How to Evaluate Government Pay
By Arnold Kling
So the bottom line is: when education and age are held constant, the entire difference in average pay between the federal and private sectors disappears.
Let me suggest a different indicator:
How far could you lower Federal pay without raising the number of vacant positions in the Federal work force by more than 1 percentage point?
That is, if 2 percent of positions are vacant now, how much could you lower Federal pay without raising that vacancy rate to 3 percent?
I would bet Peter Orszag that you could cut Federal pay by at least 15 percent without causing a one percentage point rise in the vacancy rate.