Unfortunately, the debate over federal pay has been fraught with extreme claims. Some politicians have accused federal workers of making double what they deserve, while government unions maintain they are underpaid by around 25 percent. The rhetorical back and forth has largely hidden a substantial academic literature, dating back to the 1970s, that compares the pay of federal and private workers. Economists have addressed the issue with a variety of techniques and from a number of different angles.We go on to discuss the human capital model, fixed effects analysis with "job switchers," quit rates, application rates, queue models, and the relationship between public-sector compensation and overall budgetary health. We conclude by noting that federal pay is a complicated problem with only imperfect solutions:
Fundamental reform of federal compensation—not merely temporary pay freezes or furloughs—could offer significant benefits to taxpayers. At the same time, we must acknowledge that there is no perfect solution. No amount of “good government” reforms can ensure that federal workers are paid exactly the same way as their private sector counterparts, because the federal government can never be subject to market forces the way the private sector is.It's a rigorous but accessible piece that can be read here.