Uncovering the Determinants of Competitive State Government Wages

Abstract

Given the importance of competitive public sector wage rates in the recruitment and retention of talented employees, this article seeks to shed light on the determinants of competitive state government wages. Using panel data from the U.S. Bureau of Labor Statistics' Current Population Survey, public—private wage gaps are estimated for all 50 states between 1987 and 2002, and an explanatory analysis of the determinants of state-level public—private wage gaps is performed. Results indicate that, on average, state government employees enjoy a wage premium across the years covered, but when separated by gender, female state employees are found to experience an average wage premium, whereas male state employees are found to experience an average wage penalty. Surprisingly, state fiscal capacity is found not to influence state public—private wage gaps, but in particular cases, state unemployment, citizen liberalism, and unionization are found to be positively.