2023 Workforce Federal Contracting Trends to Watch

Published: December 07, 2022

Federal Market AnalysisContracting TrendsIT Workforce

The federal government, along with federal contractors, face numerous workforce challenges in the coming year related to hiring, recruitment, retention, diversity, inclusion, skill development, wage inflation, and demand for a flexible work environment.

Age Gap

The gap between older and more experienced workers and younger workers has been growing wider each year for the past decade. As experienced government employees retire or leave federal service, they take knowledge of the complex federal environment with them. An inexperienced workforce can slow acquisitions, program success, and technology development.

The charts below show the growing gap between the percentage of federal workers age 60+ and those ages 20-29, and separations from federal service versus accessions. 

In 2023, 30% of the federal workforce is expected to be eligible for retirement. The percentage of the workforce reaching age 60+ is growing each year, while the percentage of employees in the 20-29 year age range is only increasing slightly.

Separations are outpacing accessions in the federal government. An accession is a personnel action resulting in the addition of an employee to an agency’s staff including transfers in and new hires. A separation is a personnel action resulting in the loss of an employee from an agency's staff, including transfers out, retirement, quits, reductions in force, termination, or death.

The IRS alone has at least 50,000 employees expected to retire over the next five years. Additionally, the average age of federal employees is significantly higher than the average age of private sector employees. According to the University of Minnesota Current Population Survey 1992-2021, in 2019, the average age of federal workers was close to 46 years old compared to 42 years old in the private sector. 

The federal government shows an even more significant age disparity in the information technology workforce. Of the 90,000 federal employees performing IT, cybersecurity, and cyber-related functions, more than 30% are over the age of 55. The number of IT specialists over age 60 outnumbers those under 30 years old 4.4 to 1. In 2021, GAO added federal IT workforce issues to the high-risk list.

Pay Gap

The gap between federal pay and private sector pay is also growing year over year. U.S. average worker pay rose by 38% between 2009 and 2020, but federal civilian pay only increased by 15%. Data released in October 2022 by the Federal Salary Council showed that federal workers earn about 24% less, on average, than their private sector counterparts, up from 22.5% in 2021.

The pay differential increases attrition risk within the federal workforce and reduces the competitiveness of federal jobs. Wage inflation is moderating, but this gap is likely to expand as demand for select expertise continues to grow. Agencies will need to continue to develop strategies to compete for skilled workers.

To address these challenges contractors can expect competition with agencies and the commercial sector for talent, rising employment costs, opportunities to help train and develop the federal workforce, and contracting opportunities to fill federal workforce gaps.

For more information on expected trends in 2023, see Deltek’s newest report “Federal Contracting Trends to Watch in 2023.”