Education Levels and the Public/Private Compensation Differential

by Veronique de Rugy

Comparing compensation between private and public employees is a tricky business. While there is no doubt that there is an important compensation gap, especially when measured per hour worked, some argue that it can be explained by the fact that public employees are more educated than private-sector ones. This article from the New York Times says that there are 12 percent more white-collar workers in local government than there are in private employment, and 19 percent more white-collar workers at the state level. (Click through for charts.)

It’s true that this explains some of the compensation differential, but the difference isn’t great enough to explain the disparity in wages between comparable state- and local-government and private employees.

Moreover, Bloomberg News’s Henry Goldman reports that in New York City, less-educated city employees out-earn their private-sector counterparts:

New York City public workers without college degrees earn “significantly” more than they’d expect to get at private companies, even as municipal employees receive 17% less on average, a study for city Comptroller John Liu found.

City employees, including janitors, firefighters, teachers and accountants, who are eligible for partial pensions with less than 20 years on the job, also pay less for benefits than corporate workers who don’t get promised sums upon retirement, according to the study, released today and based on census and labor data.

“Our analysis indicates that less-educated, lower-paid city civilian workers are paid a premium over the wages they could be expected to earn in the private for-profit sector,” said the study by Frank Barconi, Liu’s chief economist. Conversely, the pay of those with more education tends to be “significantly” less than in the private sector, the study shows.

The whole story is here.

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