Friday, November 02, 2007

Two Americas: Private vs. Public Sector Employees

Yes, John Edwards, there really are "Two Americas": One America for those who work for the government and make almost $62,000 on average (wages and benefits), and another America for those saps who work in the private sector who earn $6,000 less on average ($55,470), see chart above (click to enlarge).

And Yes, Hillary Clinton, there really is a disturing pay gap that calls for legislation: Private sector employees earn only 90 cents on average (wages and benefits) for every one dollar that a public sector employee earns, and this pay gap has persisted for decades. And the pay gap between private sector employees and public school teachers is even greater (see graph).

See this press release from the Heartland Institute for more information, which uses data from this BEA website.


At 11/02/2007 9:45 AM, Anonymous Anonymous said...

I don't understand what you are trying to show with your graph. Unless the educational attainment is the same for all three groups, which I don’t believe it is, I would actually expect more compensation disparity. Does the education category include principals and superintendents (most of them will have master’s and doctorate’s)?

At 11/02/2007 10:24 AM, Anonymous Anonymous said...

I am amazed to see this graph. Especially as I was a private sector employee for a number of years and earned well above what I make now as a non-profit sector employee. And my level of education has only gone up in that time. A very interesting post.

At 11/02/2007 10:37 AM, Blogger Trevre said...

This graph compares apples and oranges. For a proper comparison you need to show a specific industry that performs the same fuctions in the public and private sector. Something like a the salaries of financial consultants in public and private or better yet the salary of public and private lawyers.

And beyond all bigger than all there is the fact that work in the private sector is different than work in the public sector. Salaries should be dependent on employee demand of course is what you are getting at, but it isn't shown on this figure. I enjoy the blog very much, especially when we can disagree about it.

At 11/02/2007 10:47 AM, Blogger Mark J. Perry said...

Walt G:

I agree that the graph and the differences in compensation don't impose the "ceteris paribus" condition of holding everything else equal, including possible differences in education levels.

But you could point out the same deficiency and violation of the "ceteris paribus" condition to Hillary Clinton when she says "that women working full time, year-round still make only 77 cents for every dollar made by a man," and then introduces legislation to correct the "problem."

It would be important to control for marital status, number of children, education, age, etc. before making comparisons between male and female earnings.

At 11/02/2007 11:05 AM, Anonymous Anonymous said...

I agree that an in-depth analysis makes the disparity disappear. It's difficult to argue against the 77% figure that's so widely quoted that it seems like everyone has it memorized. Already this semester, it has been brought up in both of my graduate classes. Personally, I’ve learned to take a deeper look when statistics are manipulated for political purposes, but males get castigated when they publically touch that one.

At 11/02/2007 11:18 AM, Blogger thomasblair said...


The link noted that Dr. Perry's "education" category refers only to teachers:

The BEA data show teacher compensation has closely tracked the overall state and local government pay average since 1990. The average compensation in state and local education in 2006 was $62,371.

At 11/02/2007 11:19 AM, Blogger thomasblair said...

This comment has been removed by the author.

At 11/02/2007 11:20 AM, Blogger thomasblair said...

Dr. Perry,

You might consider including the graph presented at the site. It presents quite a picture of how public pay tracks with private pay.

At 11/02/2007 11:56 AM, Blogger spencer said...

I see you are a graduate of the GMU economics department, so I would not expect you to be confused by the facts. But some of your readers might.

Government pay compared to private pay has received much study and analysis. As a matter of fact federal employees pay is based on the concept that they will be paid comparable salaries with a lag.

The CBO and BLS has done much work on this. One of the recent studies by the CBO used data from one the biggest and best sources of data on private pay in great detail, The Hay organization. There results were:

The data from the Hay Group indicated wide variation in federal/private-sector pay differences by occupation. For example, federal employees in selected professional and administrative occupations tended to hold jobs that paid less than comparable jobs in private firms (see Figure 1). For about 85 percent of those federal employees, their pay lagged behind private salaries by more than 20 percent. By contrast, about 30 percent of federal employees in selected technical and clerical occupations held jobs with salaries above those paid by private firms (see Figure 2). In general, jobs in technical and clerical occupations showed much smaller differences in pay between federal and private workers. About three-quarters of federal employees in this analysis held jobs in those occupations with salaries that were within 10 percent, plus or minus, of private levels


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