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Compensation for State and Local Government Workers

Author

Listed:
  • Maury Gittleman
  • Brooks Pierce
Abstract
Are state and local government workers overcompensated? In this paper, we step back from the highly charged rhetoric and address this question with the two primary data sources for looking at compensation of state and local government workers: the Current Population Survey conducted by the Bureau of the Census for the Bureau of Labor Statistics, and the Employer Costs for Employee Compensation microdata collected as part of the National Compensation Survey of the Bureau of Labor Statistics. In both data sets, the workers being hired in the public sector have higher skill levels than those in the private sector, so the challenge is to compare across sectors in a way that adjusts suitably for this difference. After controlling for skill differences and incorporating employer costs for benefits packages, we find that, on average, public sector workers in state government have compensation costs 3-10 percent greater than those for workers in the private sector, while in local government the gap is 10-19 percent. We caution that this finding is somewhat dependent on the chosen sample and specification, that averages can obscure broader differences in distributions, and that a host of worker and job attributes are not available to us in these data. Nonetheless, the data suggest that public sector workers, especially local government ones, on average, receive greater remuneration than observably similar private sector workers. Overturning this result would require, we think, strong arguments for particular model specifications, or different data.

Suggested Citation

  • Maury Gittleman & Brooks Pierce, 2012. "Compensation for State and Local Government Workers," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 217-242, Winter.
    • Handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:217-42
    Note: DOI: 10.1257/jep.26.1.217
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    References listed on IDEAS

    as
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    2. Morikawa, Masayuki, 2016. "A comparison of the wage structure between the public and private sectors in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 39(C), pages 73-90.
    3. Hirsch, Barry, 2013. "An Anatomy of Public Sector Unions," IZA Discussion Papers 7313, Institute of Labor Economics (IZA).
    4. Bagchi, Sutirtha, 2019. "The effects of political competition on the generosity of public-sector pension plans," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 439-468.
    5. Jeffrey Keefe, 2012. "Public Employee Compensation and the Efficacy of Privatization Alternatives in US State and Local Governments," British Journal of Industrial Relations, London School of Economics, vol. 50(4), pages 782-809, December.
    6. Hirsch, Barry & Manzella, Julia, 2014. "Who Cares – and Does It Matter? Measuring Wage Penalties for Caring Work," IZA Discussion Papers 8388, Institute of Labor Economics (IZA).
    7. Miriam Marcén & Marina Morales, 2021. "The intensity of COVID‐19 nonpharmaceutical interventions and labor market outcomes in the public sector," Journal of Regional Science, Wiley Blackwell, vol. 61(4), pages 775-798, September.
    8. Blackburn, McKinley L., 2021. "Are U.S. teacher salaries competitive? Accounting for geography and the retransformation bias in logarithmic regressions," Economics of Education Review, Elsevier, vol. 84(C).
    9. Justin Falk & Nadia Karamcheva, 2018. "Comparing the Effects of Current Pay and Defined Benefit Pensions on Employee Retention: Working Paper 2018-06," Working Papers 54056, Congressional Budget Office.
    10. Rebecca Diamond, 2017. "Housing Supply Elasticity and Rent Extraction by State and Local Governments," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 74-111, February.
    11. Maury Gittleman & Kristen Monaco & Nicole Nestoriak, 2017. "The Requirements of Jobs: Evidence from a Nationally Representative Survey," NBER Chapters, in: Education, Skills, and Technical Change: Implications for Future US GDP Growth, pages 183-215, National Bureau of Economic Research, Inc.
    12. Jason L. Kopelman & Harvey S. Rosen, 2014. "Are Public Sector Jobs Recession-Proof? Were They Ever?," NBER Working Papers 20692, National Bureau of Economic Research, Inc.
    13. Maury Gittleman & Brooks Pierce, 2015. "Pay for Performance and Compensation Inequality: Evidence from the ECEC," ILR Review, Cornell University, ILR School, vol. 68(1), pages 28-52, January.
    14. Andrew Chamberlain, 2015. "Are State Workers Overpaid? Survey Evidence from Liquor Privatization in Washington State," Journal of Labor Research, Springer, vol. 36(4), pages 347-388, December.
    15. Jason L. Kopelman & Harvey S. Rosen, 2014. "Are Public Sector Jobs Recession-Proof? Were They Ever?," Working Papers 240, Princeton University, Department of Economics, Center for Economic Policy Studies..

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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