Introduction to “Changes in the Structure of Wages in the Public and Private Sectors”

Abstract

The sharp rise in U.S. wage inequality and educational wage differentials in the 1980s motivated this research examining the extent to which the patterns of changes in the wage structure differed in the U.S. private and public sectors. The project represented a marriage and natural outgrowth of three distinctive but related research agendas of the authors: (1) work on understanding U.S. wage structure and wage inequality changes (Katz); (2) studies of the level of the public–private wage differential and the use of data on quits and job queues (applications) to measure labor market rents for public sector employees (Krueger); (3) burgeoning research in the 1980s on testing theories of industry, firm, and establishment wage differentials (Katz and Krueger). The use of large-scale micro household Current Population Survey samples as well micro administrative personnel data on federal government employees foreshadowed more recent developments in computing power and data accessibility allowing the use of rich individual-level administrative data sets to explore key labor market issues. The analysis went beyond examining public sector compensation responses to changes in skill differentials to also explore how compensation in different levels of government (federal, state, and local) responded to variation in local