Private Sector Wage Research Articles

Public–private sector wage gaps in Australia: Extent, trends and gender

Public–private sector wage gaps in Australia: Extent, trends and gender

Follow the leader? The long‐run interaction between public and private sector wage growth in the UK

AbstractWith one‐fifth of the UK labour force employed in the public sector, public sector pay and its interaction with private sector pay is an important driver of the macroeconomy. Using new data on sector‐level earnings and sector–industry‐level pay settlements, this paper addresses the fundamental question of which sector leads and which follows in terms of earnings determination. We find that in the long run, public sector wages adjust to wages set in the private sector, maintaining a consistent relationship. We further find that there can be significant wage spillovers from the public sector to the private sector in the short run. These tend to be more pronounced for private sector industries that are domestically facing, characterized by low worker bargaining power, or reliant on public sector inputs. This paper's findings have important implications for macroeconomic policy that aims to balance inflationary forces and fiscal funding pressures.

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

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.

Wage leadership in U.S. labour markets between alternative levels of industry and governments

ABSTRACT Interaction between public and private sector real wages in the U.S. are examined over the periods 1952–2019, 1952–1972, and 1973–2019. Industries considered include all private industries and five broad industry subcategories. Measures of U.S. state & local governments and federal government are considered, and their changing contributions to total employment across periods provides context for wage leadership. Private sector wages caused federal wages as federal employment’s share of total employment decreased throughout the periods. In contrast, state & local government’s share of total employment grew substantially in the early period, with their wages causing private sector wages. In the later period, state & local government’s share of total employment stabilized and their wages cause those in half of the private sectors to be considered, with feedback in the remaining industries.

Access to essential psychotropic medicines in Addis Ababa: A cross-sectional study.

Mental disorders are becoming a growing public health problem worldwide, especially in low- and middle-income countries. Regular and adequate supplies of appropriate, safe, and affordable medications are required to provide quality mental health services. However, significant proportions of the population with severe mental disorders are not getting access to treatment. Among others, the availability and affordability of psychotropic medicines are significant barriers for many patients in meeting their medication needs. This study aimed to assess the availability, prices, and affordability of essential psychotropic medicines in the private and public health sectors of Addis Ababa, the capital city of Ethiopia. A cross-sectional study design was used in 60 retail medicine outlets from the public and private sectors. Stratified random and quota sampling were applied to select the retail outlets. Data was entered and analyzed using the preprogrammed WHO/HAI workbook and SPSS V.25. The mean availability of Lower Priced Generic (LPG) psychotropic medicines was 24.33% in Addis Ababa (28.7% in the public sector and 19.80% in the private sector). The Patient prices for the LPG ranged from 0.52-6.43 MPRs in public and 1.08-24.28 MPRs in private sectors. Standard treatment costs varied from 0.1-7.8 days' wages in public and 0.8-25 days' wages in private sectors for the lowest-paid government worker to purchase a month's supply. Essential psychotropic medicines were poorly available, with high prices and low affordability in Addis Ababa. An efficient supply across all levels of care and financial protection for essential medicines should be in place to ensure access.

Public sector wage bargaining and the balanced growth model: Denmark and Sweden compared

Denmark and Sweden are small open economies that rely on exports for economic growth. At the same time, these countries have some of the largest public sectors in the world and a high wage equality. With extensive collective bargaining and strong unions in both private and public sectors, coordination of wage setting is crucial for balancing competitiveness and real wage increases. This paper investigates how coordination between public sector and private sector wage setting in the two countries is achieved. Like other studies, we find that agreements in the manufacturing export sector set the pattern for public sector wage bargaining. However, we also find that institutional differences have significant distributive implications for public sector employees. In Denmark, wage increase disparities between the public and private sectors are automatically adjusted according to formalized procedures. In Sweden, no automatic adjustment exists, and coordination is instead based on tightly coordinated bargaining practices by unions and public sector employers. Surprisingly, we find most public sub-sector variation of wage increases in Denmark, whereas wage structures in Sweden have been very stable. We argue that timing of bargaining, level of private sector wage flexibility and politicization of public sector bargaining are key drivers for these distributional differences.

Türkiye’de Ücret Politikaları ve Gelir Dağılımı Eşitsizliği İlişkisi

Gelir dağılımındaki eşitsizlikle mücadelede önemli stratejilerden biri, emek faktörünün gelirini artırmaya yönelik ücret politikalarıdır. Zira ücret, milli gelirde en büyük paya sahip faktör geliridir. Bu bağlamda çalışmada, Türkiye’de ücret politikalarının gelir dağılımı eşitsizliğini nasıl etkilediği irdelenmektedir. ARDL Sınır Testi Yaklaşımı ile analiz edilen ekonometrik modelin bağımlı değişkeni gelir dağılımını temsilen Gini katsayısı, bağımsız değişkenleri ise özel sektör ücretlerini temsilen özel bir havayolu şirketinin ortalama ücretleri ve asgari ücrettir. Çalışmanın bulgularına göre asgari ücretteki %1’lik bir artış Gini katsayısını %0.061 oranında azaltmakta; özel sektör ücretlerindeki %1’lik bir artış ise Gini katsayısını %0.051 oranında artırmaktadır. Bu sonuç asgari ücret politikalarının eşitsizliği azaltmada önemli rol oynadığını; özel sektör ücret artışlarının ise eşitsizliği artırdığını ima etmektedir. Ayrıca nedensellik analizine göre bu ilişki kısa dönemde de geçerlidir.

