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Wages, Pensions, and Public-Private Sector Compensation Differentials for Older Workers

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  • Philipp Bewerunge
  • Harvey S. Rosen

Abstract

We use a sample of full-time workers 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 28 log points, taking differences in employee characteristics into account. However, there are no statistically discernible differences between state and local workers and their private sector counterparts, ceteris paribus. These findings are about the same whether or not indicators of occupation are included in the model. 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 about 17.2 percent, 13.4 percent, and 12.6 percent for federal, state, and local workers, respectively. 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, 2013. "Wages, Pensions, and Public-Private Sector Compensation Differentials for Older Workers," NBER Working Papers 19454, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19454
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    References listed on IDEAS

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    1. Congressional Budget Office, 2012. "Comparing the Compensation of Federal and Private-Sector Employees," Reports 42921, Congressional Budget Office.
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    Cited by:

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    2. Wang, Wen & Shi, Hongyu & Li, Qiang, 2023. "Pension gap between the Chinese public and nonpublic sectors： evidence in the context of the integration of dual-track pension schemes," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 664-688.

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    More about this item

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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