Announcement on the President's Proposal on Federal Civilian and Military Pay Increases

President Carter proposed to Congress today a pay increase of 7 percent affecting 3.5 million military and civilian employees. The President's proposal would raise the pay of 1.4 million Federal civilian workers and 2.1 million members of the armed services.

The law governing Federal civilian white-collar pay requires that the Bureau of Labor Statistics conduct an annual nationwide survey of salaries paid private sector employees who hold jobs similar to their Federal counterparts. This private sector salary data is then compared with Federal salaries by a body called the President's Pay Agent: the Secretary of Labor and the Directors of the Office of Management and Budget and the Office of Personnel Management. This year the Pay Agent found that an average increase of 10.41 percent would raise Federal white-collar salaries to the level of private sector counterparts.

The law provides the President authority to propose the lower increase because of "national emergency or economic conditions affecting the general welfare."

The President believes strongly that a 7-percent increase is required this year. The 1980 budget had provided for a 5.5-percent increase. The President recognizes, however, that employees are faced with a higher cost of living than when he submitted his 1980 budget. For example, current forecasts of CPI increases have risen 3.2 percentage points for 1979 and 2.0 percentage points for 1980 over those used in the budget.

By recommending 7 percent instead, the President's action will add a little less than $1 billion to the $60 billion that the budget already provides for these workers' annual salaries.

"Inflation continues to be the single greatest threat to our economy and is a national problem of foremost concern," the President said in his message to the Congress. the average 10.41-percent increase that would be required under the comparability act is far beyond the standard of the Council on Wage and Price Stability for this year, and exceeds any standard under consideration for the coming years.

The President's proposal recognizes that low-paid employees have felt more than others the impact of inflation and provides that employees earning less than $8,900 per year will receive larger increases. Further, to ease the burden of the limitation on the military, the President has decided that there will be no reallocation of the increase from basic pay into the allowances for quarters and subsistence.