TABLE VI.-Comparison of present law, S. 734, and Cordiner report suggested interim salaries

We recognize the problem which both S. 1326 and the Cordiner report seek to solve. It is important to the national defense and essential programs of the Government to protect, maintain, and advance scientific, technological, and research endeavor.

We point out, however, that S. 1326 seeks to build a new structure, which would involve more costs and greater difficulties of administration than modifications in the present structure as proposed by S. 734. Both S. 1326 and the Cordiner report deal with only a segment of the classified personnel and neither attempts to make adjustments for all of them. Each is a piecemeal approach to the much larger and pressing problem of making long-needed adjustments for the entire group of classified employees. To do something on behalf of some and nothing for the others is not only inequitable, but an insufficient attempt to strengthen the hand of the Government in both defense and essential services to the people of our country.

The National Federation of Federal Employees is in full accord with the purposes of S. 1326 and the general objectives of the Cordiner report, but believes that those purposes and objectives can be obtained by amending the Classification Act of 1949 in the way provided by S. 734. We also feel that the thousands of classified employees who are not included in S. 1326 nor the Cordiner report schedule should be included in any legislation the Congress enacts.

The National Federation of Federal Employees has long been aware of the urgent need for improvements in the Classification Act struc

ture as has been evidenced by resolutions adopted at our national conventions. We now find in the Cordiner report concurrence in this view by realistic businessmen as regards certain groups of civilian employees in the classified service in the Department of Defense. We say that the statements in chapter I of the Cordiner report about changing times, the role of the civilian in defense, turnover, inadequate compensation for classified employees, changes in the salary schedule, prestige and competition with industry, should be considered in legislating for the whole group of classified employees throughout the Government service.

The problem, involving as it does all classified employees, calls for a long overdue modification and improvement of the Classification Act. In its 1956 annual report to the Congress, the Civil Service Commission on page 10 said:

Among specific problems of particular concern to the Commission are the following: Improving the overall structure of the Classification Act, in order, for example, to establish more meaningful differences between the pay rates of the various grade levels, to provide more substantial step increases within the grades, to increase the spread between the entrance and the top rates of the grades, and to simplify the grade structure.

S. 734 is in line with the improvements the Commission referred to in its annual report.

Since both S. 734 and S. 1326 are under consideration, a table showing "Comparison of present GS grades with proposed CA-S. 734Grades and SPS-S. 1326-Grades and salary increase at first step in grade" follows:

TABLE VII.-Comparison of present GS grades with proposed CA (S. 734) and SPS (S. 1326) grades and salary increase at first step in grade

As a technical improvement, we suggest that S. 734 be amended to include employees covered by section 8 of the Federal Employees Pay Act of 1955, Public Law 94, 84th Congress, and to provide that the rates of salary in section 4 (c) of S. 734 be rounded to the next lower $50 per annum instead of the next lower $100, to conform to the salary rates in the salary schedule in S. 734.

We regard it as fundamental that the basic pay structure for all classified employees be improved as contemplated by S. 734, and that such overall improvement is necessary to maintain balance and fairness. We also feel that the pay increases provided in S. 734 should be granted now in order that the Government may recruit and retain qualified employees to carry on the work essential to national security and the needs of the people of a great and rapidly growing Nation.

Situations exist throughout the classified service which call for pay adjustments to narrow the wide gap between pay in business and industry and pay for the classified group in the Government service. Pay increases have been given to employees in business and industry to meet the sharply increased costs of living, while classified employees in the Government have not been granted an increase in more than 2 years. That increase of 7.5 percent, average, was admittedly inadequate. The widening of the gap between pay in Government and pay in business since the last pay increase has made the problem more acute for the Government. Even in the Government service itself, some groups outside of the classified group have had one or more increases in pay within the last 2 years and additional increases appear to be on the way.

On page 52, the Cordiner report states:

During the past 4 years, the Classification Act employee has had 1 increase of 7.5 percent. During the same period, his blue-collar brother has enjoyed a 20.6-percent increase through the operation of the wage board system. The latter follows closely the national pattern of about 5 percent per year since 1952. The anomalous position of the Government in the compensation of these two major employee groups is self-evident.

Aside from the question of justice and fairness which might be considered in giving a pay increase to classified employees, there exists the cold, hard fact that the Government is in a most unfavorable position under present salary schedules to compete for personnel to perform important and essential services to insure the defense and growth of our country. As long as the Government is the low bidder, the more capable and better trained people will neither come into nor stay in the Government service.

This is borne out by the experience in the Federal agencies and is aptly illustrated by a statement made by Mr. Russell C. Harrington, Commissioner of Internal Revenue, in a letter dated February 14, 1957, found on page 200 of "Progress Report of the Subcommittee on Internal Revenue Taxation, Committee on Ways and Means," transmitted to the Congress on April 22, 1957. Mr. Harrington said:

We do not have starting grades and pay high enough to get the quality of personnel we need.

