Federal employee wage freeze expected to impact area’s economy by $200M annually

By City News Service

President Barack Obama’s plan to freeze wages of most federal workers for two years will cost the San Diego-area economy nearly $200 million annually, an economist said Wednesday.

Kelly Cunningham of the National University System Institute for Policy Research estimated the direct loss at $108 million — pay that would going to federal employees if they got raises — and the overall loss to the regional economy at $190.3 million. The larger figure includes the loss of direct compensation and the effects of reduced spending.

“Our economy was estimated to be $170 billion in 2009, so a total of $190 million is a little over 1 percent of that,” Cunningham said. “In a struggling economy, that’s another blow.”

Cunningham said he calculated the wages of local federal workers, compared to pay increase data since 2007 to arrive at his conclusions.

Despite the cost to the local economy, the $5 billion savings to the federal government is needed to control debt, he said.

The proposed pay freeze does not include postal workers or members of the armed forces, though civilian employees of the Defense Department will be affected.

The federal government employs about 37,000 people in the area, excluding postal employees, he said. On average, Cunningham said, people working for the federal government make about 1.5 percent more than privately employed people in similar jobs.