The GS Pay System Is 'Disintegrating': 5 Pressures Driving the 2026 Reform Debate

Last Updated: May 24, 2026 Reading Time: 13 min

On May 19, 2026, GovExec published "The century-old GS system is 'disintegrating' and government can't agree on how to fix it." Within days the Reddit thread on r/fednews hit 701 score, far above the average for a workforce policy article. The piece, by workforce management consultant Howard Risher, frames the General Schedule (created in 1923, last substantively modified by FEPCA in 1990) as structurally broken from both political sides. Six months earlier, the Pay Agent's December 2025 annual report broke from decades of precedent by explicitly calling the GS system "antiquated" and recommending three specific structural reforms, including eliminating the GS step structure entirely. This is what is actually happening, what reform means for your paycheck, and why every prior attempt to do it failed.

Key Takeaways

• GovExec's May 19, 2026 article by Howard Risher framed the GS system as "disintegrating" because both parties view it as broken but agree on nothing about how to fix it. The Reddit thread hit 701 score within days.
• The Pay Agent's December 2025 report broke from precedent by explicitly calling GS "antiquated" and recommending 3 structural reforms: total compensation assessment, occupational pay differentiation, and elimination of GS steps in favor of pay-for-performance ranges.
• Alt-pay creep: Roughly 35% of federal civilians are now on non-GS pay systems (VA Title 38, FAA Core Compensation, DoD AcqDemo, DCIPS), up from 29% in 2004.
• Locality pay is frozen. The Pay Agent rejected all 11 new locality area petitions for 2026 (Kennewick-Richland, Syracuse-Auburn, others). The 34-area system has not expanded in years.
• History is grim. NSPS (2006-2009) covered 226,000 DoD employees, failed within 3 years, and was repealed. MaxHR failed faster.
• Unions are aligned. NTEU, AFGE, NFFE, NARFE all oppose eliminating across-the-board ECI-based raises in favor of performance pay. This makes administrative implementation extremely difficult without congressional action.
• What reform would actually mean for you: Winners are cyber/STEM/medical occupations and feds in offices with favorable managers. Losers are administrative/clerical grades and any employee whose performance ratings run below expectations.

Original Data: 35% of the Federal Workforce Is Already Off GS

The "disintegrating" framing is partly about a quiet shift that started in the 1990s and has accelerated. Below is the FedTools analysis no competitor has assembled in one place: the actual breakdown of federal civilians by pay system. (FedScope September 2024 base of ~2,313,000 total federal civilians.)

Pay System	Approximate Employees	Coverage	Why It Exists
General Schedule (GS)	~1,500,000	Governmentwide white-collar	The default federal pay system
Federal Wage System (WG/WL/WS)	~200,000-250,000	Blue-collar / trades (shipyards, maintenance)	Hourly trades pre-date GS
Senior Executive Service (SES)	~8,000	GS-15 equivalent and above	Created 1978 to give exec branch flexibility
Executive Schedule (Level I-V)	~800	Cabinet, agency heads, political appointees	Statutory ceiling on GS pay
VA Title 38 (healthcare)	~75,000 full + ~100,000 hybrid	VA physicians, nurses, dentists, pharmacists	Healthcare market pricing diverges from GS
FAA Core Compensation (FV bands)	~45,000	Federal Aviation Administration (all)	Congress granted FAA pay independence 1996
DoD AcqDemo (pay bands)	~49,000 enrolled (130K cap)	Defense acquisition workforce	Demo authority to test bands vs grades
DCIPS (Defense Civilian Intelligence)	~25,000-35,000	NSA, DIA, NGA, military intelligence	Cyber/STEM pay supplements
FIRREA agencies (OCC, FDIC, Fed)	~15,000-20,000	Financial regulators	Above-GS pay required to recruit
Foreign Service	~16,000	State, USAID	Separate rank/class system
Other demo / excepted service	~25,000-50,000	NSF, NIH, NIST, GAO	Agency-specific authorities

The math: Roughly 65% of federal civilians are on full GS today. In 2004 that figure was 71%. The trend is monotonic. Every successful alt-pay system makes GS look weaker by comparison, which feeds the structural-reform argument the Pay Agent is now making.

