Public vs. private sector pay

CNN/Money.com reports on a recently published study by the Center for State and Local Government Excellence and National Institute on Retirement Security. The study finds that public employees are paid 11 to 12 percent less than comparable private sector workers. Even after accounting for the more generous benefits enjoyed by public sector workers, they are still paid about 7 percent less than employees in the private sector.

The findings of this study run contrary to an analysis recently reported in USA Today. That analysis, though, appeared to be merely a crude comparison of averages and didn't take into account the different education levels and occupational mixes of public and private employees.

A more detailed treatment of this issue is available in Paul Light's The Warping of Government Work. Light finds that at the lower end of the skill/salary spectrum, say clerks, manual laborers, and similar jobs, public sector employees are better compensated than their private sector counterparts. He credits this, in part, to increased unionization in the public sector. Also, globalization has depressed private sector wages for lower skilled occupations relative to the public sector.

At the high end, say lawyers and accountants, the opportunities for higher compensation are much more abundant in the private sector than in government. Making it difficult for government to attract the best and brightest, as they say. 

This pay differential in managerial positions affects local governments, too. The City of Muncie recently lost its park director and hr director, because they had more lucrative opportunities in private sector employment.

HT: Association of Indiana Counties