Are Public Sector Workers Paid More Than Their Alternative Wage? Evidence from Longitudinal Data and Job Queues

Abstract

This paper performs a longitudinal comparison of public and private sector pay. Although not decisive because of small sample sizes, the results tend to corroborate the conclusions of previous cross-sectional studies. Specifically, I find that on average wages of federal workers exceed those of private sector workers by 10% to 25%, while wages of state and local government workers are roughly equivalent to or slightly less than the wages of private sector workers. Furthermore, these conclusions hold for a sample of workers who joined the government after being involuntarily displaced from their private sector jobs. In addition, a comparative analysis of the length of job queues suggests that on average more workers apply for job openings in the federal government than in the private sector. Finally, both longitudinal and cross-sectional analyses support the conclusion that the union wage gap is substantially smaller in the public sector than in the private sector.