Monday, January 28, 2008

The cost of foreign service

The Cookie Pusher writes a compelling argument for overseas compatibility pay. One argument he leaves out, though, is that locality pay is used in the computation of our pension, but our differentials for serving overseas (hardship and danger pay) are not. Meaning there is a dis-incentive to serving overseas right before you retire.


A recent letter from the President of the American Foreign Service Association discussed a central problem that American diplomats face in their careers vis-a-vis pay: our overseas pay is calculated based, not on Washington, D.C. salary levels, but on a much lower “base pay.”

I provide as an example my own pay history. When I joined the foreign service, “locality pay” (another way of saying cost-of-living adjustment for Washington) was around 12 percent. I was sent on my first assignment to a high-hardship post, one that was considered among the highest in the world at the time, which was 25 percent.

What this means is that my pay was increased by 25 percent over “base pay,” but only 13 percent over the pay I would have gotten for staying in Washington, and taking no hardship at all. On my second assignment, I went to a 10 percent hardship post, one that the State Department considers moderately difficult. “Moderately difficult,” to characterize this doublespeak, means regular minor bombings and occasional major bombings in the city where I was posted. At this time, Washington’s locality pay had reached approximately 16 percent. So, to serve in this posting, I took a 6 percent pay cut versus what I would have gotten in Washington.

In my upcoming assignment, I will be at a 20 percent hardship post, a significantly difficult assignment. But, since Washington locality pay has reached a stunning 20.3 percent over “base pay,” I will once again be taking a slight pay cut to do so.

Before I go further, a concession needs to be made: I get housing provided to me by the U.S. government when I’m overseas, and have to pay for my own when I’m in the United States. Sure, there’s some reason why DC pay must, perforce, adjust to this.

But, I’m poorer on balance in two differing ways:

1.) Our locality pay for DC, which is government-wide, has been vastly outstripped by the cost of housing increases in the DC area over the past ten or so years. When I joined, mid-level officers of my age were buying houses in Arlington. I recently bought a 1-bedroom condo in Arlington for more than what they paid for their houses. A couple percentage points worth of pay increase per year simply does not compensate. The market is outstripping our pay. Even with today’s depressed market, a condo that cost $100,000 three years ago goes for at least $250,000 now.

2.) I’m poorer than the other government employees who compete with me in the housing market. Other USG agencies that send people overseas — who also get USG housing while abroad — calculate overseas pay based on DC pay rates, not some amorphous base pay. After all, we’re all headquartered in Washington. And, since every major city in the U.S. has it’s own locality pay multiplier, there is no place where I would only get base pay that I could possibly be assigned to in my career. Not giving State Department personnel that same pay regime as other government agencies is fundamentally unjust.

My private sector friends probably will say that the job security that I have — and they often don’t — compensates for lower pay. I’d agree that security is worth a certain amount, but I’d also point out that I pay taxes on my income anywhere I live in the world, whereas they don’t have to pay below a certain amount (I think around $90,000 per year) when they live overseas. That’s at least a 25% penalty for me. I could easily pay a mortgage on an extra house for 25% extra pay per year.

Unfortunately, as I understand it, changing this ridiculous system requires a change in federal law by Congress, and AFSA has tried and failed for years to get it done. Maybe 2008 will be the year of change. I certainly hope so because Washington is impoverishing me, and many others like me. I’m proud to serve my country, but would prefer to do it in a suit that isn’t falling apart.


Anonymous said...

I don't understand your post. Are you saying that you think DC locality pay should be higher, or that hardship differential should be higher? Or both?

With the housing, I think post pay is fair. But with DC posts, possibly the ability to advance by making contacts compensates for the high housing costs?

Digger said...

I don't believe The Cookie Pusher is neccessarily arguing for higher pay in DC, though we certainly get paid substantially less than even our civil service collegues. What he is saying is that we actually lose money when we go overseas to places that are significantly difficult to live according to State Department standards. And I don't think the ability to make contacts makes up for the high housing costs, because making contacts is part of the job.

Consul-At-Arms said...

The main thing that sticks in my craw from a leadership/management standpoint is how utterly bass-ackwards it is for there to be a financial disincentive for a foreign service officer to take an overseas assignment. It absolutely boggles my business school-educated mind.

As it now stands, unless you go to a 20 percent (or higher) hardship post, you actually make less money when you leave D.C.

As some of my colleagues from the Sandbox would put it, that's "whack!"