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Comparing Federal And Private-Sector Wages Without Logs

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  • Justin R. Falk

Abstract

type="main" xml:id="coep12061-abs-0001"> I use Current Population Survey data from 2005 through 2010 to compare the wages of federal employees and workers in the private sector who have similar observable characteristics. The distribution of wages differed drastically between the federal and private sectors. In particular, I find that federal employees with no more than a high school diploma earned 21% more, on average, than their private-sector counterparts, whereas those with a professional degree or doctorate earned 23% less. Overall, the average of federal wages was about 2% higher than the average wage of similar private-sector workers. Other researchers have found larger differences because they used log-linearized models, which result in comparisons of geometric means. I show that arithmetic means are more relevant in the context of the relationship between a government's compensation policy and its budget. The discrepancy between differences in arithmetic and geometric means occurs because the wages of federal employees were much less dispersed than those of employees with similar characteristics in the private sector. ( JEL J31 , J38, J45)

Suggested Citation

  • Justin R. Falk, 2015. "Comparing Federal And Private-Sector Wages Without Logs," Contemporary Economic Policy, Western Economic Association International, vol. 33(1), pages 176-189, January.
    • Handle: RePEc:bla:coecpo:v:33:y:2015:i:1:p:176-189
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    File URL: http://hdl.handle.net/10.1111/coep.2015.33.issue-1
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    Citations

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    Cited by:

    1. Morikawa, Masayuki, 2016. "A comparison of the wage structure between the public and private sectors in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 39(C), pages 73-90.
    2. Blackburn, McKinley L., 2021. "Are U.S. teacher salaries competitive? Accounting for geography and the retransformation bias in logarithmic regressions," Economics of Education Review, Elsevier, vol. 84(C).
    3. 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.
    4. Justin Falk & Nadia Karamcheva, 2018. "Comparing the Effects of Current Pay and Defined Benefit Pensions on Employee Retention: Working Paper 2018-06," Working Papers 54056, Congressional Budget Office.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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