Public-Sector Wage Comparability: The Role of Earnings Dispersion

Abstract

Economists use average wage differentials to examine whether public- and private-sector workers have comparable earnings. Such average differentials, originally developed for other purposes, fail to measure the true distance from comparability. In short, if average earnings in the public and private sectors are identical, earnings need not be comparable. The authors develop alternative statistical measures of comparability that demonstrate that differences in average earnings contribute only modestly to deviations from comparability and that state and local governments in the United States deviate more from comparability than does the federal government.