Comparing Public and Private Sector Compensation over 20 Years

Comparing Public and Private Sector Compensation over 20 Years

National Institute on Retirement Security
Keith A. Bender and John S. Heywood

April 2010

Public and private workforces differ in important ways. For instance, jobs in the public sector require much more education on average than those in the private sector. Employees in state and local sectors are twice as likely as their private sector counterparts to have a college or advanced degree.

Wages and salaries of state and local employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11 percent less; local workers earn 12 percent less.

Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees.

The pattern of declining relative compensation remains true in most of the large states we examined, although some state-level variation exists.

Benefits (e.g., pensions) comprise a greater share of employee compensation in the public sector.

State and local employees have lower total compensation than their private sector counterparts. On average, total compensation is 6.8 percent lower for state employees and 7.4 percent lower for local workers, compared with comparable private sector employees.

This recession calls for equal sacrifice, but long-term patterns indicate that the average compensation of state and local employees is not excessive. Indeed, if the goal is to compensate public and private workforces in a comparable manner, then the data do not call for reductions in average state and local wages and benefits.


About the Authors

Keith A. Bender is associate professor in the Department of Economics and in the Masters in Human Resources and Labor Relations Program at the University of Wisconsin–Milwaukee.

John S. Heywood is distinguished professor in the Department of Economics and Director of the Masters in Human Resources and Labor Relations program at the University of Wisconsin–Milwaukee. Dr. Heywood expresses a debt to Dale Belman, with whom he researched public sector compensation for many years.


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