Are Public Sector Workers Paid More Than Their Alternative Wage? Evidence from Longitudinal Data and Job Queues


This paper performs a longitudinal comparison of public and
private sector pay. Although not decisive because of small sample
sizes, the results tend to corroborate the conclusions of previous
cross-sectional studies. Specifically, I find that on average
wages of federal workers exceed those of private sector workers by
10% to 25%, while wages of state and local government workers are
roughly equivalent to or slightly less than the wages of private
sector workers. Furthermore, these conclusions hold for a sample
of workers who joined the government after being involuntarily
displaced from their private sector jobs. In addition, a
comparative analysis of the length of job queues suggests that on
average more workers apply for job openings in the federal
government than in the private sector.
Finally, both longitudinal and cross-sectional analyses support
the conclusion that the union wage gap is substantially smaller in
the public sector than in the private sector.

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In Richard Freeman and B. Casey Ichniowski (eds.), When Public Sector Workers Unionize, (Chicago: The University of Chicago Press, 1988), pp 217-240
Working Papers