The Economics of Federal Compensation

The problem investigated in this paper is the economic interpretation of federal wages comparability laws. We show that estimating wages differentials to test whether federal wages comport with the law is more complex than typically treated in the literature. Although the issue is largely one of the econometric interpretation, it addresses the central question of which private sector workers should be compared to federal workers. We demonstrate the determining which explanatory variables in the wage regression equation are job‐descriptive and which are skill‐descriptive defines the comparison group.