(Why) Is There a Public/Private Pay Gap?
21 Pages Posted: 2 Aug 2018
Date Written: July 13, 2018
The government is facing a severe shortage of skilled workers, especially in information technology and cyber security jobs. The conventional wisdom in branches of policy and public administration is that the shortage is driven by low salaries that are not competitive for attracting top talent. Using longitudinal data on high skilled workers between 1993 and 2013, this paper shows that, if anything, government employees earn more than their private sector counterparts. Although government workers tend to earn less in the raw data, these differences are driven by the correlation between unobserved ability and selection into private sector jobs. These results are robust to additional data from the Census Bureau between 2005 and 2016. Instead, this paper shows that a more plausible culprit behind the worker shortage in government is a lack of development opportunities and poor management.
Keywords: careers, development and training, earnings, management, public-private pay gap
JEL Classification: H11, J31, J32, J38, M54
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