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Changes in the Structure of Wages in the Public and Private Sectors

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  • Lawrence Katz
  • Alan Krueger

Abstract

The wage structure in the U.S. public sector responded sluggishly to substantial changes in private sector wages during the 1970s and 1980s. Despite a large expansion in the college/high school wage differential during the 1980s in the private sector, the public sector college wage premium remained fairly stable. Although wage differentials by skill, in the public sector were fairly unresponsive to changes in the private sector, overall pay levels for state and local government workers were quite sensitive to local labor market conditions. But federal government regional pay levels appear unaffected by local economic conditions. Several possible explanations are considered to account for the rigidity of the government internal wage structure, including employer size, unionization, and nonprofit status. None of these factors adequately explains the pay rigidity we observe in the government.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 662.

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Date of creation: Mar 1991
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Handle: RePEc:pri:indrel:dsp01jh343s29g

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Keywords: wage structure; government pay; rigid wages;

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  1. Richard B. Freeman, 1978. "Unionism and the Dispersion of Wages," NBER Working Papers 0248, National Bureau of Economic Research, Inc.
  2. Freeman, Richard B, 1977. "The Decline in the Economic Rewards to College Education," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 18-29, February.
  3. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  4. John Bound & George E. Johnson, 1989. "Changes in the Structure of Wages During the 1980's: An Evaluation of Alternative Explanations," NBER Working Papers 2983, National Bureau of Economic Research, Inc.
  5. Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-63, October.
  6. Moulton, Brent R, 1990. "A Reexamination of the Federal-Private Wage Differential in the United States," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 270-93, April.
  7. 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.
  8. Michael A. Curme & Barry T. Hirsch & David A. Macpherson, 1990. "Union membership and contract coverage in the United States, 1983รป1988," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(1), pages 5-33, October.
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