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Does it pay to be a public-sector employee?

Author

Listed:
  • Fabien Postel-Vinay

    (University College London and Institute for Fiscal Studies, UK, and IZA, Germany)

Abstract

Direct wage comparisons show that public-sector employees earn around 15% more than private-sector employees. But should these differences be interpreted as a “public-sector premium”? Two points need to be considered. First, the public and private sectors differ in the jobs they offer and the type of workers they employ, which explains a large share of the wage gap. Second, public- and private-sector careers also differ in other important dimensions, such as job stability and income progression, which are relevant to individual career choices. So any comparison of the two sectors should take these points into account.

Suggested Citation

  • Fabien Postel-Vinay, 2015. "Does it pay to be a public-sector employee?," World of Labour, LISER, pages 156-156, June.
    • Handle: RePEc:iza:izawol:journl:y:2015:n:156
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    References listed on IDEAS

    as
    1. Richard Disney & Carl Emmerson & Gemma Tetlow, 2009. "What is a Public Sector Pension Worth?," Economic Journal, Royal Economic Society, vol. 119(541), pages 517-535, November.
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    6. Holm-Hadulla, Fédéric & Kamath, Kishore & Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
    7. repec:spo:wpmain:info:hdl:2441/23tsoiu9ve8lubqe4pa2of8d7d is not listed on IDEAS
    8. Dickson, Matt & Postel-Vinay, Fabien & Turon, Hélène, 2014. "The lifetime earnings premium in the public sector: The view from Europe," Labour Economics, Elsevier, vol. 31(C), pages 141-161.
    9. Fabien Postel-Vinay & Hélène Turon, 2007. "The Public Pay Gap in Britain: Small Differences That (Don't?) Matter," Economic Journal, Royal Economic Society, vol. 117(523), pages 1460-1503, October.
    10. Holm-Hadulla, Fédéric & Kamath, Kishore & Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Public sector private sector
      by Inaki Villanueva in Applied economist on 2015-12-04 23:00:00

    Citations

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    Cited by:

    1. Matthew Nibloe, 2025. "Levelling down: the distributional consequences of public pay caps," IFS Working Papers W25/27, Institute for Fiscal Studies.
    2. Töpfer, Marina & Castagnetti, Carolina & Rosti, Luisa, 2016. "Discriminate me - if you can! The Disappearance of the Gender Pay Gap among Public-Contest Selected Employees," VfS Annual Conference 2016 (Augsburg): Demographic Change 145905, Verein für Socialpolitik / German Economic Association.
    3. Michael, Maria & Christofides, Louis N., 2020. "The impact of austerity measures on the public - private sector wage gap in Europe," Labour Economics, Elsevier, vol. 63(C).
    4. Clara von Bismarck-Osten, 2026. "Who enters the public sector?," IFS Working Papers W26/17, Institute for Fiscal Studies.
    5. Gindling, T.H. & Hasnain, Zahid & Newhouse, David & Shi, Rong, 2020. "Are public sector workers in developing countries overpaid? Evidence from a new global dataset," World Development, Elsevier, vol. 126(C).
    6. Clara von Bismarck-Osten, 2026. "Who Enters the Public Sector?," RFBerlin Discussion Paper Series 26094, ROCKWOOL Foundation Berlin (RFBerlin).
    7. Clara von Bismarck-Osten & Matthew Nibloe, 2025. "Who enters the public sector? A cohort analysis of sectoral choice," IFS Working Papers W25/32, Institute for Fiscal Studies.
    8. Donato Di Carlo & Christian Lyhne Ibsen & Oscar Molina, 2024. "The new political economy of public sector wage-setting in Europe: Introduction to the special issue," European Journal of Industrial Relations, , vol. 30(1), pages 5-30, March.
    9. Timothy Besley & Maitreesh Ghatak, 2018. "Prosocial Motivation and Incentives," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 411-438, August.

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    More about this item

    Keywords

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    JEL classification:

    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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