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Public Sector Pay in NZ

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Abstract

Objective: According to official statistics, average pay in the public sector is 25% higher than in the private sector in New Zealand. This paper examines the factors underlying public and private sector pay differences using several complementary analyses. First, we use Household Labour Force Survey (Income) data to decompose the raw hourly wage difference into components associated with observable differences in jobs and workers. Second, we use administrative data to identify (FTE monthly) pay differences associated with workers and the firms they work for. Third, we analyse FTE earnings changes associated with workers who switch between public and private sector jobs over time. We find consistent evidence from these analyses that the public sector pay premium is 5–8% after adjusting for observable job differences, differences associated with workers and firms, or associated with workers who switch sectors. Finally, we use proprietary job evaluation and remuneration data to control for content-size differences between public and private sector jobs. Compared to the raw average public sector premium in these data of about 6% in base salary and 3% in total remuneration, controlling for job size differences we find that private sector pay is higher than public sector pay for similarly sized jobs, particularly for remuneration other than base salary.

Suggested Citation

  • Dave Maré & Dean Hyslop & Lyn Brieseman, 2026. "Public Sector Pay in NZ," Motu Working Papers 26_08, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:26_08
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    References listed on IDEAS

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    1. Kostas Mavromaras & Stephane Mahuteau & Kostas Mavromaras & Sue Richardson & Rong Zhu, 2017. "Public–Private Sector Wage Differentials in Australia," The Economic Record, The Economic Society of Australia, vol. 93, pages 105-121, June.
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    8. John Gibson, 2007. "The Public Sector Pay Premium and Compensating Differentials in the New Zealand Labour Market," Working Papers in Economics 07/20, University of Waikato.
    9. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630, Elsevier.
    10. Dean Hyslop & David C. Maré & Lily Stelling, 2025. "Minimum wages and wage inequality in New Zealand," Motu Working Papers 25_04, Motu Economic and Public Policy Research.
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    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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