For a tour of where your own GS grade and locality currently sit relative to private-sector wages, the GS Pay Calculator shows the actual 2026 OPM table by grade, step, and locality.

The Pay Agent's December 2025 Report Is the New Data Point

The Pay Agent is the joint authority of the OMB Director, OPM Director, and Secretary of Labor. It issues an annual report on federal pay every December. Most years the report is a technical document about locality boundaries and BLS wage surveys. The December 2025 report was different.

For the first time in decades, the report explicitly called the GS system "antiquated" and said its "prescribed procedures and practices effectively preclude agencies from tailoring pay programs to their specific missions and labor markets." Three Trump cabinet-level officials co-signed it. That alignment is the new signal.

The three structural recommendations:

1. Assess total compensation gap, not just wage gap. Use BLS wage surveys plus the value of FERS pension, FEHB government contribution, and TSP 5% match when comparing federal pay to private sector. If you include benefits, the 24.72% federal-private wage gap narrows substantially. This is a rhetorical setup to argue that a full GS catch-up raise is not warranted.
2. Occupational pay differentiation. Create separate pay ranges for high-demand occupations: cyber security, medical professionals, STEM. Modeled on VA Title 38, FAA Core Compensation, DCIPS. Effectively tier the GS system so not all GS-13s earn the same range.
3. Eliminate GS steps; create open ranges tied to performance. The most radical proposal. Abolish the 10-step structure (which provides automatic within-grade increases every 1-3 years based on satisfactory performance) and replace it with open pay ranges where individual pay advancement is tied to performance ratings.

The report also refused to approve any of the 11 new locality pay area petitions for 2026, including Kennewick-Richland-Walla Walla WA and Syracuse-Auburn NY. Employees in those areas who expected to move out of Rest of US locality (17.06%) into a specific area lost potential 2-4 percentage point gains.

The 5 Structural Pressures Behind the "Disintegrating" Narrative

Risher's GovExec article identified the political dynamic. The actual structural pressures are these five, all happening simultaneously.

Pressure 1: Locality Pay Is Frozen

The 34 locality pay areas have not expanded in years despite Federal Salary Council annual recommendations. The Pay Agent rejected 11 petitions in December 2025. Meanwhile, federal workforces in Austin, Nashville, Denver, and other rapidly growing metros remain in Rest of US locality (17.06% in 2026), well below what the labor market in those areas demands. The locality pay system is increasingly disconnected from where federal employees actually work.

If FEPCA's statutory formula were applied for 2026, average locality increases would be 18.9%. The actual 2026 locality rates were frozen at 2025 levels by the August 28, 2025 alternative pay plan executive order. That gap between statutory formula and actual practice is itself one of the strongest "the system is broken" arguments.

Pressure 2: Alt-Pay Creep (35% and Growing)

Every agency that gains pay flexibility outside GS uses it to pay more competitively. VA physicians can earn $300,000+ in high-cost areas under Title 38. FAA Core Compensation FV bands typically pay above GS-equivalent. DCIPS provides STEM and cyber supplements. The structural effect: the most market-sensitive federal jobs are moving off GS, leaving GS as the system for white-collar work where competitive pressure is lower.

This creates a self-reinforcing problem. As more work moves off GS, GS represents an increasingly residual category, which weakens the political case for GS-wide pay increases.

Pressure 3: SES Pay Compression and Award Inequity

SES base pay is capped at Executive Schedule Level IV ($197,300 in 2026). Awards are capped at 20% of basic pay. A GS-15 step 10 in high-locality areas (San Francisco, DC) is paid the same as the SES Level IV cap, eliminating the financial incentive to take SES positions.

Meanwhile, 2026 brought bonus chaos:

• DoD (Hegseth memo): authorized cash bonuses up to $25,000 for top civilian performers, effective by January 30, 2026
• HHS: shrinking cash awards for top performers, shifting funds to less clear bonus criteria
• OPM proposed rule (February 2026): limit top performance ratings to 30% of SES/Senior Professional employees, mandatory in FY2026

These three moves are running in different directions simultaneously. That fragmentation is part of the "disintegrating" framing.

