Which Pays Better?
Sep 10, 2014
The ongoing debate about whether private or public sector jobs pay better continues, and the Canadian Centre for Policy Alternatives (CCPA) has recently released another study that looks at this very issue.
Which Pays Better: Public or Private Sector Jobs? Settling the Debate is the latest in a long line of studies that look at compensation levels between the private and public sectors. Richard Schillington finds that public sector workers are indeed better paid than their private counterparts.
But the results are not necessarily what one would expect. The discrepancy isn't due to high-end salaries. In fact, when relevant variables are adjusted, public and private sector jobs pay pretty much the same. However, there is a significant difference in two particular areas: lower-paid workers and female workers. As Schillington states, "in both cases, more egalitarian pay practices of the public sector, compared to the private sector, generate a positive outcome for public sector workers."
The study found an overall average wage premium for public sector workers of 12.5 percent. It virtually disappears if you limit the analysis to those earning more than $25 per hour.
By digging through the numbers, Schillington has concluded that women, on average, make about 10 percent less than men in the public sector and 13.5 percent less than men in the private sector. More specifically, he finds that the overall public sector wage premium is due to three factors: a smaller wage gap for women in the public sector, fewer low-wage positions in the public sector, and a higher effective minimum wage in the public sector.
In other words, "there is a pay premium for workers at the bottom end of the income scale in the public sector and that's what explains the overall difference between public and private sector pay."
The study's most important insight from the analysis of public versus private sector wage rates is that "only those who would receive very low pay working in the private sector can reliably be expected to be paid more in the public sector."
The report can be viewed in its entirety here.
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