(Why) Is There a Public/Private Pay Gap?

21 Pages Posted: 2 Aug 2018  

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Government of the United States of America - Council of Economic Advisors

Date Written: July 13, 2018

Abstract

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

Suggested Citation

Makridis, Christos, (Why) Is There a Public/Private Pay Gap? (July 13, 2018). Available at SSRN: https://ssrn.com/abstract=3213757 or http://dx.doi.org/10.2139/ssrn.3213757

Christos Makridis (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Government of the United States of America - Council of Economic Advisors ( email )

Eisenhower Executive Office Building
17th and Pennsylvania Avenue, NW
Washington, DC 20502
United States

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