Pressure 4: Recruitment and Retention in Cyber, STEM, and Medical

GAO has had strategic human capital management on its High Risk list since 2001. The federal government cannot compete with private sector pay for cyber security professionals, AI/data scientists, or specialized medical personnel under standard GS rates. The DCIPS and VA Title 38 systems are explicit workarounds. The pressure to create more occupational pay differentiation is largely about whether to handle these gaps with more alt-pay systems or restructure GS itself.

Pressure 5: The Political Paradox

Both parties want GS reform. They want incompatible reforms.

The Republican/DOGE view: GS creates a "compliance culture" that protects underperformers and makes it nearly impossible to fire federal employees. Elon Musk's "Regulations are immortal" and "The bureaucracy is the problem" framings reflect this position. The desired reform is at-will employment, pay-for-performance, and easier RIF.

The progressive view: GS is bureaucratically rigid, perpetuates inequities, and fails to pay competitive salaries that can attract talent. The desired reform is occupational pay flexibility, market-competitive base pay, and stronger labor protections during transition.

Both agree the system is broken. Neither can agree on how to fix it. That paradox is the political ceiling on any nationwide structural reform.

Why Every Prior Reform Failed: The NSPS Lesson

Any conversation about GS reform has to start with the National Security Personnel System (NSPS).

What it was. Congress authorized NSPS for DoD in the National Defense Authorization Act for FY2004. The system replaced GS grades with pay bands for up to 700,000 DoD employees, with performance pay replacing step increases.

What happened. Implementation began in 2006 for approximately 226,000 employees. The system was designed by DoD and OPM without adequate union input. Managers received minimal training on how to rate employees fairly. Internal data quickly showed racial and gender disparities in performance ratings. Employees at higher GS-equivalent levels received disproportionately larger raises. Employees closest to senior managers received higher ratings regardless of actual performance. AFGE and other unions mounted sustained congressional pressure citing these disparities.

The repeal. President Obama signed the FY2010 NDAA, which repealed NSPS effective January 1, 2012. Every NSPS employee was converted back to GS. Cost: hundreds of millions in implementation. Lasting structural change: zero.

The lesson (2020 RAND report, cited in the GovExec article): Successful pay system modernization requires employees to be "full partners" in planning and implementation. NSPS failed because it was designed from the top and imposed from above.

DHS attempted a parallel reform called MaxHR in 2005-2007. It failed for identical reasons before it was ever fully implemented.

The success case. DoD AcqDemo (Defense Civilian Acquisition Workforce Personnel Demonstration Project) has been running since 1999 and is continuously expanding. It works because it is voluntary, limited to a specific occupational community (acquisition), phased over years rather than overnight, independently assessed by RAND, and involves employees in planning. As of 2021 it covered ~49,000 of an authorized 130,000 cap. RAND's FY2025 assessment found AcqDemo "faring well in terms of most criteria."

The pattern is clear: occupational-specific, phased, assessed reform with employee involvement can work. Governmentwide overnight conversion cannot.

Where the Unions Stand

NTEU, AFGE, NFFE, and NARFE are unified on the red lines for any pay reform:

1. Across-the-board ECI-based base raises must continue. Replacing the annual GS pay raise with pure performance pay is the single most opposed reform. NTEU's position dates to 2003 congressional testimony and has not changed.

2. Union partnership in design and implementation is non-negotiable. Every union cites NSPS as the cautionary tale. Reform designed without union input will face sustained congressional pressure.

3. Adequate funding and manager training are prerequisites. Without funding for fair performance evaluation systems and manager training, performance pay devolves into favoritism. This is also a Tennessee state government success-case finding (pre-COVID; cited in the GovExec piece).

4. Pay-for-performance, if implemented, should be limited to within-grade increases only. Replacing the entire pay raise mechanism is opposed. Tying step-equivalent increases to performance is potentially acceptable.

5. Disparities in performance ratings (race, gender, age) must be monitored. NSPS failed in part because the system produced disparate impact.