Going subnational: Wage differentials across levels of government in Brazil, Mexico, and Uruguay

Workers at subnational governments play a prominent role in the delivery of public services in most countries. Yet, information about their remuneration is scarce. Using data for Brazil, Mexico and Uruguay, we document that national government employees earn on average higher wages than observationally similar subnational employees; consequently, public–private sector wage gaps vary significantly by level of government. Then we use individual fixed-effects to estimate the wage premium to public sector employment (the wage gap net of selection effects) for Brazil and Mexico. We find that (i) both national and subnational public employees receive a significant wage premium with respect to private sector employment; and (ii) the difference between the national and subnational wage premiums is small in Brazil and null in Mexico.

Paradox or Mitigation? Childless and Parent Gender Gaps across British, Finnish, and German Wage Distributions

Abstract Part of the welfare paradox is that generous family policies increase private sector employer discrimination particularly against higher-wage women. We argue instead that bundles of generous policies mitigate gender productivity differences among parents, and in turn the discrimination also affecting childless women. We test these assertions by estimating the two gaps across the British, Finnish, and German private sector wage distributions using 2000–2018 panel data and unconditional quantile regression. Because of smaller motherhood penalties below the median, parenthood gaps are smallest in Finland and Germany. In contrast, fatherhood premiums constitute most of the parenthood gap for high-wage German and British women, whereas high-wage British women are disadvantaged by motherhood penalties and fatherhood premiums. The childless gap is also smaller across the bottom of the Finnish and German wage distributions. Overall, our advanced modeling strategy finds strong support for the mitigating effects of generous family policies on gender wage gaps.

The Impact of Marriage on Women's Employment in the Middle East and North Africa

Marriage is a central stage in the transition to adulthood in the Middle East and North Africa (MENA). This article investigates the effect of marriage on women's employment in MENA, examining how different types of work are affected by relatively early marriage, defined as marriage by the median age of marriage. An important contribution of this study is to examine the two main mechanisms by which marriage can affect work: (1) its effect on ever entering work and (2) its effect on exiting work. This study endogenizes the marriage decision using an instrumental variables approach. It finds that marriage by the median age reduces women's probability of market work by 47 percent in Jordan, 30 percent in Tunisia, and 16 percent in Egypt. Much of the effect is due to a reduction in the probability of private wage work, which women tend to leave at marriage. HIGHLIGHTS Women in Egypt, Jordan, and Tunisia often leave employment at marriage. Marrying by the median age has varying effects on different types of employment. Women are particularly likely to leave private sector wage work at marriage. Changes are needed to reconcile private wage employment with women's domestic roles.

Differential Patterns between Private and Public Sector Wages in Spain

Differential Patterns between Private and Public Sector Wages in Spain

Suresh Narayanan Comment on Wage Differentials in Malaysia: Public Employment, Gender, and Ethnicity

Suresh Narayanan Comment on Wage Differentials in Malaysia: Public Employment, Gender, and Ethnicity

Aggregate Public-Private Remuneration Patterns in South Africa

This paper investigates the public-private remuneration patterns in South Africa with time-series methods for the first time since the introduction of an inflation-targeting framework in 2000. Co-integration tests and analysis confirm that there is a stable, long-run relationship between nominal and real remuneration in the public and private sector. The adjustment to the deviations from this long-run relationship is strong and significant for public-sector remuneration, while private-sector wages neither respond to deviations from the long-run relationship nor lagged changes in public-sector remuneration. The causal direction from private- to public-sector remuneration does not change if real earnings are calculated with the gross domestic product deflator. This is confirmed by simple Granger-causality tests.

Public-sector resource allocation since the financial crisis

PurposeDistinguishing what employers in different areas of Great Britain need to pay to attract and retain labour has been a central component of public-sector resource allocation decisions. This paper examines how changes in the pattern of spatial wage differentials following the global financial crisis have impacted on the formulae which allocate government funding to local government and health providers in the NHS.Design/methodology/approachUsing employer-reported data on earnings, we examine spatial patterns of private-sector wages in Great Britain between 2007 and 2017. The method permits the analysis of finely defined geographical areas and controls for differences in industry and workforce composition to distinguish those differences that are attributable from unmeasured characteristics, such as differences between areas in the cost of living and amenities. These standardised spatial wage differentials (SSWDs) underpin the funding allocation formulae.FindingsThe analysis shows that since 2007 private-sector wage dispersion, both within and between regions, has reduced: lower paid areas have experienced a relative increase in wages and higher paid a relative decline. Over the period, there was a significant reduction in the London wage premium.Originality/valueThis paper demonstrates the importance of ensuring established policies are applied using contemporary data. The SSWDs used to distribute government funds have not been re-estimated for some time. As a result, the current resource allocation model has overcompensated the London region and undercompensated others during this period.

