
In popular imagination, the government spends its money by employing bureaucrats to harass an already much-harassed citizenry. Whatever the case may be, it is certainly true that salaries are a large expense for the federal government. So how does Congress decide exactly how much money will be spent on government salaries?
Or to be more precise: an agency needs Congress’ approval to hire workers. How many different ways can it receive this permission from Congress?
There are four fundamental methods.1
Lump sum – an agency is given a total amount of money for salaries, with no further restrictions.
Statutory definition – Congress creates a position and sets its compensation directly, in statute.
Pay-grade allotment – Congress prescribes a standardized pay scale, which is not (necessarily) intended to strictly correspond with job responsibilities. Congress gives an agency the right to hire a certain number of people at certain pay-grades, but the agency writes job descriptions without anyone else being allowed to object.
Position classification – Congress sets a standardized pay scale that is intended to correspond to job duties: if two workers do the same sort of work, they ought to have the same salary, regardless of what agency they work for. Accordingly, a single central personnel agency is tasked with reviewing all government job descriptions and classifying these positions, thereby setting their salary.
Each approach has a different tradeoff with respect to 1) legislative control of spending, 2) executive flexibility in administration, and 3) fairness toward government employees.
All four approaches were used at some point in US history, but position classification has been by far the most important approach ever since the Classification Act of 1923. The four methods are discussed in turn below.
Lump sum
The simplest way of controlling salaries is for Congress to appropriate a lump-sum of money for that purpose. For example, Congress might say that an agency gets $50 million to spend on salaries.
From there, the agency has total flexibility with respect to salaries – the only restriction is that it cannot spend a penny more than $50 million. For example: The agency can write any job description it wants and offer any salary that it chooses. It could offer two applicants precisely the same job, and then pay them entirely different salaries. The agency might increase or decrease salaries for any reason at all, and at any time. It implies total executive discretion.
This might sound fantastical, but it was how the US actually appropriated money for salaries up through about the 1830s. And the approach didn’t die out until much later – some agencies received lump-sum salary appropriations up to 1923.
By the time of the Classification Act 1923 (see below), this lump-sum approach was considered outdated. However, it had a minor renaissance in the 1990s – reformers aligned with the New Public Managment thought that its flexibility might foster entrepreneurial government. A National Academy of Public Administration report in the 1990s recommended experimenting with lump-sum salary appropriations; so far as I know, this suggestion was never followed.
Tradeoffs: This approach gives Congress total control over salaries. If Congress says an agency gets $50 million for salaries, then $50 million is exactly what will be spent. In turn, this gives the executive total control in using these funds – and therefore, the maximal possibility for misuse. It offers employees no protection against bias, as the agency can pay two identical employees entirely different salaries. (Of course, this doesn’t mean the agency will, only that it might.)
Statutory definition
An equally simple way for Congress to control salaries is for it to designate salaries in statute. The most obvious example is the President: Congress sets his salary in 3 USC § 102 – it happens to be $400,000.
Statutory definition was used throughout the 1800s and early 1900s and was applied more or less at random. Some positions’ salaries were set in statute but most were not; there was no particular reason for positions to be in the one group or in the other.
The Classification Act of 1923 replaced this approach.
Tradeoffs: In principle, this approach also gives Congress total control over salaries. However, amending statutes to change salaries is very time-consuming and therefore unlikely to happen – Congressional control was nominal instead of real. This approach has no executive flexibility. This approach also offers no assurance of fairness to government employees.
This approach is bad at all three potential goals: it is almost never the right approach, except for niche use-cases (such as for setting the President’s salary).
Pay-grade allotment
Another possibility is for Congress to define a standardized pay scale and allot an agency a certain number of positions at each grade of the pay-scale. The agency is responsible for drawing up job descriptions and assigning duties itself.
This can be illustrated with the actual US history. In 1854, Congress created a four-tiered pay-scale that lasted until 1923. There were four classes of clerks, each with their own salary: a class one clerk earned $900 per year; a class two clerk earned $1,200 per year; a class three clerk earned $1,500 per year; and a class four clerk earned $1,800 per year.