The Pay Agent's December 2025 recommendation to eliminate GS steps hits all of NTEU's red lines simultaneously. This is why administrative implementation without congressional action is very difficult.

What Reform Would Actually Mean for You

If meaningful GS reform happened, here is who is positioned to gain and lose under the most likely models.

Winners under pay-for-performance models:

• Cyber security, AI/data science, STEM, and medical occupations (occupational pay differentiation directly benefits)
• Employees in offices with managers who rate favorably
• Feds in metros where GS locality lags private-sector wages (if locality system is replaced with market-rate pay)
• High-performing GS-13/15 employees who would benefit from broader pay bands

Losers under pay-for-performance models:

• Administrative and clerical employees at lower grades (GS-3 through GS-9), where automatic step increases provide the most relative pay growth
• Feds in areas without competitive labor markets (where market-rate pay would be lower than current GS)
• Any employee whose manager rates them below expectations under performance pay
• Employees near retirement, whose High-3 depends on the next 3 years of pay stability

Structurally uncertain for most feds: The current step structure provides predictable pay growth: a satisfactory rating produces a within-grade increase after the statutory waiting period. Performance pay does not provide that predictability. The trade-off is upside (potentially larger raises for top performers) for downside (smaller or zero raises if rated poorly, even if performing as required).

For most federal employees, the current system's predictability is a real benefit even when the dollar amounts disappoint.

What Is Likely Versus Unlikely in the Next 24 Months

Likely:

• Continued alt-pay creep. More occupational communities petition for pay flexibility outside GS.
• Limited pilot programs. H.R. 201 (119th Congress) proposes a 5-year pay-for-performance pilot covering 1-10% of eligible employees. No markup scheduled as of May 2026.
• More Pay Agent reports calling for structural reform. Continued political pressure from both parties.
• More bonus structure fragmentation across agencies (HHS, DoD, SSA going in different directions).

Unlikely in 24 months:

• Nationwide elimination of GS steps. Requires congressional action plus implementation funding plus at minimum some union acquiescence. None of those three are present.
• Conversion of large agencies off GS. The NSPS lesson remains too recent and too expensive to ignore.
• New locality pay area approvals. The Pay Agent's December 2025 freeze signals continued resistance.

Possible:

• A demonstration project for cyber/STEM occupational pay differentiation in a single agency. AcqDemo is the template.
• Expansion of existing alt-pay systems (DCIPS to more military intelligence positions, AcqDemo to more acquisition agencies).
• Modest base pay raise restraint with cash awards taking up the gap, fragmenting compensation predictability.

Calculate Your Current Position

If you want to know exactly where your grade and locality sit under the current GS system before any reform happens, the math is straightforward:

• GS Pay Calculator: See your 2026 base pay, locality adjustment, and total salary by grade, step, and duty station. The calculator covers all 58 locality areas.
• High-3 Calculator: Calculate your High-3 average salary for retirement annuity purposes. Reform pressure on base pay structure directly affects High-3 for anyone retiring in the next 3-5 years.

Frequently Asked Questions

Is the GS pay system actually being eliminated?

No, not in the short term. The GS system covers roughly 1.5 million federal civilian employees and changing it requires congressional action plus implementation funding plus union agreement. None of those three exist as of May 2026. What is happening: the Pay Agent (OPM Director, OMB Director, and Secretary of Labor) issued an unusual December 2025 report explicitly calling GS antiquated and recommending structural reforms, and GovExec published a May 19, 2026 article calling the system disintegrating. These are pressure signals, not implementation steps.

What is the Pay Agent's December 2025 report and why does it matter?

The Pay Agent is the joint authority of the OMB Director, OPM Director, and Secretary of Labor that issues an annual report on federal pay. The December 2025 report broke from precedent by explicitly calling the GS system antiquated, refusing to approve any of the 11 new locality pay area petitions, and recommending three structural reforms: assess total compensation (including benefits) instead of just wages, create occupational pay differentiation for high-demand fields, and eliminate the GS step structure in favor of open ranges tied to performance. Three Trump cabinet officials co-signed this report. That alignment matters.

What is alternative pay system creep?

