Public Sector Pay Research Articles

The Public and Private Sector Pay Gap in Pakistan: A Quantile Regression Analysis

This paper examines the magnitude of public/private wage differentials in Pakistan using data drawn from the 2001-02 Pakistan Labour Force Survey. As in many other countries, public sector workers in Pakistan tend both to have higher average pay and education levels as compared to their private sector counterparts. In addition, the public sector in Pakistan has both a more compressed wage distribution and a smaller gender pay gap than that prevailing in the private sector. Our empirical analysis suggests that about two-fifths of the raw differential in average hourly wages between the two sectors is accounted for by differentials in average characteristics. The estimated public sector mark-up, ceteris paribus, is of the order of 49 percent and is substantial by the standards of developed economies. The quantile regression estimates suggest that the mark-up was found to decline monotonically with movement up the conditional wage distribution. In particular, the premium at the 10th percentile was estimated at 92 percent as compared to a more modest 20 percent at the 90th percentile.

Mozambique: Public Sector Pay Reform

Mozambique: Public Sector Pay Reform

Jumping the Queue: Nepotism and Public-Sector Pay

We set up a model with search and matching frictions to understand the effects of employment and wage policies, as well as nepotism in hiring in the public sector, on unemployment and rent seeking. Conditional on inefficiently high public-sector wages, more nepotism in public-sector hiring lowers the unemployment rate because it limits the size of queues for public-sector jobs. Wage and employment policies impose an endogenous constraint on the number of workers the government can hire through connections.

TUNISIA: Public Sector Pay Agreement

TUNISIA: Public Sector Pay Agreement

State Collective Bargaining Laws and Public-Sector Pay

Using the Public Use Microdata Sample from the 2005 to 2015 American Community Survey, the authors provide new evidence on how state collective bargaining laws affect public-sector wages. To isolate the causal effect of bargaining laws on public-sector pay, they examine wage differentials between otherwise similar public- and private-sector employees located in the same local labor market. They estimate difference-in-differences (DD) models that exploit two sources of plausibly exogenous variation: 1) policy discontinuities along state borders and 2) variation within states in collective bargaining laws in states where the majority of public workers are without collective bargaining rights. Findings show that mandatory collective bargaining laws increase public-sector wages by approximately 5 to 8 percentage points. Results therefore suggest that mandatory collective bargaining laws provide a formal mechanism through which public-sector workers are able to bargain for increased compensation.

The Status of Public Sector Pay Equity for Women of Color in the United States

Research by Reese and Warner and Llorens, Wenger, and Kellough assesses the relative pay of women in the United States. However, research on the relative pay of women of color remains scant. What kinds of factors predict relative pay for women of color, and are they the same as for White women? The author utilizes ordinary least squares (OLS) regression on an Equal Employment Opportunity Commission (EEOC) panel data set on public sector employment by state to analyze the pay of Black, Hispanic, Asian, and American Indian women relative to men for 2005-2013. The author reaffirms that whether a woman lives in a state that has implemented a major gender pay equity measure is a significant factor determining her relative pay. Furthermore, the intersectional nature of public sector pay for women of color is numerically verified. Women fare better in states where they are descriptively represented in terms of gender and race/ethnic group.

Understanding the Public Sector Pay Gap

Understanding the Public Sector Pay Gap

The Public Sector Pay Gap in a Selection of Euro Area Countries in the Pre-crisis Period

We investigate the public-private wage differentials in ten euro area countries (Austria, Belgium, France, Germany, Greece, Ireland, Italy, Portugal, Slovenia and Spain) in the pre-crisis period (2004-2007). To account for differences in employment characteristics between the two sectors, we focus on micro data taken from EU-SILC. The results point to a conditional pay differential in favour of our public sector proxy that is generally higher for women, at the low tail of the wage distribution, in the Education and the Public administration sectors rather than in the Health sector. Notable differences emerge across countries, with Greece, Ireland, Italy, Portugal and Spain exhibiting higher public sector premia than other countries.

Explaining the Public-Sector Pay Gap: The Role of Skill and College Major

This paper reassesses the public-sector pay gap using AFQT score and college major as measures of skill. Among the college educated, there is strong evidence that those with lower skills enter the public sector. In contrast to the private sector, for college-educated public-sector workers, AFQT score is not correlated with pay, and college major is only weakly predictive of pay. Furthermore, simple controls for college major explain most of the public-private-sector pay gap. I conclude that the public-sector pay gap is much smaller than previously estimated and pay rigidities cause significant skill-based selection between the sectors.

Public Sector Pay in the UK: Quantifying the Impact of the Review Bodies

This paper examines the impact of the UK Public Sector Pay Review Bodies (PRBs) on the pay of their remit groups comparing the real weekly earnings of workers using ASHE and LFS data from 1993 to 2007 for 10 occupational subgroups. Using consecutive difference‐in‐differences we can identify whether the PRBs have had an impact by comparing the differences in pay for different occupations in successive time periods. Our examination of the annual changes in differentials suggest that the PRBs may have had relatively little systematic impact on earnings over and above that observed for comparable individuals working elsewhere in the public sector.

Public Sector Pay Scales in PNG: Are Academics Underpaid?

PNG’s public universities face difficulties in retaining academic staff, many of whom join government departments, statutory authorities, public enterprises, or the private sector for better paid jobs. We compare university pay in PNG with public service, statutory authority, and state-owned enterprise pay. We include allowances in our comparison, among them, importantly, the imputed value of university-provided housing. University salaries are uncompetitive for professors, and uncompetitive for all positions relative to the salaries offered by state-owned enterprises and probably some by statutory authorities. They are relatively competitive for positions below that of professor relative to the salaries offered by the public service. The PNG government will need to raise salaries to improve the competitive position of universities in those disciplines that are facing shortfalls. However, given that universities are likely to remain at a competitive disadvantage for some time to come, improving job satisfaction for academics and expanding the supply of quality candidates for areas where there are shortages will also be important.

