What Is Recency Bias in Public Sector Pay?
Recency bias in local government compensation refers to a growing phenomenon where newer employees tend to receive higher salaries than their longer-tenured colleagues performing similar work. According to proprietary data from City Compensation, this wage disparity is not just anecdotal but a measurable trend affecting municipalities across the country.
The Data Behind the Disparity
City Compensation’s analysis reveals a clear pattern: employees hired within the last 3-5 years frequently command starting salaries that match or exceed what existing employees with 10+ years of experience are earning. This creates an inverted compensation structure where institutional knowledge and loyalty are effectively undervalued in salary terms.
Why This Happens
Several factors contribute to this growing disparity:
- Market-rate hiring: Municipalities must offer competitive salaries to attract new talent in today’s job market, while existing employees remain on predetermined step-and-grade systems.
- Budget constraints on across-the-board raises: When budgets tighten, governments often limit raises for existing staff while still needing to pay market rates for new positions.
- Outdated compensation schedules: Many local governments update hiring scales more frequently than they adjust compensation for existing employees.
- Job hopping premium: Employees who switch between municipalities often secure larger salary increases than those who remain loyal to a single employer.
The Hidden Costs
This recency bias creates several organizational challenges:
- Morale issues: Long-term employees discover they earn less than recent hires with less experience.
- Knowledge loss: Experienced employees leave for other opportunities when they realize they can earn more by job-hopping.
- Increased turnover costs: Training and onboarding expenses rise as seasoned employees depart.
- Reduced institutional memory: Critical operational knowledge is lost with departing veteran employees.
Solutions for Forward-Thinking Municipalities
Based on City Compensation’s findings, local governments can address this issue through:
- Compensation equity audits: Regular reviews to identify and address internal salary compression.
- Market adjustment funds: Dedicated budget allocations to bring long-term employees’ salaries in line with market rates.
- Retention bonuses: Financial incentives that reward institutional knowledge and loyalty.
- Transparent compensation discussions: Open communication about how salaries are determined and adjusted over time.
Take Action Now
Is your municipality experiencing the hidden costs of recency bias? Get ahead of this growing trend with data-driven insights tailored to your local government’s needs.
Email us at sales@publicsectortalentanalytics.com today to learn more about how City Compensation can help you monitor and address compensation trends in your organization. Our proprietary analytics can identify wage disparities before they impact morale and retention, giving you the tools to build a more equitable and sustainable compensation structure.
The data is clear: recency bias in local government compensation is real and measurable. Don’t wait for your experienced staff to start leaving before addressing this issue.
Better Data, Decisions, Better Outcomes