Changes in the Structure of Wages in the Public and Private Sectors

58 Pages Posted: 6 Apr 2004 Last revised: 15 Jul 2010

See all articles by Lawrence F. Katz

Lawrence F. Katz

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: March 1991

Abstract

The wage structure in the U.S. public sector responded sluggishly to substantial changes in private sector wages during the 1970s and 1980s. Despite a large expansion in the college/high school wage differential during the 1980s in the private sector, the public sector college wage premium remained fairly stable. Although wage differentials by skill, in the public sector were fairly unresponsive to changes in the private sector, overall pay levels for state and local government workers were quite sensitive to local labor market conditions. But federal government regional pay levels appear unaffected by local economic conditions. Several possible explanations are considered to account for the rigidity of the government internal wage structure, including employer size, unionization, and nonprofit status. None of these factors adequately explains the pay rigidity we observe in the government.

Suggested Citation

Katz, Lawrence F. and Krueger, Alan B., Changes in the Structure of Wages in the Public and Private Sectors (March 1991). NBER Working Paper No. w3667. Available at SSRN: https://ssrn.com/abstract=305594

Lawrence F. Katz (Contact Author)

Harvard University - Department of Economics ( email )

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Alan B. Krueger

Princeton University - Industrial Relations Section ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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