Alternative pay system creep is the slow movement of federal employees off the GS system and onto agency-specific pay systems like VA Title 38 (healthcare), FAA Core Compensation (aviation), DoD AcqDemo (acquisition), DCIPS (defense intelligence), and others. In 2004, about 71% of federal civilians were on GS. As of 2024 the figure is closer to 65%. The remaining 35% are on alternative systems that typically pay more competitively for the same work. Every successful alt-pay system makes the GS system look weaker by comparison.

What happened to NSPS and why does it matter to current reform?

The National Security Personnel System (NSPS) was the last major attempt to convert a large chunk of the federal workforce off GS. It launched in 2006, covered 226,000 DoD employees, replaced GS grades with pay bands, and was repealed in 2009 after sustained union opposition, racial and gender disparities in performance ratings, and political backlash. The full NSPS implementation was abandoned and every employee was converted back to GS. It cost hundreds of millions with zero lasting structural change. The lesson cited by every reform proponent since: top-down conversion without union partnership fails.

Will my GS step increases go away?

Not in the near term. Step increases (within-grade increases, or WGIs) are statutorily required under 5 USC 5335 and depend on satisfactory performance plus the waiting period (52 weeks for steps 2-3, 104 weeks for 4-6, 156 weeks for 7-10). The Pay Agent's December 2025 recommendation to eliminate steps would require congressional action. The unions (NTEU, AFGE, NFFE, NARFE) are unified in opposing elimination of steps because steps are the predictable, automatic pay growth that protects most federal employees. If reform happens, expect it to start with broader pay bands for one occupational community first, not nationwide step elimination.

If GS reform actually happens, who would win and who would lose?

Winners: high-demand occupations (cyber, STEM, medical, AI/data science), employees in offices with managers who rate them favorably, and feds in metros where GS locality lags private-sector wages. Losers: administrative and clerical employees at lower grades (where automatic step increases provide the most relative pay growth), feds in areas without competitive labor markets, and any employee whose manager rates below expectations under a performance-pay model. The structural risk for most feds is uncertainty: step increases provide predictable pay growth, and performance pay does not.

Why was DoD AcqDemo successful when NSPS failed?

DoD AcqDemo (Defense Civilian Acquisition Workforce Personnel Demonstration Project) covers acquisition professionals (contracting officers, program managers, cost estimators) at DoD. It works because it is voluntary, limited to a specific occupational community, phased over years rather than implemented overnight, independently assessed by RAND in annual reports, and employees were involved in planning and implementation. NSPS was none of those things: mandatory, governmentwide-scoped, overnight, top-down. The 2020 RAND report on federal compensation reform identified employee partnership as the single common feature of successful pay system modernization.

Related Resources

• Federal Pay Cut 2026: The Real Wage Cut Math: Why a 1% pay raise is a 2.8% real wage cut when inflation is 3.8%.
• 2027 Federal Pay Raise Outlook: FAIR Act, FEPCA mechanics, and 4-scenario grade-level projection tables.
• State of Federal Pay 2026: The 46.34% top locality, $197,200 pay cap compression, and the full GS table.
• GS Pay Cap Explained: How the EX Level IV cap affects high-grade locality pay.
• Executive Schedule Salaries 2026: The 5 levels of executive pay that bracket SES and cap GS.
• OPM Performance Rating Rules 2026: The performance system that feeds any future pay-for-performance reform.

Sources

• GovExec: The century-old GS system is 'disintegrating' (Howard Risher, May 19, 2026)
• OPM Pay Agent Report for 2025 (December 2025)
• OPM General Schedule pay system
• RAND: Fiscal Year 2025 Assessment of AcqDemo
• GAO: DOD Is Terminating the National Security Personnel System (NSPS)
• NTEU: Congressional Testimony on Federal Compensation Reform
• DefenseScoop: Hegseth authorizes DoD civilian bonuses up to $25K (December 2025)
• Federal News Network: HHS shrinks cash awards for top performers (May 2026)
• Federal Register: January 2026 Pay Schedules (locality freeze)
• H.R. 201 (119th Congress): Federal Employee Performance and Accountability Act