An idea for $60 billion per year in federal savings

I dusted off an old idea of mine because of President Trump's freeze on federal hiring, his tasking to create an attrition plan, and a statistic I read yesterday in a Washington Post article by Juliet Eilperin.  Eilperin reported that in the federal workforce, "there are nearly three times as many employees over age 60 as under age 30."  Yikes.  That's no way to run a railroad.

The idea I'd roughed out gave a way to cut back the federal workforce by tempting people to retire or move on earlier than they would otherwise.  Depending on whom I'd run the idea past, I'd hear that it's fantasy, fantastic, or the best sense of fantastical.

The cliché to address what I'd like to see happen is, "You've got to spend money to make money."  What if we spent a bunch of money offering departure incentives high enough to entice 750,000 feds to resign or retire?  Then, how about filling one third of the vacated positions with veterans, graduates, and the un- and underemployed?  We'd be spending billions to save billions more every year, and to get 250,000 people into careers they and the country need them to have.

The mere mention of spending billions to save billions more will never make sense nor get support from some people, but economic and employment reality helps explain and justify the scale.  When I put numbers together a few years ago on this, the average salary plus benefits per federal employee was $116,828.  By 2017, estimated the U.S. Government Accountability Office, 600,000 government workers would be eligible to retire.  That's now, and the under-30 to over-60 statistic would say it still holds.

Using 600,000 feds as the number eligible to retire, the remaining gap of 150,000 willing Feds needed to reach 750,000 departures would be found in early retirement-eligible and separation-minded workers willing to take an attractive incentive to leave for new opportunities.

The rough math says 750,000 people leaving at $116K per year gains back $87,621,000,000 annually.  The 250,000 newly hired workers would earn less than $29,207,000,000 annually – less than the average, because years of employment determine pay steps and salaries.  Less expensive new employees would mean savings of more than $58,414,000,000 annually.

So how much investment would it take in retirement and separation incentives for enough people to hit the door and that $60 billion per year be saved from 2017 forward?  About $87 billion.  How long is the return on investment?  The $60-billion-per-year savings says about 18 months.

Here's the first very hard, very political change needed to start things in motion.  It's where the $87-billion investment comes in: the government cap on employee separation incentives needs to be raised to its average annual cost burden per employee.  The current cap, established decades ago, is $25,000.  That's less than three months' average salary and benefits, not enough to tip a decision.  A cap of $116K would cause a rush at the doors.

The second very hard, very political change needed would be to make sure every agency plays along, with some formula for public safety playing into recruiting and backfilling.  The retirement and separation incentive offerings must be mandatory across agencies and not restricted to positions that would be abolished after the person leaves.  Otherwise, agency self-interest will undermine the higher goal of big savings and big, real employment gains for the quarter-million who need and want careers.

I've waited late to disclose this: I'm a federal worker.  I can't retire but might leave for other work if the incentive were enough.  Any selfish interest I have lies in finding the promotion opportunities that open up when others leave, which is a pretty normal ambition.  The other things I like are the billions of dollars saved, seeing my friends who want to retire and will, opening their jobs to hundreds of thousands who need them, and seeing the rejuvenation through the new faces and ideas that come in the door.

Fantasy?  Fantastic?  Fantastical?