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The Wage Penalty for State and Local Government Employees

Executive Summary:

As recent reports in the media have emphasized, on average, state and local government employees appear to earn more than private-sector workers.

But, on average, state and local workers are also older and substantially better educated than private-sector workers.  Half of state and local employees have a four-year college degree or more, and almost one-fourth have an advanced degree.  Less than 30 percent of private-sector workers have a four-year college degree, and less than 10 percent have an advanced degree.  The typical state and local worker is also about four years older than the typical private-sector worker.

Sixty percent of state and local government employees are women, compared to 46 percent of employees in the private sector.

When state and local government employees are compared to private-sector workers with similar characteristics — particularly when workers are matched by age and education — state and local workers actually earn 4 percent less, on average, than their private-sector counterparts.  For women workers, the public-sector penalty is about 2 percent of earnings; for men, it is about 6 percent of earnings.

The wage penalty for working in the state-and-local sector is particularly large for higher-wage workers.  While low-wage workers receive a small wage premium in state-and-local jobs (about 6 percent for a typical low-wage worker), the typical middle-wage worker earns about 4 percent less in state-and-local work, and the typical high-wage worker makes about 11 percent less than a similar private-sector worker.

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John Schmitt is a Senior Economist at the Center for Economic and Policy Research in Washington, DC.  This article was published by CEPR in May 2010 under a Creative Commons license.




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