IDEAS home Printed from https://ideas.repec.org/p/pri/cepsud/227.html
   My bibliography  Save this paper

Wages, Pensions, and Public-Private Sector Compensation Differentials

Author

Listed:
  • Philipp Bewerunge

    (Neuss Associates)

  • Harvey S. Rosen

    (Princeton University)

Abstract

We use a sample of full-time workers mostly over 50 years of age from the 2004 and 2006 waves of the Health and Retirement Study to investigate whether workers in federal, state, and local government receive more generous wage and pension compensation than private sector workers, ceteris paribus. With respect to hourly remuneration (wages plus employer contributions to defined contribution plans), federal workers earn a premium of about 39 percent, taking differences in employee characteristics into account. The differential varies by gender and race. However, there are no statistically discernible differences between state and local workers and their private sector counterparts, ceteris paribus. On the other hand, pension wealth accumulation is greater for employees in all three government sectors than for private sector workers, even after taking worker characteristics into account. As a proportion of the hourly private-sector wage, the hourly equivalent public-private differentials are 14.3 percent for federal workers, 8.3 percent for state workers, and 8.6 percent for local workers, ceteris paribus. Again, there are differences by gender and race. We find no evidence that highly-educated individuals are penalized by taking jobs in the public sector, either with respect to wages or pension wealth.

Suggested Citation

  • Philipp Bewerunge & Harvey S. Rosen, 2012. "Wages, Pensions, and Public-Private Sector Compensation Differentials," Working Papers 1388, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:227
    as

    Download full text from publisher

    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/227rosen.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Richard B. Freeman & Casey Ichniowski, 1988. "When Public Sector Workers Unionize," NBER Books, National Bureau of Economic Research, Inc, number free88-1.
    2. Congressional Budget Office, 2012. "Comparing the Compensation of Federal and Private-Sector Employees," Reports 42921, Congressional Budget Office.
    3. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1995. "Retirement Measures in the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages 57-83.
    4. Congressional Budget Office, 2012. "Comparing the Compensation of Federal and Private-Sector Employees," Reports 42921, Congressional Budget Office.
    5. Joseph F. Quinn, 1979. "Wage Differentials among Older Workers in the Public and Private Sectors," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 41-62.
    6. Alan B. Krueger, 1988. "Are Public Sector Workers Paid More Than Their Alternative Wage? Evidence from Longitudinal Data and Job Queues," NBER Chapters, in: When Public Sector Workers Unionize, pages 217-242, National Bureau of Economic Research, Inc.
    7. Gyourko, Joseph & Tracy, Joseph, 1988. "An Analysis of Public- and Private-Sector Wages Allowing for Endogenous Choices of Both Government and Union Status," Journal of Labor Economics, University of Chicago Press, vol. 6(2), pages 229-253, April.
    8. Gustman, Alan L. & Steinmeier, Thomas L. & Tabatabai, Nahid, 2010. "Pensions in the Health and Retirement Study," Economics Books, Harvard University Press, number 9780674048669, Spring.
    9. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    10. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jason L. Kopelman & Harvey S. Rosen, 2014. "Are Public Sector Jobs Recession-Proof? Were They Ever?," NBER Working Papers 20692, National Bureau of Economic Research, Inc.
    2. Jason L. Kopelman & Harvey S. Rosen, 2014. "Are Public Sector Jobs Recession-Proof? Were They Ever?," Working Papers 240, Princeton University, Department of Economics, Center for Economic Policy Studies..

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philipp Bewerunge & Harvey S. Rosen, 2012. "Wages, Pensions, and Public-Private Sector Compensation Differentials," Working Papers 1388, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. repec:pri:cepsud:227rosen is not listed on IDEAS
    3. Philipp Bewerunge & Harvey S. Rosen, 2013. "Wages, Pensions, and Public-Private Sector Compensation Differentials for Older Workers," NBER Working Papers 19454, National Bureau of Economic Research, Inc.
    4. Christofides, Louis N. & Pashardes, Panos, 2002. "Self/paid-employment, public/private sector selection, and wage differentials," Labour Economics, Elsevier, vol. 9(6), pages 737-762, December.
    5. repec:eee:labchp:v:3:y:1999:i:pc:p:3573-3630 is not listed on IDEAS
    6. Moundir, Lassassi & Menna, Khaled, 2016. "La Notion De « Femmes Au Foyer » En Algerie, Une Realite Ou Une Representation Nostalgique [The Notion Of “ Homemaker” In Algeria, A Reality Or A Nostalgic Representation]," MPRA Paper 85740, University Library of Munich, Germany.
    7. Madhu Mohanty, 1998. "The role of the desire for union status in the decision to enter local government job queues: the US evidence," Applied Economics, Taylor & Francis Journals, vol. 30(10), pages 1369-1378.
    8. Maury Gittleman & Brooks Pierce, 2012. "Compensation for State and Local Government Workers," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 217-242, Winter.
    9. Tymon Słoczyński, 2022. "Interpreting OLS Estimands When Treatment Effects Are Heterogeneous: Smaller Groups Get Larger Weights," The Review of Economics and Statistics, MIT Press, vol. 104(3), pages 501-509, May.
    10. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630, Elsevier.
    11. Maria Manuel Campos & Mário Centeno, 2011. "Public-private wage gaps in the period prior to the adoption of the euro: an application based on longitudinal data," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    12. Rebecca Diamond, 2017. "Housing Supply Elasticity and Rent Extraction by State and Local Governments," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 74-111, February.
    13. Sloczynski, Tymon, 2018. "A General Weighted Average Representation of the Ordinary and Two-Stage Least Squares Estimands," IZA Discussion Papers 11866, Institute of Labor Economics (IZA).
    14. Rahman, Mustafizur & Al-Hasan, Md., 2018. "Male-Female wage gap and informal employment in Bangladesh: A quantile regression approach," MPRA Paper 90131, University Library of Munich, Germany.
    15. Ricardo Hausmann & Ljubica Nedelkoska & Sehar Noor, 2020. "You Get What You Pay For: Sources and Consequences of the Public Sector Premium in Albania and Sri Lanka," CID Working Papers 376, Center for International Development at Harvard University.
    16. Andrew Chamberlain, 2015. "Are State Workers Overpaid? Survey Evidence from Liquor Privatization in Washington State," Journal of Labor Research, Springer, vol. 36(4), pages 347-388, December.
    17. Mathilde Godard & Pierre Koning & Maarten Lindeboom, 2024. "Application and Award Responses to Stricter Screening in Disability Insurance," Journal of Human Resources, University of Wisconsin Press, vol. 59(5), pages 1353-1386.
    18. Mueller, Richard E., 1998. "Public-private sector wage differentials in Canada: evidence from quantile regressions," Economics Letters, Elsevier, vol. 60(2), pages 229-235, August.
    19. Nicholas Barton & Tessa Bold & Justin Sandefur, 2017. "Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya - Working Paper 457," Working Papers 457, Center for Global Development.
    20. França, Marco Túlio Aniceto & Frio, Gustavo Saraiva, 2022. "Unionization and wages: a quantile analysis," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    21. Jean-Pierre Lachaud, 2010. "Dynamique des profits des micro-entreprises urbaines et genre à Madagascar. Une approche de régressions quantiles," Documents de travail 151, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.

    More about this item

    Keywords

    benefits; public employees; retirement; pensions; wages; private sector; HRS; Health Retirement Study; United States;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:cepsud:227. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/ceprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.