CEILING PROVISION

SEC. 153. Notwithstanding any other provision of this Act, except as provided herein, the rates of basic compensation in excess of $20,000 per annum provided in this Act shall become effective on the effective date of legislation adjusting the compensation of heads of executive departments and other Federal officials and until such effective date the rate of basic compensation of each officer and employee subject to this Act shall not exceed $20,000: Provided, That no rate of basic, gross, or total annual compensation or salary shall be reduced by reason of the enactment of this Act.

AGRICULTURAL STABILIZATION AND CONSERVATION COUNTY COMMITTEE EMPLOYEES

SEC. 154. The rates of compensation of persons employed by the county committees established pursuant to section 8(b) of the Soil Conservation and Domestic Allotment Act (16 U.S.C. 590h (b)) shall be increased by amounts equal, as nearly as may be practicable, to the increases provided by section 101 for corresponding rates of compensation in the appropriate schedule or scale of pay.

EFFECTIVE DATE

SEC. 155. Except as otherwise expressly provided, this Act shall become effective on the first day of the first pay period which begins on or after January 1, 1964.

The CHAIRMAN. As indicated in the letter from the Chairman of the Civil Service Commission, the administration's salary proposal is submitted pursuant to the policy of the Postal Service and Federal Employees Salary Act of 1962 (Public Law 87-793), to the effect that such recommendations are expected to be submitted from time to time. as appropriate to maintain the "comparability" principle with respect to the relationship between Federal and private enterprise salary levels. The Chairman of the Civil Service Commission stated, in his letter of submittal, that the salary rates therein proposed are necessary to carry out the comparability policy.

Personally, it is my feeling that further general salary increases are completely inappropriate at this time-when the second phase of the generous raises granted by Public Law 87-793 has yet to be placed in effect next January. There are a number of other questions of critical national concern yet to be resolved by the Congress this year, many of which should be decided before consideration is given to increasing expenses by granting general pay raises for Government workers. The postal, classified, and other Federal employees' salary schedules certainly seem adequate even generous, in view of the second-phase increase already approved for next January under last year's bill. In fact, I have received several letters from employees strongly expressing this view.

The first witness this morning is Chairman John W. Macy, Jr., of the U.S. Civil Service Commission, who will present the views of the administration on the pending legislation.

Mr. Macy, we will be glad to receive your testimony and that of your associate at this time.

STATEMENT OF JOHN W. MACY, JR., CHAIRMAN, U.S. CIVIL SERVICE COMMISSION, ACCOMPANIED BY 0. GLENN STAHL, BUREAU OF PROGRAMS AND STANDARDS, U.S. CIVIL SERVICE COMMISSION

Mr. MACY. Thank you, Mr. Chairman.

I am accompanied this morning by Mr. Glenn Stahl, the Director of the Commission's Bureau of Programs and Standards.

I appreciate the opportunity to appear before you to open these hearings on the matter of Federal pay.

Mr. Chairman and members of the committee, I am especially glad to have this opportunity to appear before you today, because we are jointly concerned with a highly significant event: the first annual review of Government pay levels under the Federal Salary Reform Act of 1962. The act provides a sound, modern salary policy. We are now engaged in the first effort to make that policy effective.

On April 29 the President transmitted to Congress the comparison of Federal salaries with those in private enterprise, as required each year by the new salary law, and recommended the revisions in Federal salaries necessary to carry out the statutory policy of comparability with private enterprise levels. At the President's direction, the Civil Service Commission sent to Congress on May 16 a draft of a proposed bill which would put the President's recommended adjustments into effect in January 1964. The delayed effective date was recommended to coincide with the second step in salary increases authorized in the Salary Reform Act to catch up with comparability levels as measured in 1962. I will return to this question of effective dates later.

I wish to express my appreciation to Mr. Udall for introducing the bill, H.R. 7552, which incorporates this proposal, and to other members of the committee who have introduced identical bills. I also wish to thank the members of the committee staff, particularly Mr. Charles Johnson, for their cooperation in arranging for committee prints of the documents transmitted with the President's message and the bill draft, which facilitate consideration of the proposal.

The CHAIRMAN. They will be included in the record. (The document referred to follows:)

To the Congress of the United States:

THE WHITE HOUSE.

