State and local government employees earn 11% to 12% less, respectively, than their peers working in comparable private sector jobs, a new study finds. Moreover, the wage imbalance has grown over the last 15 years.
The report, “Out of Balance? Comparing Public and Private Sector Compensation Over 20 Years,” was commissioned by the Center for State and Local Government Excellence and the National Institute on Retirement Security (NIRS) to gain a clearer picture of wage disparities through apples-to-apples employment comparisons.
The study’s two authors – economics professors at the University of Wisconsin-Milwaukee – analyzed publicly available data from the Bureau of Labor Statistics using a variety of factors that help to determine a worker’s earnings: education, training, experience and job location, among others. The authors also evaluated benefits to capture overall compensation.
“These public sector employees earn less than they would earn if they took their skills to the private sector,” said co-author Keith A. Bender.
As might be expected, the authors found that benefits such as retirement and healthcare make up a slightly larger share of compensation for public employees. However, even when factoring in benefits, total compensation was 6.8% lower for state employees and 7.4% lower for local employees, compared to private workers.
“For a long time, there has been a compensation trade-off in public sector jobs – better benefits come with lower pay as compared with private sector jobs. This study tells us that is still true today,” said Beth Almeida, executive director of NIRS. “What’s striking is that on a total compensation basis – looking at pay and benefits – employees of state and local government still earn less than their private sector counterparts.”
The study also found that public sector jobs typically require more education than positions in the private sector. State and local employees are twice as likely to have earned at least a college degree, compared to private employees. About 23% of private sector workers and 48% of public sector workers have completed college.
The authors looked at regional trends, too, examining states including California, Florida, Illinois, Michigan, New York, Pennsylvania and Texas.
For more on the report, click here.