The White House published its budget proposal this week for fiscal year 2025 and indicates a lower pay raise for federal workers than the past few years
The Biden Administration released its recommended budget for the upcoming fiscal year. It included a pay raise of 2.0% for federal employees. Although the previous two federal pay raises were the two of the biggest in over forty years, a 2.0% raise would be the lowest since the 2021 pay raise, which was the last one to be enacted by the Trump administration, and ended up being 1.0%.
Heading into an election year, the president’s thinking might be that a lower pay raise signals a stronger economy and going into an election year, would want to accentuate the country’s resilience in avoiding a recession during his first term. To make the case for a higher pay raise for feds, the salary gap between private sector and public government jobs is widening, being over 20% for at least the past decade. A bigger pay increase is needed to bolster the federal government’s workforce ability to retain and hire top talent. Should the FAIR Act pass into law, it would give federal employees a 7.4% pay increase in 2025. But in each of the past eight years, similar bills introduced by Rep. Gerry Connolly have never made it out of Congress. If 2.0% becomes the actual raise, the difference between that and the FAIR act’s suggestion would be the biggest ever at +5.4%.
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Last year’s pay raise of 5.2% was technically 4.7% “across-the-board” (what all federal employees received) with 5.2% being average raise when locality pay is factored in. It is not entirely clear if the 2.0% mentioned in the recent white house budget is the “across-the-board” figure or not, but in previous Biden budgets, it has been the average raise with locality pay. If that’s the case again, the 2025 federal pay raise would be even less than 2.0% for some feds.
Whether it derives from a law from Congress that the President must sign or from an executive order that originates from the white house office itself, the path to the finalized federal pay raise ends at the President’s desk. The recent recommended budget from the executive branch was released just days after the shutdown drama ended and the budget for fiscal year 2024 was finally passed by Congress.
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
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