I forward herewith the annual comparison of Federal salaries with the salaries paid in private enterprise, as provided by section 503 of the Federal Salary Reform Act, and recommended adjustment of the Federal statutory salary schedules in accordance therewith, to be effective in January 1964. The Civil Service Commission will send to the Congress in the next few days a draft bill which would put these recommendations into effect. The budget which I have proposed for fiscal year 1964 contains a provision for $200 million for the adjustment.

The Federal Salary Reform Act of 1962, the most important Federal employee pay legislation in 40 years, declares that Federal salary rates shall be comparable to private enterprise salary rates for the same levels of work, and provides in section 503 that:

"In order to give effect to the policy stated in section 502, the President: (1) shall direct such agency or agencies, as he deems appropriate, to prepare and submit to him annually a report which compares the rates of salary fixed by statute for Federal employees with the rates of salary paid for the same levels of work in private enterprise as determined on the basis of appropriate annual surveys conducted by the Bureau of Labor Statistics, and, after seeking the views of such employee organizations as he deems appropriate and in such manner as he may provide, (2) shall report annually to the Congress (a) this

comparison of Federal and private enterprise salary rates and (b) such recommendations for revision of statutory salary schedules, salary structures, and compensation policy, as he deems advisable."

By Executive Order 11073, I directed the Director of the Bureau of the Budget and the Chairman of the Civil Service Commission to make the required annual comparisons and to refer the Bureau of Labor Statistics findings and their comparisons to the Federal employee organizations for their views. Under the order the Director and the Chairman are to report these comparisons and employee views to me, and to make recommendations with respect to the several statutory salary systems after consultation with the Postmaster General, the Secretary of State, and the Administrator of Veterans' Affairs.

The first annual report of the Director and the Chairman is attached. The Bureau of Labor Statistics national survey of professional, administrative, technical, and clerical pay shows that private enterprise rates increased in 1961-62. The new levels of private enterprise rates are reflected in the revised statutory salary schedules proposed in the attached report.

To carry out the intent of the 1962 Salary Reform Act, the schedules in the attached report, which will be in the bill to be submitted by the Chairman of the Civil Service Commission, should be adopted in lieu of the second-phase schedules provided in the act, to be effective in January 1964.

The Salary Reform Act, pending adjustments in executive pay, imposed a temporary $20,000 ceiling on the GS-18 salary, in place of the $24,500 rate I had recommended. As one consequence of this ceiling, the act established rates below the 1961 comparability levels for all grades above GS-7. The schedules I am now proposing include the increases necessary to bring salary rates for all grades through GS-15 up to full comparability. The scheduled rates proposed for the grades above GS-15 approach as near to full comparability as is feasible at this time, in light of the review now being made of top executive salaries. It is highly desirable, in the interests of equity and the solution of pressing problems in professional and administrative staffing, to achieve full comparability rates for all grades as soon as possible. The draft bill to be submitted by the Chairman of the Civil Service Commission, which would put into effect up-to-date career salary schedules, will take account of the relationship with executive pay by providing that the rates above $20,000 in the recommended career schedules shall go into effect only upon adjustments in top executive pay.

In accordance with the recommendations of the Senate Committee on Post Office and Civil Service, a study of executive pay is now underway. Development of an objective approach to Federal executive pay poses important and complex problems. Consequently, I have asked the Advisory Panel on Federal Salary Systems to study the subject and to recommend a course of action.

The views expressed by employee organizations, which are contained in appendix C of the attached report, are thoughtful and constructive. The greatest concern expressed by employee representatives is for reduction in the timelag between BLS reports and adjustments in the statutory salary rates. The spirit of the comparability principle and natural considerations of equity require that the lapse of time be held to the minimum possible, and the Director of the Bureau of the Budget and Chairman of the Civil Service Commission will review the process and renew discussion of the subject with employee organizations. Several other suggestions of substance have already been or will be studied and discussed with employee organizations.

The Government's action in this, the first year of operations under the Salary Reform Act, is critical to the rights and reasonable expectations of Federal employees and to the needs of Federal agencies. The Government has adopted the principle of comparability with private enterprise and a process for accomplishing it which are noteworthy for objectivity and clarity. By our actions in this first year's test we can demonstrate that the Government has sincerely committed itself to the twin proposition of fair treatment of is employees and adequate compensation for recruitment and retention purposes.

THE WHITE HOUSE, April 29, 1963.

JOHN F. KENNEDY.

