Military personnel are not slated to be affected by the freeze and could see a pay increase between 1.4 percent and 1.9 percent, based on earlier congressional measures this year.
Obama said he did not reach the decision easily and the White House estimated the move would save $28 billion over five years. The fiscal 2010 federal budget deficit was nearly $1.4 trillion.
If enacted, the freeze will touch a lot of wallets in the Tennessee Valley.
There are approximately 16,000 government civilian employees on Redstone Arsenal, including Army, NASA and other agencies, according to a recent Installation Manpower Status report.
A spokesperson said Monday there are also about 17,000 contractors and 8,000 military personnel and dependents who are not affected by the freeze.
The president had earlier this year recommended a 1.4 percent increase for federal civilian workers and military personnel. The U.S. Senate agreed to that figure. The U.S. House has not yet settled on a rate increase.
Congresman-elect Mo Brooks, a Republican elected in November, said he is glad the president is recognizing the deficit needs to be addressed, but Brooks said there are a number of other steps, from cutting spending in federal programs to enacting growth-friendly economic policies that make much more sense that cutting pay for federal workers.
Brooks is also concerned that if the pay scales become out of balance, talented workers will bolt to the private sector.
"It's a bad idea if we don't address the other issues first," Brooks said. "What President Obama is advocating should be a last resort, not the first resort. There are people we may lose who are producing valuable services for national defense, NASA and TVA.
"There's a gamble involved here."
The freeze would also not affect workers who are promoted to a new position over the next two years. The workers would be eligible for the higher salary that goes with that position.
Don Eiermann, president of the American Federation of Government Employees Local 1858, which represents nearly 10,000 local federal workers, said he was shocked by Monday's announcement.
"(President Obama) professed that he wanted to take care of the middle class, we are the middle class," Eiermann said. "Where's the logic?"
Eiermann said that he realizes that many people are out of work and a pay increase of less than 2 percent doesn't sound like much. Eiermann said the limited impact on the deficit that the cuts will produce and the failure of Obama to help with work-place issues as promised, will cause union officials to urge Congress to oppose the move.
He said typically military pay and wages for civilian Defense Department workers are adjusted in concert. That military pay is being increased while civilian rates are frozen is disappointing, Eiermann said.
"Civil services employees are sitting side by side with their military counterparts in Afghanistan, in harm's way, right now," Eiermann said. "If you look at the statistics, very rarely do you find a civil service employee who refused to do what they were asked to do.
"But they want to treat us differently."
Staff Writer Ken Kesner and the Associated Press contributed to this story.