One of the difficulties involved in comparing public sector and private sector compensation is determining how we should account for differences in the security of job tenure. Andrew Biggs and Jason Richwine have been trying to find a sound method for answering this question, and Biggs has written an interesting post on his preliminary findings:

Our baseline result was that job security for federal government employees was equivalent to a 1.5 percent to 3 percent increase in pay. (There is some recent academic work cited in our paper showing that this may be an underestimate—a German survey found that individuals stated they would accept a more than 10 percent pay cut to receive public sector levels of job security.) Importantly, though, our baseline result assumes that federal employees who lost their jobs would, after a period of job-searching, find new employment at similar pay. However, our working paper also showed that federal workers receive a significant salary and benefits premium over similar private sector employees. This is where job security becomes particularly valuable, because it protects not only against lost income during unemployment but also against being forced into a lower paying job afterward. When this factor is accounted for, the value of job security rises to around 17 percent of pay.

More recently, Biggs has drawn on data from a private supplemental unemployment insurance program for workers that implies that public sector job security is valued is properly valued at 2.4 percent of pay. This is far from a final answer, as Biggs makes clear, but it is a useful starting point.