Nsttute for Research on Povertydiscussion

Wages in the public sector are often set on the basis of the comparability doctrine, which states that pay should be comparable with private sector compensation for the same type of work. Other researchers have suggested that this approach, and specific problems in its application, will probably result in government pay schedules which exceed those in the private sector. Simply comparing the wage rates for similar jobs may be an inadequate test of this hypothesis, since it ignores differences in the quality of the individuals being employed. In this paper, using a human capital model of wage determination and a sample of mature male workers, we attempt to compare wages in federal, state, and local public administration with those in the privata sector, after adjusting for differences in personal and geographic characteristics. We find that the wage gaps which do exist cannot be completely explained by human capital and locational variables, and that there are positive rents associated with both federal and state government employment. In contrast, at the local level, employees appear to be paid slightly less than they would be in the private sector. These results are confirmed when the other components of compensation are investigated. Existing evidence suggests that fringe benefits and job stability are higher in government employment than in the private sector. We present some estimates which suggest that job characteristics are also superior in the federal and state government sectors, but that this is not the case when local government--private sector comparisons are made.