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The Public-Private Sector Wage Differential for Full-Time Male Employees in Britain: A Preliminary Analysis

  • Chatterji, Monojit


    (University of Dundee)

  • Mumford, Karen A.


    (University of York)

Relative employment conditions have changed across the public and private sectors in Britain over the last decade with the former becoming a more attractive earnings option. Using new linked employee-employer data for Britain in 2004, this paper shows that, on average, full-time male public sector employees earn 11.7 log wage points more than their private sector counterparts. Decomposition analysis reveals that the majority of this pay premium is associated with public sector employees having individual characteristics associated with higher pay and to their working in higher paid occupations. Whilst there is some evidence of workplace segregation in the private sector, there is little indication that rates of return vary across the earnings distribution for either public or private sector employees. It no longer appears to be the case that the public sector provides a refuge for the low skilled at the expense of the highly educated. Furthermore, working conditions appear more uniform in the public sector and, unlike the private sector, there is no significant penalty associated with ethnic background.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2781.

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Length: 28 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2781
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  1. Yu, Keming & Van Kerm, Philippe & Zhang, Jin, 2004. "Bayesian quantile regression: An application to the wage distribution in 1990s Britain," IRISS Working Paper Series 2004-10, IRISS at CEPS/INSTEAD.
  2. Lucifora C. & Meurs D., 2004. "The Public Sector Pay Gap in France, Great Britain and Italy," Working Papers ERMES 0403, ERMES, University Paris 2.
  3. Karen Mumford & Peter N Smith, . "The Gender Earnings Gap in Britain," Discussion Papers 04/05, Department of Economics, University of York.
  4. Stephen Nickell & Glenda Quintini, 2002. "The Consequences of The Decline in Public Sector Pay in Britain: A Little Bit of Evidence," Economic Journal, Royal Economic Society, vol. 112(477), pages F107-F118, February.
  5. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
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