Economic Snapshot | Budget, Taxes, and Public Investment

For public-sector workers, a wage penalty

Workers in the state and local public sector earn less on average than their private-sector counterparts, in terms of both wages and total compensation. The Figure from EPI’s 2010 paper, Debunking the Myth of the Overcompensated Public Employee, shows that public sector workers in state and local government earn, on average, $6,061 per year less in annual wages than their private-sector counterparts. When measuring total compensation that includes non-cash compensation such as health and insurance benefits, the gap narrows, but the average public employees still earns $2,001 less per year.

Because there are many differences in the private- and public- sector workforces, the study controlled for several factors such as level of education (the public sector as a whole is more highly educated) and number of hours worked (public sector workers tend to work fewer hours), as well as the nature of the work itself. Many public sector jobs such as firefighter and corrections officer do not exist in the private sector, so the study compared workers of “similar human capital,” or labor market skills.