More on the Public/Private Sector Pay Gap…

Today we’re going to follow up an article which I first delved into last year.  Using BLS data, I detailed the pay gap between workers in the public sector and workers in the private sector.  Public and private sector wages has become an increasingly politicized issue, so when the Congressional Budget Office tackled the topic, I read the report with great interest.

How does the compensation of federal civilian employees compare with that of employees in the private sector?

It’s a worthy title for this section, and also, the name of the CBO report: “How does the compensation of federal civilian employees compare with that of employees in the private sector?“.  Similar to the results we found last year, the actual income earned by Federal and Private workers is only negligibly different.  In fact, across all education levels (one common proxy to do skill based comparisons), there was only a 2% advantage for Federal employees.  The largest income gap came for workers who attained only a High School diploma or less: Federal Employees made 21% more, on average.  The private sector has an advantage for post-graduate work, with a 23% advantage on the income scale.  Those who attained a Bachelor’s degree saw roughly the same income in private or Federal work.

CBO Analysis of the Federal / Private Income Gap

CBO Analysis of the Federal / Private Income Gap, 2010 Dollars

Total Compensation, or the Benefits Gap

The place where the Federal sector wins out?  Total compensation – or the combined value of both income and benefits to a worker.  In fact, for anything less than a doctorate or professional degree, Federal workers held the advantage.  In benefits alone, Federal workers with a High School diploma or less saw a 72% advantage.  Overall, the CBO estimates that a worker in that demographic, on average, was 36% better compensated in Federal employment.  Across all workers, including Professional Degrees and Doctorates?  Federal workers were 16% better off.

There may be some bias introduced since the report didn’t narrow workers down to like professions.  Some private sector positions have no direct comparison on the Federal side, and it is possible that those positions pay less.  Additionally, it may be that as a whole, a country should have higher compensation for Government employees – theoretically, better performing workers (who could demand higher compensation) would be able to run the Government in a superior manner.  Government employees also have another advantage – it is accepted that a Federal job is more stable than a private position, although the value is tough to quantify.

So, what do you think?  Are you satisfied with the power of government and with its compensation practices?  Do you think the CBO performed a fair study?  What would you like to see for additional information on this topic?


  1. says

    In theory, I wouldn’t think it would be so bad that federal employees make more than private sector employees. However, my opinions of some of the government departments and how effective they aren’t so great. This is simply based off a few first-hand experiences, and obviously isn’t the case for everyone that works in government. If I were ever to work for the government, it would most likely be based on benefits before any other reasons.

    • says

      All I know is the federal government department I deal the most with – the IRS – is good, haha! I’ve seen them catch mistakes in their favor and in the payer’s favor a few times.

      Most of my first person negative government experiences are state and local. However, I have seen enough of these types of studies to believe there is something going on when it comes to compensation.

  2. says

    I wonder how this data is affected by union memberships. Many government employees are unionized, including college educated teachers. I would be curious to see this same data with the union variable thrown in. I bet unions play a bigger role than the simple fact that it is a government job. Unionization is probably also to blame for the job security aspect.

    • says

      I present this without comment, but here are the numbers from the most recent BLS report:

      “Public-sector workers had a union membership rate (37.0 percent) more than five times higher than that of private-sector workers (6.9 percent).”

    • freeby50 says

      This data is about federal jobs.  I don’t belive that direct federal employees generally have collective bargaining rights.  So without collective bargaining any unionization would not have much impact on wages.   THe post office has unions but I don’t believe they’re covered in this study.  Air traffic controllers are another exception that I am aware of but they’re pretty small % of federal emloyees.

      State/local government jobs are another matter.   Here’s data for state/local government jobs comparing union vs non-union wages :

      • says

        That’s true, actually… The largest pocket of collective bargaining is in the USPS, but the government will do all they can to try to say it’s not exclusively a government organization (also, I have a bridge to sell you!).

        • says

          Thanks for clearing that up.  Federel.. local.. state.. they’re all government!  All one in the same to me (I know, not really).  I still like my point though, regardless of whether or not this article had anything to do with it.  Interesting stuff on the BLS stats.

          • says

            Yeah, having a monopoly on labor at the same time as there is a monopsony seeking that labor (and tossing politics into the mix!) probably helps regardless of collective bargaining status.

            However, that (in a nutshell) is why the midwest/northwest union changes are such a big deal. Removing collective bargaining at the state level is a pretty huge deal…

  3. freeby50 says

    This seems pretty realistic and believable to me.    Gov. jobs certainly have better benefits.  If you look at the wages then most of the disparity is at the low end and high end.   Professionals can make far more in the private sector but if you only have a high school diploma then you do better with a gov. job. 

