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

In: When Public Sector Workers Unionize

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  • Alan B. Krueger

Abstract

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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This chapter was published in:

  • Richard B. Freeman & Casey Ichniowski, 1988. "When Public Sector Workers Unionize," NBER Books, National Bureau of Economic Research, Inc, number free88-1, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 7910.

    Handle: RePEc:nbr:nberch:7910

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    1. Walter Fogel & David Lewin, 1974. "Wage determination in the public sector," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 27(3), pages 410-431, April.
    2. Martin Asher & Joel Popkin, 1984. "The effect of gender and race differentials on public-private wage comparisons: A study of postal workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(1), pages 16-25, October.
    3. 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.
    4. Richard B. Freeman, 1985. "How do Public Sector Wages and Employment Respond to Economic Conditions," NBER Working Papers 1653, National Bureau of Economic Research, Inc.
    5. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
    6. Richard A. Ippolito, 1987. "Why Federal Workers Don't Quit," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 281-299.
    7. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
    8. Sharon P. Smith, 1976. "Pay differential between federal government and private sector workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 29(2), pages 179-197, January.
    9. Ronald G. Ehrenberg & Joshua L. Schwarz, 1983. "Public Sector Labor Markets," NBER Working Papers 1179, National Bureau of Economic Research, Inc.
    10. Kathleen Classen Utgoff, 1983. "Compensation Levels and Quit Rates in the Public Sector," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 394-406.
    11. Mellow, Wesley S, 1981. "Unionism and Wages: A Longitudinal Analysis," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 43-52, February.
    12. Borjas, George J, 1980. "Wage Determination in the Federal Government: The Role of Constituents and Bureaucrats," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1110-47, December.
    13. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
    14. Steven F. Venti, 1985. "Wages in the Federal and Private Sectors," NBER Working Papers 1641, National Bureau of Economic Research, Inc.
    15. Joseph E. Stiglitz, 1984. "Theories of Wage Rigidity," NBER Working Papers 1442, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Jan K. Brueckner & David Neumark, 2014. "Beaches, Sunshine, and Public Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 198-230, May.
    2. Bahman Bahrami & John Bitzan & Jay Leitch, 2009. "Union Worker Wage Effect in the Public Sector," Journal of Labor Research, Springer, vol. 30(1), pages 35-51, March.
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