someone moves from one job from another, it means that they will move to more pay. if they will move from public to -- from private to public, and

they are moving on a normal course, it is logical, i guess, that they will make more money. >> we did control for that difference. most people get a pay increase when they switch jobs. that is one of the main reasons that people do switch jobs. with private sector workers who found a new job in the federal government received pay around 8% higher than private-sector workers who found a new job in the private sector. the same person getting different jobs -- this has been represented in other studies as well. it is not just do you get a pay increase when you get another job? do you get a larger pay increase to find a public-sector job than if you get a private sector job and the answer is yes. >> the gentleman from virginia. >> thank you, mr. chairman. is turnover a problem in

certain sectors of the federal government? >> yes. absolutely. if you look at the overall attrition number relative to the overall private-sector number, it is lower. but in the critical area of new employees, it is about 25%. nursing is close to 18%. my favorite example is the department of homeland security between 2003 and 2007. three-quarters left. what is amazing is that no one was paying attention and no one did exit interviews to find out why. >> when we look at certain categories of employees, the attrition might be conservative lay higher than in the private sector. we have not bothered to find out

why. >> correct. >> most private-sector firms do exit interviews. >> the good ones do. >> can you think of some categories of federal workers with high turnover time. >> the highest is that tsa, those to protect our skies. up until about a year ago, it was running at over 20%. >> per year? so federal salaries and cushy jobs, one of the working conditions the top of an 20% of the work force to leave every year. >> these tsa workers earn less than $30,000 a year. that is not something you can put into a category of being overpaid. >> a few years ago, when we had a much lower unemployment rate -- i'm hearing testimony about

how a lot of people are flocking to federal service or public service. of course, when you have an almost 10% unemployment rate, my guess is that that is a pattern. but when your looking at 4% unemployment rate, especially in the higher end, my guess would be that the labor market gets real tight in being able to recruit and retain skilled workers for the federal work force. is that true? >> absolutely. even with high unemployment, there are certain fields that the federal government is having trouble recruiting. >> for example? >> the center security area is one that is front and center. you have examples in -- the cyber security area is one that is front and center. you have examples of nursing. >> why do we have a problem in cyber 63. >> there is a lot of

competition. >> it requires a high skill set, a technical skill set. >> right. >> what percentage of the federal workforce is eligible for retirement in this decade? >> again, depending on -- you looking at over half. a very large portion of the population will be able to retire. i think the general numbers are less important than looking at the specific populations that we should be most concerned about. that is where you see much higher numbers. >> so i would assume that, frankly, we will not have any trouble at all filling 50% of the existing federal spots as people retire over this next decade. is that your view as well? >> it is my view that there will be no problem filling the spots. the question is filling them with whom. can you get the right talent? >> of course. >> we have to do a better job

in a lot of different spent >> to have the right talent in government. >> i am worried about the ability to fill the positions when they are vacated. for years, every talk about the tsunami that was coming up, federal retirement, and it did not come in large part because of the economy. but it will come. it will happen. agencies are not positioned to be able to hire the skill level, the skill set to be able to maintain what it is they are trying to do in their agencies today. >> of course, the more we debase federal service, the less attractive we make it and then you have to worry about who you are tracking to federal service, especially in the higher skill set. thank you. >> i now recognize the vice chair of the subcommittee, the distinguished gentleman from michigan. >> mr. shirk and dr. bates,

thank you for being here today. i have a question. how much did the federal government say with equal benefits compared to the private sector. -- private-sector? >> i did not look at benefits specifically. if you like, i can get it later. but putting benefits together, we save $47 billion this year under my account. >> i think that is about right. >> thank you. excuse me for a second. miss kelly, your union represents a cross-section of federal workers who perform key functions of government. if they pay fees is enacted, how many we do have in federal service?

i cannot give you -- >> i cannot give you an exact answer. many who have been eligible to retire and plan to stay are now talking about leaving. i think we will see real numbers in the foreseeable future. but i could not give you a number today. >> i have a general question. any of you can answer it. the president has talked about freezing pay for two years. does this include within great staff adjustments at 3% a year? >> no, it does not cover those at all. it is purely the cost of living adjustment. but the vast majority of federal employees will get those three% reses. >> when mr. barry was year earlier, he testified that there should be no place in the federal government for non- performers to hide. how would you respond to the

fact that federal government rarely fires employees. in the majority of cases, it is the length of service rather than job performance. >> is a serious problem. once they finish the probationary year, the first year, 20% of a place either quit or are fired. after that, it is rare to see a federal employee get fired. there are also very few rewards for performing above and beyond the mediocre level. the employees basically get to appeal and they can challenge it. most employers do not want to go through the hassle. they want to manage the agency and not do that kind of work. the employees qualify, but very little above and beyond that for performance pay.

it is simply to encourage mediocrity. but you can get the majority of the apples -- the bad apples out in the first year. >> incompetence is not -- competence is not enough for raising a person's salary. work ethic, dedication and exceeding expectations are the proper criteria for salary increase? >> sure. i do not want to demean the work ethic and dedication of federal employees. i worked with them for a significant time. as director barry said, you're surprised at how hard working people are. at the same time, it does not serve the hardworking dedicated federal employee when people who are not pulling their weight is essentially cannot be fired. it is a natural process in any business. some people do very well and are promoted. others do not do well and are

fired. to explain the federal rates of firing, we have to assume that the fed government is extremely good at picking employees such that it's never find anybody that does not work out. it is not plausible. you want to retain good employees. you want them to build up the job-specific skills. you wanted to increase productivity. but you want to have the plucks ability to move on when people are not working out. you need a strong balance between those two. >> i think that the things you identified are important. but i also think that performance is important. performance is an aspect of the federal system today. the flaws that are being described are grossly overstated, that federal employees can never be fired because they are fired. but they are fired after their probationary period. if they're not hired at the ritz they should be with somebody thinks should not be -- if they're not hired at the rates that somebody thinks they should

be, you have to look at the managers. they have to either improve their performance or move them out of the agency. that is the manager's job. that has nothing to do with the system. it is the manager's job. it is true from a training perspective and also from an implementation perspective. >> thank you. that completes our questions. >> thank you, mr. chairman. i asked some of the statements of the american federation of american employees, the national confederation of federal employees. >> without objection, so ordered. i want to thank our panel very much for being here. i appreciate your patience. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> later this morning, we will talk more about federal employees and benefits with "the washington post" reporter. he will be our guest on "washington journal" in a moment. we're also covering the house homeland security community. it will be looking into the muslim american community. coverage begins at 9:30 a.m. eastern on c-span3. first, today's "washington journal." that is followed by a live coverage of the house. today, is scheduled to continue looking at a bill to eliminate a mortgage pre finance assistance system. beginning in about 45 minutes, congress woman