Mr. MACY. These documents, the joint annual report of the Director of the Bureau of the Budget and the Chairman of the Civil Service Commission transmitted with the President's message and the statement of purpose and justification and section analysis accompanying

the draft bill, present comprehensively the specific features of the proposal and the facts on which they rest. Consequently I shall now merely summarize and reemphasize certain key features.

CONFORMANCE WITH REQUIREMENTS OF LAW

One fundamental consideration is that the salary adjustments proposed by the President are called for by existing law and have been developed in strict accordance with existing statutory provisions.

As basic policy, the 1962 act requires that Federal salary fixing shall be based upon the principles that—

(a) There shall be equal pay for substantially equal work, and pay distinctions shall be maintained in keeping with work and performance distinctions; and (b) Federal salary rates shall be comparable with private enterprise salary rates for the same levels of work.

To give effect to this prescribed salary policy, the act calls for—

A report to the President, by agencies he designates, comparing Federal statutory salary rates with private enterprise rates for the same levels of work, as determined on the basis of annual surveys by the Bureau of Labor Statistics.

A report to Congress, by the President, after seeking the views of employee organizations in a manner he deems appropriate; the report to provide the comparison of Federal and private enterprise salary rates and any recommendations the President deems advisable.

The salary adjustments that the President has recommended for January 1964 conform with the policy and procedure prescribed by law.

BUREAU OF LABOR STATISTICS SURVEY

In late 1962, the Bureau of Labor Statistics reported national average salary rates for 75 position classes. Although serving industry and other users equally well, these work levels match our Federal Classification Act grades in the range from GS-1 through GS-15. The averages were based on data collected in 80 metropolitan areas, so chosen as to be representative of all U.S. metropolitan areas. For professional and administrative occupations, the averages are based on data collected from about 1.750 establishments. Clerical and drafting job averages reflect data from 4.700 establishments. The survey covers only establishments having 250 or more employees.

The complete survey report has been published as Department of Labor Bulletin No. 1346, October 1962, "National Survey of Professional, Administrative, Technical, and Clerical Pay, Winter 1961-62."

DESIGNATION OF AGENTS OF THE PRESIDENT

As required by the 1962 act, Federal salaries have been compared with private enterprise levels determined on the basis of the Bureau of Labor Statistics survey report of 1962. The President, in Executive Order 11073 and as authorized by the Salary Reform Act, designated the Director of the Bureau of the Budget and the Chairman of the Civil Service Commission as the agents who were to make and report. to him the annual comparisons, with their recommendations as to salary schedules and other salary matters.

The order also directed that they provide employee organizations with Bureau of Labor Statistics findings and the methods and results of their comparison of Federal salary schedules with survey findings, establish means for receiving and considering the views of employee organizations, and transmit the views of the organizations to the President.

COMPARISON OF FEDERAL AND PRIVATE ENTERPRISE SALARIES

For purposes of comparing Federal and private enterprise salary levels, staff members at the Civil Service Commission and Budget Bureau first combined into a "grade average" the national average salaries reported for every job category that matched a particular Classification Act grade. A few of the averages had to be discarded because the jobs surveyed did not represent a sufficiently large proportion of Classification Act occupations in the grades concerned.

A consistent, logical Classification Act "pay line" was then derived from the grade averages, fitting to them as closely as possible while giving proper consideration to logical internal alinement. This pay line was then extended beyond grade GS-15 by projection of the same salary alinement relationship used below that grade. The resulting GS-16, GS-17, and GS-18 rates were tested against the Commission's 1962 updating of earlier studies of salaries of comparable executive and technical positions with equivalent responsibilities in 19 very large private corporations. This study found the middle rate for positions equivalent to GS-16, 17, and 18 much higher than those arrived at by a simple projection, culminating in a $44,500 rate for jobs equal to Federal grade 18. These private industry jobs were below the level of corporate officers of these firms. The study's results therefore show that the much lower rates arrived at by projecting the pay line based on BLS data were certainly on the conservative side.

The Classification Act pay line thus derived continued to reveal a gap between current Federal and private enterprise salaries at most grades. The gap increases as it proceeds from lower to higher level positions.

At a few illustrative grade levels, the gap between the fourth rates of the Classification Act already scheduled to go into effect in January 1964 (which is called schedule II) and the pay line based on the Bureau of Labor Statistics 1962 report of private enterprise salaries looks like this:

The Federal salary gap at grade GS-3 amounts to $85; at GS–7, $205; at GS-12, $695; and at GS-15, $1,660.