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May 20, 2010
Another Wage Gap: Public Sector vs. Private Sector
A report released in April 2010 reveals a continuing gap between the wages paid to employees in the public sector compared to those working for private companies. That's not news. But interestingly, the report found that, even when benefits are factored in, public sector employees still earn less than their private sector counterparts.

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Commissioned by the Center for State and Local Government Excellence and the National Institute on Retirement Security (NIRS), “Out of Balance? Comparing Public and Private Sector Compensation over 20 Years,” examined pay data over 2 decades and found the gap wider now than in years past.
Among the findings:

  • Public sector jobs typically require more education than private sector jobs. About 48% of public sector employees have completed college, compared to 23% of people working in the private sector.
  • When comparing employees with comparable earnings determinants, such as education level and work experience, state workers earn about 11% less than their counterparts in the private sector, and local workers about 12% less.
  • The pay gap has increased over the last 15 years.

It is generally accepted that public employees earn less because their benefits tend to make up the difference. “For a long time,” says Beth Almeida, NIRS executive director, “there has been a trade-off in public sector jobs—better benefits come with lower pay as compared with private sector jobs. This study tells us that this is still true today.”

But the report adds another facet. “What’s striking is that, on a total compensation basis—looking at pay and benefits—employees of state and local government still earn less than their private sector counterparts.” The report found the difference to be 6.8% for state employees, and 7.4% for local employees.

 “The picture is clear,” according to Keith A. Bender, a co-author of the report and an associate professor of Economics at the University of Wisconsin-Milwaukee. “In an apples-to-apples comparison, state and local government employees receive less compensation than their private sector counterparts.”

Could that be a reason some public sector jobs remain chronically unfilled? It might be, said Elizabeth K. Kellar, president and CEO of the Center for State and Local Government Excellence. “Hiring managers told us (in another recent study) that, despite the economy, they find it difficult to fill vacancies for highly-skilled positions such as engineering, environmental sciences, information technology and healthcare professionals. The compensation gap may have something to do with this.”

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