The two-year freeze would apply to all civilian federal employees, including those working at the Department of Defense, but would not affect military personnel. The freeze is expected to save more than $5 billion in savings over two years, $28 billion over five years and more than $60 billion over 10 years, White House officials said.
Federal pay is determined by Congress, and lawmakers must approve Obama's call for a freeze.
Congress is not covered by Obama's order, but lawmakers voted last April to freeze their pay, with the House and Senate opting to forgo an automatic $1,600 annual cost-of-living increase. House members and senators now are paid $174,000 a year. Their last pay increase was $4,700 a year at beginning of 2009.
The president's pay of $400,000 a year was fixed by Congress in January 2001. It has not changed since then.
While Obama said the federal employee salary freeze was necessary to put the nation on sound fiscal footing, he also said that he didn't reach the decision lightly.
"This is not just a line item on
a federal ledger," he said. "These are people's lives."
The savings from the pay freeze make only a small dent in the nation's $1 trillion-plus budget deficit. But with voters voicing their anger over Washington's spending during the midterm elections, even a symbolic gesture would show the White House got the message.
Obama and bipartisan congressional leaders will meet at the White House Tuesday for the first time since Republicans gained control of the House and increased their strength in the Senate during the midterm elections. Obama said he hopes the move to freeze federal pay sets a serious tone for the meetings.
"We're going to have to budge on some deeply held positions, and compromise for the good of the country," Obama said.
California Rep. Darrell Issa, the top Republican on the House Oversight Committee, said that while the pay freeze was "long overdue," the president and congressional leaders should take additional steps to reduce spending, including imposing a federal hiring freeze of non-security employees.
The co-chairmen of Obama's bipartisan deficit commission have proposed a three-year freeze in pay for most federal employees as part of its plan to reduce the nation's growing deficit. The commission's proposal also suggested cuts to Social Security benefits and higher taxes for millions of Americans to stem the flood of red ink that they say threatens the nation's very future. The popular child tax credit and mortgage interest deduction also would be eliminated.
The commission's final report is due to be released later this week.
Shortly after taking office in January 2009, Obama froze salaries of top White House aides. He proposed extending that freeze to political appointees across the government in last year's budget, and also eliminated bonuses for political appointees.
The pay freeze would not affect bonuses or step increases for federal employees.
Labor leaders assailed Obama's decision as bad for the economy and the middle class.
"We need to invest in creating jobs, not undermining the ones we have," AFL-CIO president Richard Trumka said in a statement.
John Gage, president of the 600,000-member American Federation of Government Employees, called the decision "a slap at working people."