Compensation for State and Local Government Workers
AbstractAre state and local government workers overcompensated? In this paper, we step back from the highly charged rhetoric and address this question with the two primary data sources for looking at compensation of state and local government workers: the Current Population Survey conducted by the Bureau of the Census for the Bureau of Labor Statistics, and the Employer Costs for Employee Compensation microdata collected as part of the National Compensation Survey of the Bureau of Labor Statistics. In both data sets, the workers being hired in the public sector have higher skill levels than those in the private sector, so the challenge is to compare across sectors in a way that adjusts suitably for this difference. After controlling for skill differences and incorporating employer costs for benefits packages, we find that, on average, public sector workers in state government have compensation costs 3-10 percent greater than those for workers in the private sector, while in local government the gap is 10-19 percent. We caution that this finding is somewhat dependent on the chosen sample and specification, that averages can obscure broader differences in distributions, and that a host of worker and job attributes are not available to us in these data. Nonetheless, the data suggest that public sector workers, especially local government ones, on average, receive greater remuneration than observably similar private sector workers. Overturning this result would require, we think, strong arguments for particular model specifications, or different data.
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Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 26 (2012)
Issue (Month): 1 (Winter)
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
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- Hirsch, Barry T., 2013. "An Anatomy of Public Sector Unions," IZA Discussion Papers 7313, Institute for the Study of Labor (IZA).
- Maury Gittleman, & Brooks Pierce,, 2013. "Pay for Performance and Compensation Inequality: Evidence from the ECEC," Working Papers 465, U.S. Bureau of Labor Statistics.
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