In this paper, we examined the wage gap between workers in the public sector and those in the private sector just before the recent economic crisis and in the wake of it. For the years 2008 and 2011, we decomposed the gap in the real hourly net wage into the contribution of differing individual characteristics and the contribution of differing marginal returns to these characteristics. The decompositions are performed at the mean, as well as at a number of quantiles along the entire wage distribution. In addition to analyzing the wage gaps in 2008 and 2011, we also look at the factors that contributed to the change in the gap during the three-year period considered.
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Our results show that in both years there was a significant wage gap in favor of the public sector; that is, there was a premium for working in the public sector. This holds at the mean, as well as at different points along the distribution. Mean decomposition results show that, in both 2008 and 2011, both the composition and wage structure effects are gap-increasing. This holds as well at different quantiles, the only exception being that the wage structure effect is gap-reducing at the very top of the distribution. The wage structure effect generally dominates, but not by much, over roughly the bottom half of the distribution, while in the upper part it weakens, getting even negative (gap-reducing) at the very top.
Concerning the detailed decompositions of the two effects, the results indicate that, in the case of the composition effect, the effects human capital-related characteristics, namely experience and tenure, education, and occupation, are gap-increasing and dominate in absolute value the gap-reducing effects of innate characteristics, namely gender and age.
These results hold roughly for both years. As regards the detailed wage structure effects, in both years the effects of age and the intercept are the strongest and of opposite signs virtually everywhere along the distribution. The other detailed wage structure effects are small compared to these two.
The mean gap increased in the analyzed three-year period, as did the gaps at almost all quantiles that we consider. The changes in the total gaps were mostly due to changes in the wage structure than due to changes in the composition. This should come as no surprise, given that one can hardly expect the distribution of individual characteristics to change much in only three years. On the contrary, the returns to these characteristics are easier to change even in a relatively short period, especially if this period was characterized with a general economic downturn.
The main objectives of this paper were to quantify the public-private wage gap and its determinants prior to and in the wake of the Great Recession, and in addition to whether and
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why the gap changed in the period 2008-2011. Many related questions remain, however, unanswered and thus warrant further research. Departing from the results of this paper, one should pursue more detailed analyses of the public-private wage gap. An avenue worth pursuing is to analyze more carefully the changes in the marginal returns to different individual characteristics that took place under the influence of the economic downturn.
Another direction for further research would be to check the robustness of the results to different definitions of the public sector, for instance by dividing the public sector as it is defined in this paper into the budgetary public sector and the part comprising publically-owned enterprises. Such an analysis may reveal that the wage gap is different and possibly driven by different factors when alternative definitions of the public sector are considered.
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29 Table 3. OLS estimates of the wage regressions
Dependent variable: log hourly wage 2008 2011
Public Private Public Private
(1) (2) (3) (4)
University graduate 0.410*** 0.358*** 0.357*** 0.344***
(0.037) (0.039) (0.038) (0.042)
Plant/machine operator -0.451*** -0.843*** -0.353*** -0.876***
(0.045) (0.061) (0.054) (0.064)
30 Table 4: Mean decomposition
2008 2011
Difference
Estimate Std. Err. Estimate Std. Err.
(1) (2) (3) (4)
Mean log wage, public 3.3210 0.0073 3.3600 0.0085 -
Mean log wage, private 3.0630 0.0068 3.0700 0.0079 -
Total gap 0.2580 0.0099 0.2890 0.0115 0.0310
Composition effect 0.1630 0.0086 0.1650 0.0102 0.0020
Gender -0.0078 0.0018 -0.0106 0.0024 -0.0028
Age -0.0043 0.0096 -0.0472 0.0109 -0.0429
Experience & tenure 0.0584 0.0092 0.1000 0.0110 0.0416
Education 0.0642 0.0064 0.0585 0.0072 -0.0057
Occupation 0.0527 0.0069 0.0643 0.0085 0.0116
Wage structure effect 0.0948 0.0095 0.1240 0.0109 0.0292
Gender -0.0043 0.0012 -0.0032 0.0013 0.0011
Age -0.0095 0.1660 -0.4420 0.1950 -0.4325
Experience & tenure 0.0420 0.0372 0.1260 0.0438 0.0840
Education 0.0337 0.0212 -0.0689 0.0193 -0.1026
Occupation 0.0270 0.0116 0.0640 0.0133 0.0370
Intercept 0.0058 0.1440 0.4490 0.1690 0.4432
Notes: The differences are obtained by subtracting the column (1) from column (3). Characteristics are grouped as follows:
age = (age, age2/100); experience and tenure = (experience, experience2/100, tenure); education = (primary or less, 3-year high school, 4-year high school, college, university graduate, postgraduate); occupation = (manager, professional, technician, clerk, service and sales, agriculture, craftsman, plant/machine operator, elementary).
31 Figure 1. Comparison of densities
Notes: On each of the panels, the vertical lines represent the means of the corresponding distributions.
