Reducing federal employee compensation to market levels could save taxpayers roughly $77 billion per year.

Nationwide, as governors and legislators seek to rein in labor costs, public-employee unions are protesting that their members are actually underpaid. But a growing body of evidence strongly suggests that their protests have no basis in fact.

A new CBO study shows that federal-government employees receive significantly higher compensation than private-sector workers with the same levels of education and experience. It confirms many of the findings of a 2011 study written by Andrew Biggs and Jason Richwine and helps rebut union claims that federal workers are underpaid.

Several studies have shown that public-sector workers receive higher compensation than their counterparts in the private sector. Although, federal contractors have some of the advantages of private sector workers, in that poor performers can be dismissed and the composition of the contractor workforce altered, it is possible that they are overcompensated just as federal employees are right now.

On April 13, 2012, the US Department of the Treasury released new cost estimates for the Troubled Asset Relief Program. Looking principally at actual and projected contractual cash flows, the document concludes that: "Overall, the government is now expected to at least break even on its financial stability programs and may realize a positive return." 

Are teachers paid too much? It's a question that would ignite heated debate at the most mellow of cocktail parties. But it's a question that AEI took head-on this year.

A January 2012 report by the Congressional Budget Office (CBO) shows that federal government employees receive substantially higher compensation than similarly skilled workers in the private sector. The report’s methodology and conclusions are broadly similar to previous studies from both The Heritage Foundation and the American Enterprise Institute.

Alan Krueger, recently named by President Obama to be the new chair of the Council of Economic Advisors, is perhaps best known for his claim that raising minimum wage will not reduce employment. But Krueger has had a long, varied career as a labor economist--and a history that should be especially interesting to budget cutters.