The Civil Service Commission has made an attempt to meet competition in recruiting by the use of section 104, Public Law 763, 83d Congress, which authorizes the Commission to set hiring rates above the minimum. On page 43 of the 1956 annual report, the Commission says it used the maximum of its authorization in 1956 to raise rates by raising the rates to the top of grades 5 and 7 for all categories of professional engineering and all categories of physical science known to be short. For patent examiners, patent advisers, and patent classifiers the rates were set at the top steps of grades 9 and 11 and at the fourth step of grade 12. Moving further, the Commission states,

on page 44 of its report, it authorized increases to the top step of grades 9 through 17 for certain categories of professional employees. Problems in the use of the legislation to hire at rates above the minimum grade were commented on as follows:

Certain problems in the use of the legislation became apparent. This was particularly true in the application of the law to the higher grade levels. Its use for grade 11 engineers, for example, made it apparent that while the Commission could alleviate a critical recruitment situation by raising minimum rates, it had no authority to encourage the retention of experienced engineers through the adjustment of the maximum rates or the rates in between. This would also be desirable in order to maintain the proper internal alinement of within-grade steps. A solution to this problem is being sought.

This problem will become more acute in many categories as living costs continue to go up and pay outside the Government service increases, and Government operations will be still more seriously hampered by it.

We believe we speak in the true interest of the Government and of the people whom the Government serves when we say that a suitable remedy should be applied before the ravages of this disease of low and unrealistic pay go any farther. There should be concern not only about the place where the Federal Government finds itself today as regards this vital personnel problem, but also about the direction in which it is going.

At the present time, there is a heavy increase in the number of Federal employees who are retiring from the service. Most of them represent years of valuable experience and training. Many will be replaced and, where there are replacements, new employees will have to be trained. In the chain of promotions in making replacements, each employee in the chain will have to have some training. The training problem goes beyond the problem of training the employee who will take the place of the one who retired.

Turnover, due to separations other than retirements, is high. The cost of processing separatees and the processing of recruits and training them constitutes a heavy burden, and it would be economical to reduce the cost as much as possible. The turnover costs for clerical workers, according to the Cordiner report, page 53, range between $300 and $500, while for engineers the range is $5,000 to $20,000.

The number of Federal employees who quit or transferred, as distinguished from other separations, in January 1957, was 18,672. That is at the quit rate of about 224,000 per year. It is only reasonable to expect an increase in turnover of Federal employees so long as their pay in Government stays unrealistically below pay in business and industry.

Business is quick to sense any disadvantage it may encounter in recruiting and keeping qualified employees because of higher pay elsewhere, and adjusts its pay upward to meet the competition. The Government should make somewhat similar adjustments. Although it may not be able to met, dollar for dollar, the outside pay for higher salary range positions, it should at least have a reasonable pay policy which does not require too great a sacrifice on the part of those who are interested in a public career. It is decidedly to the advantage of the Government and in the public interest to have a pay schedule which will encourage the career-service concept as a means of reducing turnover costs.

As Government operations become more complex and complicated and as machines and automation are introduced, additional emphasis will have to be placed on training programs and, consequently, the turnover problem is likely to become more and more disquieting. It is our observation that hundreds of employees trained by the Government in the operation of machines are leaving for employment with higher pay in industry. There can be no question that those who remain in the Government service are vitally affected by the low-pay factor. Attitude, morale, and productivity cannot be expected to reach desired heights when the classified employee realizes that the pay he received for Government work is considerably lower than the pay on the outside.

On page 57 of the Cordiner report, the following comment was made:

The apparent fact that a man in Government is paid less than his counterpart in industry is damaging to the prestige of the individual and to the prestige of Government employment in general.

A reasonable increase in pay for classified employees, as contemplated by S. 734, would not create any serious inflationary pressures. Whatever inflationary tendencies, if any, such an increase might have, and 1 penny for each employee theoretically could be said to have that tendency, should be considered in the light of its relative magnitude in the whole economy and in comparison with actual and known inflationary tendencies which are of great magnitude. The Director of the Budget, in his letter dated May 6, 1957, regarding pay increases, stated a 1-percent increase would amount to about $70 million. Now, while $70 million standing alone is a big figure, it is only 1 percent of $7 billion, less than one-tenth of 1 percent of the budget for the fiscal year 1958, and about sixteen one-thousandths of 1 percent of the gross national product.

There are inflationary tendencies of much greater magnitude than the pay increase for classified employees under S. 734. The gross national product increased from a little more than $200 billion in 1946 to over $412 billion in 1956. The index of industrial production rose from 60 in 1939 to 147 in December 1956.

There have been widespread increases in prices. Wholesale prices in January 1957 had risen to 125.2-index 1947 minus 1949 equals 100. The cost of living index rose in March 1957 to 118.9-index 1947 minus 1949 equals 100-which is an all-time high. The interest rate has been increased on FHA loans and most all other public and private loans. Extensive wage and pay increases have occurred in business and industry and the Government pays these increases in those industries selling their products to the Government. Low downpayments and liberal terms of payment prevail. The population of the country is increasing at the rate of about 3 million per year. Huge outlays are planned for schools and roads. States, counties, and cities are expanding their services and increasing their expenditures. Many businesses and industries have made extensive additions to their plants and the trend is continuing. All of these are inflationary tendencies and the magnitude of the total is so great that a pay raise for classified employees would be insignificant in comparison with it.

On the other hand, the classified employees have seen these inflationary tendencies eat away the value of their own income dollars so that