0.511.5Density
32 Figure 2. Public-private wage gap in 2008 and 2011
Notes: The horizontal straight lines represent the mean gaps. The curvy lines represent the gaps at all the percentiles between the 5th and the 95th, smoothed using locally weighted regression (lowess).
.1.2.3.4Log wage difference
5 20 35 50 65 80 95
Percentile
Total gap in 2008 Total gap in 2011
33 Figure 3. Aggregate decomposition, 2008
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Total gap 2008 0.266 0.299 0.348 0.327 0.358 0.359 0.348 0.364 0.284 0.343 0.313 0.268 0.274 0.241 0.219 0.197 0.174 0.115 0.0355 Composition ef. 2008 0.092 0.14 0.147 0.193 0.17 0.167 0.145 0.145 0.16 0.172 0.172 0.157 0.154 0.154 0.146 0.165 0.16 0.158 0.189 Wage structure ef. 2008 0.174 0.159 0.201 0.134 0.188 0.193 0.203 0.219 0.124 0.171 0.141 0.111 0.121 0.0872 0.073 0.0325 0.0139 -0.044 -0.154 Mean gap 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258 0.258
-0.2 -0.1 0 0.1 0.2 0.3 0.4
Log wage difference
34 Figure 4. Detailed decomposition of the composition effect, 2008
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Gender -0.008 -0.011 -0.011 -0.012 -0.01 -0.009 -0.006 -0.006 -0.006 -0.007 -0.006 -0.005 -0.004 -0.004 -0.005 -0.006 -0.007 -0.007 -0.009 Age -0.038 -0.033 -0.022 -0.016 -0.024 0.0018 -0.002 -0.002 -0.012 -0.001 -0.006 -0.009 -0.006 -0.006 -0.013 -0.019 -0.024 -0.021 0.0024 Experience & tenure 0.0748 0.0816 0.0711 0.0788 0.0802 0.055 0.0496 0.0496 0.0669 0.062 0.0664 0.0615 0.053 0.053 0.0562 0.0637 0.0702 0.0607 0.0449 Education 0.0553 0.058 0.0571 0.0655 0.0557 0.0597 0.048 0.048 0.0607 0.0598 0.0581 0.0544 0.0574 0.0574 0.0598 0.0699 0.0757 0.0636 0.0681 Occupation 0.0075 0.0438 0.0507 0.0769 0.0678 0.0596 0.0561 0.0561 0.0499 0.0582 0.0593 0.0549 0.0532 0.0532 0.0474 0.0554 0.0456 0.0623 0.0827
-0.06 -0.04 -0.02 0 0.02 0.04 0.06 0.08 0.1
Log wage difference
35 Figure 5. Detailed decomposition of the wage structure effect, 2008
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Gender 0.0007 0.0017 -0.003 -0.002 -0.004 -0.006 -0.007 -0.006 -0.006 -0.007 -0.009 -0.009 -0.008 -0.008 -0.007 -0.006 -0.002 -0.004 0.0021 Age -0.243 0.208 0.461 0.265 0.223 0.44 0.237 0.147 -0.019 0.0258 -0.139 -0.348 -0.447 -0.347 -0.407 -0.671 -0.86 -0.848 -0.445 Experience & tenure 0.104 0.101 0.0148 0.0723 0.0604 -0.02 -0.004 0.0015 0.0863 0.037 0.0296 0.0433 0.0403 0.0344 0.0159 0.0962 0.161 0.126 0.0872 Education -0.023 -0.025 -0.002 -0.005 0.0078 0.0013 0.0067 0.0051 -0.02 -0.01 -0.001 -2E-05 0.0063 0.0179 0.038 0.044 0.023 0.132 0.423 Occupation -0.008 -0.028 -0.031 -0.04 -0.03 -0.009 -0.015 -0.003 -0.003 0.0053 0.0115 0.0003 0.018 0.0256 0.0262 0.0338 0.0634 0.119 0.223 Constant 0.343 -0.101 -0.239 -0.157 -0.068 -0.213 -0.015 0.0738 0.0873 0.12 0.249 0.424 0.511 0.364 0.407 0.535 0.629 0.432 -0.444
-1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8
Log wage difference
36 Figure 6. Aggregate decomposition, 2011
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Total gap 2011 0.267 0.337 0.35 0.343 0.375 0.381 0.325 0.361 0.402 0.35 0.341 0.334 0.275 0.273 0.276 0.262 0.189 0.158 0.113 Composition ef. 2011 0.156 0.124 0.147 0.163 0.139 0.137 0.163 0.173 0.173 0.167 0.158 0.158 0.163 0.169 0.163 0.163 0.164 0.197 0.3 Wage structure ef. 2011 0.111 0.213 0.203 0.181 0.236 0.245 0.162 0.187 0.229 0.183 0.183 0.176 0.111 0.104 0.113 0.09940.0256 -0.039 -0.187 Mean gap 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289 0.289
-0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Log wage difference
37 Figure 7. Detailed decomposition of the composition effect, 2011
