Public Sector vs. Private Sector Compensation

This is largely for my own benefit, as a way of keeping track of some of the more interesting, rigorous, and compelling academic research that I’ve found on this topic. The research question? Michael Miller phrases it properly in his important 1996 article:

“If two persons are doing the same job, at the same level of duties and responsibilities, with one person performing that job in state or local government service and the other in private industry, are they also paid alike?”

Note that this list is preliminary and very incomplete. Consider it a work in progress.

Dale Belman and John Heywood (1995), “State and local government wage differentials: An intrastate analysis,” Journal of Labor Research. Summary: lower-level government employees earned more than their private sector counterparts, but mid- to upper-level employees in government were paid less than those in the private sector. For the seven states examined, six underpaid local government employees and three underpaid state government workers compared to similar workers in the private sector.

Michael Miller (1996), “The public/private pay debate: What do the data show?” Monthly Labor Review. Summary: Contrary to comparisons based on overall averages or broad occupational groups, private industry paid better for virtually all professional and administrative occupational job levels and for the majority of technical and clerical jobs levels. For blue-collar workers, the situation was mixed, . Pay premiums for private sector professional and administrative positions exceeded 10 percent; for technical and clerical jobs, a private sector pay advantage was found in 60 percent of the jobs examined.

Dale Belman and John Heywood (2010), "Out of Balance? Comparing Public and Private Sector Compensation over 20 Years," Center for State & Local Government Excellence and National Institute on Retirement Security. Summary: "Wages and salaries of state and local employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11 percent less; local workers earn 12 percent less. Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees."

Gregory B. Lewis and Chester S. Galloway (2011), “A National Analysis of Public/Private Wage Differentials at the State and Local Levels by Race and Gender,” Andrew Young School of Policy Studies Working Paper. Summary: “Holding constant education, estimated work experience, occupation, location, race, and gender, State and Local Government (SLG) employees earned 4 to 6% less than comparable private sector workers in 1990, 2000, and 2005-06, whether we used a dummy variable or modified Oaxaca method. Neither method suggests that the SLG/private pay disparity has widened or narrowed much since 1990... [the] disparity varies widely with race/ethnicity and gender. Both methods indicate that white and Asian American men consistently have lower expected earnings in the SLG sector, with disadvantages of at least 10% for white men and at least 5% for Asian men in most years. White and Asian women probably also have lower expected earnings in the SLG sector, but the findings are not consistent and the disadvantage is probably only about 2%. In contrast, black and Latino men and women are generally expected to earn more in SLGs, though the advantage is typically less than 5%.”