Wages, Pensions, and Public-Private Sector Compensation Differentials for Older Workers

43 Pages Posted: 20 Sep 2013 Last revised: 27 Feb 2021

See all articles by Philipp Bewerunge

Philipp Bewerunge

Neuss Associates

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 2013

Abstract

We use a sample of full-time workers over 50 years of age from the 2004 and 2006 waves of the Health and Retirement Study to investigate whether workers in federal, state, and local government receive more generous wage and pension compensation than private sector workers, ceteris paribus. With respect to hourly remuneration (wages plus employer contributions to defined contribution plans), federal workers earn a premium of about 28 log points, taking differences in employee characteristics into account. However, there are no statistically discernible differences between state and local workers and their private sector counterparts, ceteris paribus. These findings are about the same whether or not indicators of occupation are included in the model. On the other hand, pension wealth accumulation is greater for employees in all three government sectors than for private sector workers, even after taking worker characteristics into account. As a proportion of the hourly private-sector wage, the hourly equivalent public-private differentials are about 17.2 percent, 13.4 percent, and 12.6 percent for federal, state, and local workers, respectively. We find no evidence that highly-educated individuals are penalized by taking jobs in the public sector, either with respect to wages or pension wealth.

Suggested Citation

Bewerunge, Philipp and Rosen, Harvey S., Wages, Pensions, and Public-Private Sector Compensation Differentials for Older Workers (September 2013). NBER Working Paper No. w19454, Available at SSRN: https://ssrn.com/abstract=2328500

Philipp Bewerunge (Contact Author)

Neuss Associates ( email )

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New York, NY 10012
United States

Harvey S. Rosen

Princeton University - Department of Economics ( email )

001 Fisher Hall
Princeton, NJ 08544
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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