An appropriation might say, “The agency XYZ is permitted ten class one clerks and two class three clerks.”" Therefore, the agency would spend exactly $12,000 dollars on salaries per year. However, the agency could assign any sort of duties to its clerks – it might give the third class clerks less work than the first class clerks.
But in practice, a given agency typically did a logical enough job allocating work to the different classes of clerks. The real inequality was between agencies: some agencies thought that accounting (for example) was a job for class two clerks, while other agencies felt it was a job for class three clerks.
Pay-grade allotment was the typical approach from 1854-1923, until the Classification Act of 1923 abolished it.
Tradeoffs: This approach gives Congress complete control over spending and offers the executive branch reasonable flexibility. It is likely to be reasonably fair to government employees in practice, although in principle it might not be.
Position classification
The final possibility is to have a central agency analyze each job description and then set the corresponding salary. This approach prizes equality above all else, and aims to treat similar workers equally across the entire government.
In every previous approach, workers might receive unequal wages for equal work, particularly across agencies. One agency might treat all HR workers quite equally, and pay them all $50,000; another might treat all HR workers quite equally, and pay them all $55,000. But at the level of the federal government as a whole, HR workers are not being paid equally.
To combat this, an agency might be designated as the personnel agency – in the US, it is the Office of Personnel Management (OPM). This agency might be responsible for reviewing all job descriptions and analyzing how much skill is needed for their performance. With this knowledge, all jobs requiring similar levels of skill will be paid equally, which thereby creates a rationalized pay-scale. In the US, this pay-scale is called the General Schedule (GS) – OPM has rather elaborate guidance for classifying positions in the GS.
Naturally, putting a single agency in charge of salary decisions means taking it away from the rest of the executive branch. But less obviously, it also means taking it away from the legislature. For example, suppose that I, Kevin Hawickhorst, am a government employee with a lowly job title – Substack blogger, say. I might try to convince the personnel agency that my work is actually more technical and specialized than they had first thought – I am actually a historian of bureaucracy and a government reformer. If the personnel agency accepts my argument, then I get favorably reclassified and my salary is increased. The result: although Congress has not taken any action at all, total spending on salaries has increased.
Upward pressure on position classification is very common in practice, so this lack of legislative control is not merely theoretical.
Position classification was imposed by the Classification Act of 1923. This approach is much younger than the other three: the first position classification scheme (at any layer of government) was in Chicago in 1908.2
Tradeoffs: This option gives Congress the least amount of control over spending. It has minimal administrative flexibility and precludes several generally-desirable personnel practices.3 The only consideration is equal treatment of government employees – but even government employees frequently dislike the classification decisions of personnel agencies.
Personnel: then and now
Position authority is a very narrow issue: how Congress grants agencies the right to hire workers. This is separate from the question of hiring procedures – how specific applicants are interviewed and selected, and upon what basis; and separate from the question of discipline – how employees are separated from government service, and upon what basis. This also does not cover promotions, and therefore sidesteps the issue of pay raises for current employees.
But even for such a narrow issue, the US has adopted four wildly different approaches across its history. Ultimately, position classification has reigned supreme ever since the Classification Act of 1923 imposed it as the governmentwide standard. From there, the Classification Act of 1949 drastically expanded the scope of position classification, and its dominance has gone unquestioned since.
And this lack of questioning is surprising. The classification acts are bizarrely under-discussed given their importance and their dysfunction. These acts were controversial at the time of their adoption, and were consistently unpopular among federal workers.
More than that, there are alternatives: it is not a law of nature that the federal government must use position classification. There are three other approaches – and two of them are potentially good!
Appendix: Note on sources
My main source is Ismar Baruch’s book History of Position-classification and Salary Standardization in the Federal Service, 1789-1941. It can be described using several adjectives, one of which is “comprehensive”. On the off chance that the book’s title grabbed you, it is available on Google Books.
Statutory definition and pay-grade allotment are my own nonstandard terms.
Timmerman, Hazel B. “Position Classification and Pay Plans.” Library Trends 3 (July 1954): 67.
For example, this approach also makes training via job-rotation almost impossible, as it ties salary entirely to the position that an employee currently holds. If an employee is rotated to a lower-paid job, he would have to take a pay cut.