State and Local Workers Earn Less than Similar Private Sector Workers

For Immediate Release

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Alan Barber, (202) 293-5380 x115

State and Local Workers Earn Less than Similar Private Sector Workers

Recession, not overpaid public sector employees to blame for state and local budget woes

WASHINGTON - A new report from the Center for Economic and Policy Research (CEPR)
shows that state and local government workers pay a wage penalty
compared to private-sector workers with similar characteristics. Recent
media accounts have suggested that state and local workers earn more
than private sector employees, but these analyses fail to control for
the fact that public employees are on average older and have
substantially more formal education than private sector workers,
according to the CEPR report.

Once these systematic differences in the
workforces are taken into effect, state and local government employees
earn about 4 percent less than private sector workers at the same age
and education level, the CEPR finds. The pay penalty is particularly
large for the most skilled state and local workers, who trail more than
10 percent behind their private sector counterparts.
The report, "The Wage Penalty for State and Local Government
Employees
," uses data from the Census Bureau's Current Population
Survey (CPS) on the state and local government workforce and the private
sector-workforce and finds three important differences:

  1. State and local employees are
    substantially better educated than workers in the private sector --over
    half of state and local employees have a four-year college degree or
    more, compared to about 30 percent in the private sector.
  2. State and local employees are
    about four years older than private sector workers.
  3. Sixty percent of state and local
    workers are women compared to less than half of private sector worker.

"We expect and the market confirms that
older, better-educated workers earn more than younger workers with less
formal education," said John Schmitt, a senior economist at CEPR and author
of the study. "When we compare state and local government workers with
private sector workers on an apples-to-apples basis, state and local pay
actually trails a bit behind pay in the private sector."

The full study contains data on the earnings
differential between private and public sector employees based on wage
levels, age, and gender as well as the composition of the state and
local government workforce on a state-by-state basis through 2009, the
latest full year of available data.

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The Center for Economic and Policy Research (CEPR) was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.

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