Beaches, Sunshine, and Public Sector Pay: Theory and Evidence on Amenities and Rent Extraction by Government Workers

Rent extraction by public sector workers may be limited by the ability of taxpayers to vote with their feet. But rent extraction may be higher in regions where high amenities mute the migration response. This paper develops a theoretical model that predicts such a link between public sector wage differentials and local amenities, and the predictions are tested by analyzing variation in these differentials and amenities across states. Public sector wage differentials are, in fact, larger in the presence of high amenities, with the effect stronger for unionized public sector workers, whose political power may allow greater scope for rent extraction. (JEL H75, H76, J31, J32, J45, J51)

The Public Sector Pay Gap in a Selection of Euro Area Countries

We investigate the public-private wage differentials in ten euro area countries (Austria, Belgium, France, Germany, Greece, Ireland, Italy, Portugal, Slovenia and Spain). To account for differences in employment characteristics between the two sectors, we focus on micro data taken from EU-SILC. The results point to a conditional pay differential in favor of the public sector that is generally higher for women, at the low tail of the wage distribution, in the Education and the Public administration sectors rather than in the Health sector. Notable differences emerge across countries, with Greece, Ireland, Italy, Portugal and Spain exhibiting higher public sector premia than other countries.

BOOK REVIEW: "Review of Public Sector Power and Public Sector Pay in Hong Kong: A Survey of the Political Economy of Pay Determination in a British Colony (1965–1985)", edited by Tushar K Ghose.

BOOK REVIEW: "Review of Public Sector Power and Public Sector Pay in Hong Kong: A Survey of the Political Economy of Pay Determination in a British Colony (1965–1985)", edited by Tushar K Ghose.

Labor Market Monopsony

There has been a renewed interest in monopsony in labor markets in recent years that includes both the traditional static approach to monopsony, ably reviewed by Boal and Ransom (1997), and the “new” approach to monopsony with more attention paid to dynamic issues, developed in detail by Manning (2003). The articles presented in this supplement highlight both approaches and illustrate the range of labor market settings in which the exercise of monopsony power may be important. The first use of the term “monopsony” in economics is widely attributed to Robinson (1969). Robinson conceived of monopsony as analogous to monopoly. Whereas monopoly refers to the case of a single seller confronted in a market by many buyers, monopsony refers to the case of a single buyer confronted in a market by many sellers. Just as the monopolist faces a downward-sloping demand curve for his product and

The Economic Crisis, Public Sector Pay, and the Income Distribution

An important aspect of the impact of the economic crisis is how pay in the public sector responds – in the face not only of the evolution of pay in the private sector but also extreme pressure on public spending (of which pay is a very large proportion) as fiscal deficits soar. What are the effects on the income distribution of cutting public sector pay rates or alternative strategies to reduce the public sector pay bill? This chapter investigates these issues using data and a tax–benefit simulation model for Ireland, a country which faces a particularly severe fiscal crisis and where innovative measures have already been implemented to claw back pay from public sector workers in the guise of a ‘pension levy’, followed by a significant cut in nominal pay rates. The SWITCH (Simulating Welfare and Income Tax Changes) tax–benefit model first allows the distributional effects of these measures, which achieved a substantial reduction in the net public sector pay bill, to be teased out. The overall impact on the income distribution is assessed. This provides empirical evidence relevant to policy choices in relation to a key aspect of household income over which governments have direct influence, while at the same time illustrating methodologically how a tax–benefit model can serve as the base for such investigation.

A Fair Day's Wage? Perceptions of Public Sector Pay

There is a scarcity of evidence pertaining to the general public's perception of public sector pay. Hence, in the present study, 161 women and 149 men were asked to estimate the wages 35 public sector professions should receive annually in the fictitious nation of Maldoria, based on a comparison value of an annual income of T10,000 for general practitioners. Analysis showed that only pilots were given a higher annual income than general practitioners; miners and local government workers were also provided with relatively high annual incomes. By contrast, newscasters were provided with the lowest annual income. Participants' sex did not affect these evaluations, and other demographic variables and public sector-related information of the participants were poor predictors of their evaluations. The implications of this research on public attitudes toward wage determination are discussed, and avenues for further research highlighted.

National and Provincial Influences on Public Sector Pay: Northern Ireland after 1945

This article examines the national and regional pressures in Northern Ireland in the post-war period for parity in public sector pay with the rest of the UK. Northern Ireland had a devolved legislature and government within the UK from 1921 and was constitutionally in an essentially federal relationship with the rest of the UK. However, the Stormont Government chose to use legislative devolution to minimize policy differences with the rest of the UK. The article highlights the national industrial relations environment as the backdrop for provincial developments in pay setting. It establishes the important role played by the Social Services Agreement negotiated with the Labour Government at Westminster in triggering the principle of parity in public sector pay in the early post-war years. The principle of pay parity subsequently became a benchmark for regional trade union coercive comparisons in collective bargaining across the devolved public sector. The article highlights the policy relevance of these developments both to the UK Treasury and to devolved Governments in the UK, as they address the issue of regional public sector pay.

The Impact of the Public Sector Pay Review Bodies in the UK

The Impact of the Public Sector Pay Review Bodies in the UK

Public Sector Pay Gap in France: New Evidence Using Panel Data

Public Sector Pay Gap in France: New Evidence Using Panel Data