Compensation in the Public or Private Sector – Which is Highest?
January 14, 2011
This long running debate seems to be heating up as federal, state, and local governments face deficits across the United States. Just looking at averages for all employees, the public sector workers may win this contest. But wages, as usual, are most influenced by what you do and where you do it – occupation and job title, industry, size of the entity, geography. A closer analysis of the data may bring a different answer about where the compensation is greater.
While some think that public employees are overcompensated (as a group, they tend to have more education, work in more highly paid occupations, enjoy shorter workweeks with better health and pension benefits), a recent paper by Rutgers University professor Jeffrey Keefe, published by Economic Policy Institute (www.epi.org) found this perception to be wrong.
Keefe’s analysis controlled for the impact of level of education, hours worked and non-cash compensation. He concluded that on average, full-time state and local employees are undercompensated, compared to “otherwise similar private-sector workers.” You can read the whole paper at: http://www.epi.org/publications/entry/debunking_the_myth_of_the_overcompensated_public_employee.
Private sector workers earned average annual wages of $55,132, which is $6,061 greater than the $49,072 earned by public sector workers. When benefits are factored in, the private sector workers still earned $2,001 more per year than public sector workers ($71,109 in total compensation, versus $69,108). This gap was especially large among more educated workers. College-educated workers on average earned $22,966 per year less in total compensation.
So before you take that public sector job, do some research!