PUBLIC SECTOR WAGE PREMIUM IN POLAND: A HUMAN CAPITAL APPROACH

Abstract

Aim: The aim of the article is to estimate the value of the public sector wage premium. It is an important issue both in the area of wage management in an organization and labor market performance. Methods: The research method is based on measuring the rates of return on human capital in the public and private sectors. It assumes that human capital is a function of the cost of living, education, and work experience. The average value of human capital was calculated in a model sample of employees in the public, private, and total sectors in each of the analyzed periods. In order to calculate the rate of return, its value was compared with the average wage in each of the sectors. Results: The results indicate the existence of a small average negative public sector wage premium in Poland. However, in some periods, the observed wage gap widens signifi­cantly, reducing the wage competitiveness of the public sector. The results of measuring the return on human capital of employees of both sectors is about 8% per year. Conclusions: The paper’s findings can be used to optimize the wage policy and analyze wage competitiveness in public sector entities. The paper contributes to the sector wage differentials literature by developing an original methodology based on a human capital rate of return and also contributes to the research paradigm on normative return on capital. Findings in the second field are consistent with the concept of an 8% economic constant of potential growth.