    One detail buried in the CBO report is that the federal gov. workers are 4 years older on average.  People with 4 more years experience generally have higher wages on average, so experience / age will impact the wages in favor of fed. gov. employees.

    • says

      Yeah when the report first came out I saw a few articles complaining about the methodology, but it seemed pretty fair to me. Of course, my first reaction was, “how are there government employees without high school degrees?”

      Yeah, I saw the line on age: “Partly because of that difference, the average age of federal employees is four years higher than that of private-sector employees (45 versus 41).” However, I also took them at face value when they said, “…CBO sought to account for differences in individuals’ level of education, years of work experience, occupation, size of employer, geographic location (region of the country and urban or rural location), and various demographic characteristics (age, sex, race, ethnicity,”, haha. There is also a note in there which said that if they hadn’t adjusted the gap would have been even larger in favor of Government employment.

      Whether it’s a bad thing? I don’t know. At some level, when you get down to a good level of Government (we’re probably too large now), you want the best possible people staffing it. I’d rather there was a lean, efficient, ideal-sized government than a bunch of low performing workers, heh.

  4. says

    I believe it was FDR who said it was not in the public’s interest for government employees to be unionized.  I believe it skews the system in their favor due to their proximity to lawmakers who have the powers of taxation at their disposal.

    • says

      Nailed it – but to be perfectly accurate, he was talking about collective bargaining in Government unions (“All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service.”) and a discussion of how dangerous a strike would be. Of course, that had echoes in the 1980s as Ronald Reagan had to deal with the ATC strike.

  5. says

    All I know is that when an organization has no real incentive to make a profit, you have waste.  I can’t help to think of my own business that, if it would be relieved of any short-falls from the taxpayer, would certainly pay me a salary of at least $20 million per year.

    I am worth every penny!

    • freeby50 says

      JT would you then conclude that all churches and other non profits are inherently wasteful due to their lack of profit motive?

  6. says

    It’s always bothered me that federal employees are more than fairly paid but in most of my interactions with them, I’ve met people who seem very unmotivated. Looking at these graphs, it seems like they should be smiling and dancing every day they show up at work.

    • says

      State or Federal or Local? The more I think about it, the IRS has been the most responsive to me (haha!) while it’s the local services where I have the most problems.

      That said, I’m sure the Feds create their own bureaucratic nightmares, it’s just I haven’t experienced them firsthand, haha!

  7. says

    Very interesting stats that you have presented.  You mentioned at the end that it is generally accepted that Federal jobs are more stable than private sector.  Given the state of employment and the economy over the past few years, job stability is a huge advantage.

    • says

      Yeah – that’s an important point, especially in the current economic climate. It’s hard to value, however, but it’s definitely a perk!

  8. says

    I work in IT as a federal employee.  Pay is somehere in the middle for my area.  What I mean is, I was in the same role as a state employee.  Pay was below average for my market.  I think worked at a University Hospital, which was also state owned but had a separate pay scale that was better than the state agencies.  However, the general IT (tech support, field support, systems administrators) pay was below average, and the technical consultants and project managers pay were above average.  In fact, the technical consultants and project managers at the university hospital pay more then me at the federal level.  I think pay for the public sector IT worker varies widely.  From talking with my friends, some make as low as $10/hour and others make 6 figures.  It all depends on where you work, what you are doing, and if your salary is negotiable.

    • says

      Hi Squeezer,

      Thanks for the perspective. What is your title? I worked IT at one point (Help Desk back in High School) but it was for a private college. Of course, since I was working PT and didn’t yet have a degree, my pay was pretty low too…

      It doesn’t sound good if you’ve got degreed IT workers making $10 an hour – that seems way undervalued. Are any of your friends thinking of trying to make the switch to private companies? It seems to me that unless their benefits are truly ridiculous they’d be better off in this case.

  9. Afford Anything says

    Roughly 25 – 30 percent of American workers today have pensions — and the vast majority of those with pensions are government employees. That’s a massive benefit I rarely hear gov’t workers express praise for.

    • says

      I worked for 3 years at my first job before moving West, and during my tenure they eliminated their pension program. I actually could have qualified by working 2 more years, but “Go West, young man!“. (It was a defense contractor).

      So now I’m at a private firm and I’ve got a 401(k). Interesting how these things turn out! Great comment!