Who’s the boss? Exploring public and private wage growth leadership in state-level education and health industries in Australia

Abstract

ABSTRACT Public sector wage research has evolved beyond the estimation of public sector wage premiums to investigating the nature of interrelationships between public and private wage patterns. This article seeks to extend this wage leadership research to investigate intra-industry linkages and spillovers between public and private sector wage growth in Education and Health industries, using Australia as a case study. The research employs vector error correction models to encompass tests for full wage adaptability, long-run and short-run wage leadership. Results show that the public sector is the long-run leader in all models, regardless of industry and alternative jurisdictions’ public sector wage setting policy. Our findings have important policy implications for public sector wage setting practices, demonstrating that wage policies which may be based on political motivations can have widespread effects on the private sector.