As 2017 is well underway, most of us are noticing that our paychecks are a little bit bigger, and we aren’t complaining! In case you were wondering why, in December of 2016 President Obama approved a pay increase to take effect on January 1, 2017. We were all expecting an increase anyways, but this year the deal just got a little bit sweeter.
From pay freeze to “more please!”
Back in 2010, President Obama set into place a pay freeze for all federal employees to go into effect in the beginning of January 2011. This was due to an overwhelming nationwide deficit, as he made an attempt to get our nation’s spending under control, particularly that of federal employees. For two long years, we suffered as inflation brought our living expenses up, meanwhile, our paychecks remained the same. It was a tough time for all of us. Many of us were in an uproar; Why attack the federal employee’s paycheck – especially the lower-paid employees? It made many of us very frustrated with the Obama administration, but there really wasn’t much for us to do unless we wanted to abandon ship and look for work in the private sector. Thankfully, those days are now far behind us.
In 2014 and 2015 we noticed a slight bump in our paychecks – the keyword being slight. A 1% increase was issued across the board for all federal employees. While it was indeed better than the proverbial kick in the pants, it wasn’t very much considering our pay had effectively been frozen for the past few years before that. Nonetheless, our checks did go up a little bit. In 2016, we enjoyed another small pop in our paychecks, with federal employees receiving a 1.6% increase across the board. Again, not enough to allow us to all go out and buy new homes, but it was better than nothing.
In a surprising move, In December of 2016, President Barack Obama approved another pay increase, although it wasn’t exactly what we were expecting. Instead of another 1.6% increase across the board, he approved a generally larger increase – a 2.1% bump. Woohoo! Now we’re talking! However, this increase depended largely on where you live and work. The easiest way I can explain it is that we all got another 1% across the board increase, and then depending on our location, we received another 1.1% on average.
The end result was an average 2.1% increase in federal civilian employee pay – something we had all been waiting for. Of course, people new into the service or working in lower-level positions may not have noticed too big of a bump, but those of us who work in the mid to upper levels of the federal system have enjoyed some substantial increases. Active duty military saw a 2.1% across the board increase, which at the end of the day, typically isn’t much, but let’s face it, new recruits have a lot more to gripe about than their small paychecks.
Position and seniority are the key driving factors
For low-level federal employees (namely newly recruited military personnel) the difference was minimal. An E-1 just 6 months into the service still makes a pretty humble living. For those of us who have been in the service (or work in other federal positions) for several years, the pay raises have been noticeable. The ones that seemed to notice the increase the most were executive level officers of the federal government, federal judges, and those working federal positions as doctors and dentists. Like with most other industries and businesses, your position and time on the job typically dictate your salary. The same applies for those working a federal job. If you’re the new guy on the job, you are usually the lowest paid with the lowest position. After we’ve been there a while, we start seeing bigger paychecks as your experience and skill level increase. It only makes sense for our financial gain to increase accordingly.
How does this wage increase affect our quality of life?
Aside from giving you more money overall, having a larger paycheck allows you to do things you weren’t able to do before. One of the major benefits is credit and bank loan qualifications. Since banks and credit unions lend money based off of what you earn (It’s called a DTI ratio – Debt-to-Income ratio) with a bigger number on your check stub, the banks are able to extend larger loans. This allows us to buy homes easier, finance cars, and generally have an easier time qualifying for anything we want to finance.
Of course, it’s not advised to go out and take on all the debt you can get approved for (we don’t know if or when another pay freeze will take place) but it sure is nice to know that you have more options. While the 2.1% increase is nice, we have to keep in mind that in a general sense, things cost more nowadays, so the money isn’t really stretching that much further, if at all.
What can we expect in the future?
With our current administration, this is a tough one to answer. We’ll just have to wait and see, and hope for the best. It would be nice to know that we had steady increasing coming for the next 20 years, but those of us who have been federal employees at least since 2010 know that another pay freeze wouldn’t be entirely out of the question.
With that said, it would be well-advised to join the quickly growing group of wage-conscious, frugal group of federal employees. If we can save a little money every month and build up our savings, it won’t sting so bad if we come up against another pay freeze in the future. If there isn’t a pay freeze, well then we can put that savings to good use, buy a house, car, boat, motorcycle … whatever it is that you’ve had your eye on. Just remember, even though we’re seeing bigger checks this year, it may not stay this way forever. Odds are, it is very likely to change in 2018. We just don’t know which way the federal employee pay increase will move. Be smart, and save a % of your check every two weeks. It may come in very handy in the future.