The public sector pay gap in a selection of Euro area countries (ECB Working Paper, December 2011)

ABSTRACT:

"We investigate the public-private wage differentials in ten euro area countries (Austria, Belgium, France, Germany, Greece, Ireland, Italy, Portugal, Slovenia and Spain). ...The results point to a conditional pay differential in favour of the public sector that is generally higher for women, at the low tail of the wage distribution, in the Education and the Public administration sectors rather than in the Health sector. Notable differences emerge across countries, with Greece, Ireland, Italy, Portugal and Spain exhibiting higher public sector premia than other countries".

NON TECHNICAL SUMMARY (P. 5):

"According to national account aggregate data, the wage earned by a representative public sector employee is higher than the one earned by a representative private sector employee in all the countries of this study, except Belgium, France and Germany. In particular, in the period 1995-2009 the ratio of public to private compensation per employee is found to be consistently below one in the case of France, slightly below one in the cases of Germany and Belgium, around 1.1 for Austria, around 1.2-1.3 for Italy, Spain, Greece, Ireland and Slovenia, and above 1.5 for Portugal.

However, it is well documented that public sector employees are generally older, better educated and are more likely to take managerial positions. In addition, wage dispersion is much higher in the private sector than in the public sector. Hence, controlling for individual characteristics is necessary to determine the existence of a true “premium” in the public sector, i.e. whether, ceteris paribus, public sector employees are better paid than employees in the private sector...

As in the previous studies, our results, referring to the period 2004-2007, point to a conditional pay differential in favour of the public sector that is generally higher for women, for workers at the bottom of the wage distribution, in the Education and the Public Administration sectors rather than in the Health sector. We also find notable differences across countries, with Greece, Ireland, Italy, Portugal and Spain exhibiting higher public sector premia than other countries. The differential generally decreases when considering monthly wages as opposed to hourly wages and if we restrict our comparison to large private firms...

APPENDIX II (P. 34):

"In Portugal, the wage differential is relatively high, which is mainly explained by the gap in the qualifications of the workers in the public and private sectors. This differential was on an upward trend from the mid- 1990s, but has narrowed since the mid-2000s; however, when calculated on the basis of wages and salaries, this narrowing started around 2003 following the implementation of restraining measures on public wage growth."