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Gender -0.017 -0.013 -0.015 -0.013 -0.01 -0.009 -0.009 -0.008 -0.008 -0.008 -0.008 -0.008 -0.009 -0.009 -0.008 -0.008 -0.009 -0.012 -0.016 Age -0.223 -0.145 -0.108 -0.083 -0.055 -0.048 -0.038 -0.04 -0.04 -0.021 -0.022 -0.022 0.0004 -0.001 -0.015 -0.015 -0.022 -0.016 0.011 Experience & tenure 0.273 0.193 0.164 0.138 0.0986 0.0915 0.0926 0.0914 0.0914 0.0699 0.0701 0.0701 0.0532 0.0588 0.0629 0.0629 0.0648 0.0689 0.078 Education 0.0391 0.0352 0.0307 0.0417 0.0319 0.0318 0.0441 0.0573 0.0573 0.0518 0.053 0.053 0.0537 0.0606 0.0722 0.0722 0.0959 0.113 0.167 Occupation 0.0842 0.0543 0.0756 0.0789 0.073 0.0705 0.0736 0.0733 0.0733 0.0739 0.0648 0.0648 0.0647 0.0598 0.0504 0.0504 0.0335 0.0431 0.0596
-0.3 -0.2 -0.1 0 0.1 0.2 0.3
Log wage difference
38 Figure 8. Detailed decomposition of the wage structure effect, 2011
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Gender 0.0109 0.0049 0.0018 -3E-04 -0.005 -0.003 -0.003 -0.004 -0.006 -0.008 -0.008 -0.007 -0.005 -0.005 -0.006 -0.005 -0.005 -0.011 -0.005 Age -2.13 -1.099 -0.718 -0.33 -0.08 0.0043 -0.017 -0.098 -0.309 -0.221 -0.261 -0.23 -0.341 -0.412 -0.674 -0.612 -0.532 -0.743 -0.292 Experience & tenure 0.753 0.392 0.279 0.131 0.0191 0.0527 0.0703 0.0719 0.0547 -0.026 -0.035 -0.005 -0.016 0.0047 0.0659 0.088 0.102 0.174 0.208 Education -0.036 -0.049 -0.029 -0.023 -0.012 -0.019 -0.043 -0.059 -0.065 -0.055 -0.064 -0.027 -0.036 -0.048 -0.05 -0.024 -0.116 -0.198 -0.53 Occupation 0.0497 0.0233 0.0274 0.0107 0.0148 0.0159 -0.002 -0.007 0.0035 0.0103 0.0243 0.0337 0.0228 0.0235 0.0619 0.0643 0.0732 0.187 0.244 Intercept 1.463 0.941 0.642 0.391 0.299 0.194 0.158 0.283 0.55 0.483 0.526 0.412 0.487 0.54 0.715 0.588 0.503 0.552 0.189
-2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2
Log wage difference
39 Figure 9. Comparison of the total gaps for 2008 and 2011
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Total gap 2008 0.266 0.299 0.348 0.327 0.358 0.359 0.348 0.364 0.284 0.343 0.313 0.268 0.274 0.241 0.219 0.197 0.174 0.115 0.0355 Total gap 2011 0.267 0.337 0.35 0.343 0.375 0.381 0.325 0.361 0.402 0.35 0.341 0.334 0.275 0.273 0.276 0.262 0.189 0.158 0.113 Difference 0.001 0.038 0.002 0.016 0.017 0.022 -0.023 -0.003 0.118 0.007 0.028 0.066 0.001 0.032 0.057 0.065 0.015 0.043 0.0775
-0.05 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45
Log wage difference
40 Figure 10. Comparison of the composition effects for 2008 and 2011
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Composition ef. 2008 0.092 0.14 0.147 0.193 0.17 0.167 0.145 0.145 0.16 0.172 0.172 0.157 0.154 0.154 0.146 0.165 0.16 0.158 0.189 Composition ef. 2011 0.156 0.124 0.147 0.163 0.139 0.137 0.163 0.173 0.173 0.167 0.158 0.158 0.163 0.169 0.163 0.163 0.164 0.197 0.3 Difference 0.064 -0.016 0 -0.03 -0.031 -0.03 0.018 0.028 0.013 -0.005 -0.014 0.001 0.009 0.015 0.017 -0.002 0.004 0.039 0.111
-0.05 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35
Log wage difference
41 Figure 11. Comparison of the wage structure effects for 2008 and 2011
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Wage structure ef. 2008 0.174 0.159 0.201 0.134 0.188 0.193 0.203 0.219 0.124 0.171 0.141 0.111 0.121 0.0872 0.073 0.03250.0139 -0.044 -0.154 Wage structure ef. 2011 0.111 0.213 0.203 0.181 0.236 0.245 0.162 0.187 0.229 0.183 0.183 0.176 0.111 0.104 0.113 0.09940.0256 -0.039 -0.187 Difference -0.063 0.054 0.002 0.047 0.048 0.052 -0.041 -0.032 0.105 0.012 0.042 0.065 -0.01 0.0168 0.04 0.06690.01170.0048 -0.033
-0.25 -0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25 0.3
Log wage difference