Public-private sector wage gap by gender in Egypt: Evidence from quantile regression on panel data, 1998–2018

Abstract This paper estimates the public-formal private wage gap in Egypt using Egypt Labor Market Panel Survey for the 20 year period of 1998–2018 for men and women separately. We estimate the public-formal private sector wage gap with wage equations including a public sector indicator both at the mean and at different quantiles of the conditional wage distribution using the panel feature of the data. We also address the endogenous employment and the sector of employment selection issue and find a persistent public wage penalty for the males and public wage premium for the females (except at the top) even after controlling for the observable and the time-invariant unobservable characteristics. We further examine the public wage gap over time and in different sub-samples by potential experience, skill levels and regions. Generally, the results are consistent with a decrease in the public wage gap for both men and women over the period considered. We further provide evidence on the quality of workers. We find that the public sector fails to attract better quality men throughout the conditional wage distribution while it manages to attract better quality women in the lower parts of the conditional wage distribution but not at the top, all on the basis of time-invariant unobservable attributes. These results indicate concern for the efficient provision of public services.

Reducción de la desigualdad de las remuneraciones e instituciones en Argentina (2002-2015)

La reducción de las brechas entre las remuneraciones de trabajadores con diferente nivel educativo es el principal factor que explica la baja de la desigualdad de los salarios privados en Argentina desde 2002. Este artículo analiza la influencia del salario mínimo y las negociaciones colectivas sobre la reducción de los premios a la educación entre los asalariados formales privados. Se resalta que ambas instituciones no pueden analizarse de manera separada y se muestran evidencias acerca de que en el periodo analizado no habrían influido sobre la disminución de las brechas salariales educativas.

The gender wage gap: an analysis of US congressional staff members

The gender wage gap has been a concern in the United States since the mid-twentieth century. Congress and some states have enacted and continue to advocate equal pay legislation. We extend the analysis to Congress itself, which is important for two reasons. First, members of Congress are pushing equal pay for men and women in an attempt to produce an outcome in the private economy that they may not be able to achieve. Second, the discussion of the so-called gender pay gap has focused on private sector wage differences, but the incentive structure facing public sector actors is very different, namely the absence of a profit motive and a residual claimant. Political institutions may allow Congress to shirk in closing the wage gap among staffers. The literature on the gender pay gap emphasizes that labor market structures along with differences in gender-based preferences and occupational choices may be more salient in explaining the wage gap. We investigate the gender wage gap in congressional offices using panel data from 2000 to 2016 using a Blinder–Oaxaca decomposition. We control for human capital, office characteristics, and individual-level demographics. Regardless of specification, we find that a gender wage gap exists across staffers similar to the gap in the private sector. Our findings suggest that if Congress wants to close the wage gap, it could find ways of allowing labor markets to provide employees greater flexibility including their own saffers.

Public–private sector wage gap in a group of European countries: an empirical perspective

This paper investigates the impact of the great recession of 2007–2009 and the debt crisis on the evolution of wages in the public and the private sectors, and the changes in the public–private sector pay gap in a group of 26 EU countries. The results indicate that earnings decreased in both sectors in most of the analysed countries between 2008 and 2013. However, the decline in wages was mostly due to the differences in returns to workers’ and jobs’ characteristics while the endowment effect affected earnings in the opposite direction. The findings suggest that the overall public–private wage gap reduced or remained unchanged in the majority of the European countries over the crisis, which was due to diminishing differences in the observed characteristics of workers and their jobs as well as shrinking positive discrimination of public employees.

Under economic adjustment programs, do private sector wages respond to changes in public wages and employment?

We examine the spillovers from changes in public sector wages and employment on private sector wages. Using a panel VAR model, we show that changes in public sector wages have a greater effect on private sector wages than changes in public sector employment. We motivate our analysis using the Economic Adjustment Program for Greece, and a simple theoretical model. The empirical validity of these effects is verified through a series of robustness tests. These results have important implications on the evaluation of the recent EU Economic Adjustment Programs and the future design of Internal Devaluation strategies.

The impact of austerity measures on the public - private sector wage gap in Europe

Considering the year prior to the international and sovereign crises (2007) as a benchmark and studying all years until the crises receded (2013) in most of the 31 countries available in the European Union Survey of Income and Living Conditions (EU SILC), we examine the impact of public sector pay reforms on the public-private sector wage gap. We do so at the mean and along quantiles of the wage distributions, using decomposition methods to identify the explained and unexplained components of the gap. We code the pay reforms in the 31 countries into the categorical variables Freeze and Cut and consider their impact on quantile features of the wage gap using static and dynamic panel methods. Robust estimates suggest that public sector freezes and/or cuts had negative and statistically significant effects on the unexplained public-private sector gap, particularly evident at the median and the 90th quantile. At the 10th quantile, the impact of the measures was positive but statistically weaker. The 90th minus 10th quantile effects are negative, reflecting attempts by many countries to protect the low-paid, regardless of the initial public-private pay gap for this group. Countries which received external financial assistance had high pay gaps before the crises and displayed a variety of adjustments during the crises.