The Central Government-Private Sector Wage Differential

Since Ehrenberg and Schwarz (1986) there has been a plethora of articles investigating the relationship between public and private sector wages. This article examines part of this post 1986 literature by reviewing articles that examine central government-private sector wage differentials. In sum, most articles find that there is a premium paid to central government workers, although the premium has declined in recent years. In developing countries, however, the differential is usually negative. Women and minorities tend to do better in the public sector relative to their private sector counterparts. The evidence on union premiums between sectors is mixed, although the premium tends to be higher in the private sector. However public sector union workers do not do much better than private sector union members. The magnitude of all of the wage differentials discussed are sensitive to the estimation technique and data source used. The most common explanation for the public sector wage premium is economic rent accruing to government workers, although the public sector wage determination literature suggests that the differential is due to returns to political and 'vote producing' activities not relevant in the private sector.     

The impact of minimum wages on wages,work and poverty in Nicaragua

In this paper we use an individual- and household-level panel data set to study the impact of changes in legal minimum wages on a host of labor market outcomes including: a) wages and employment, b) transitions of workers across jobs (in the covered and uncovered sectors) and employment status (unemployment and out of the labor force), and c) transitions into and out of poverty. We find that changes in the legal minimum wage affect only those workers whose initial wage (before the change in minimum wages) is close to the minimum. For example, increases in the legal minimum wage lead to significant increases in the wages and decreases in employment of private covered sector workers who have wages within 20% of the minimum wage before the change, but have no significant impact on wages in other parts of the distribution. The estimates from the employment transition equations suggest that the decrease in covered private sector employment is due to a combination of layoffs and reductions in hiring. Most workers who lose their jobs in the covered private sector as a result of higher legal minimum wages leave the labor force or go into unpaid family work; a smaller proportion find work in the public sector. We find no evidence that these workers become unemployed.Our analysis of the relationship between the minimum wage and household income finds: a) increases in legal minimum wages increase the probability that a poor worker's family will move out of poverty, and b) increases in legal minimum wages are more likely to reduce the incidence of poverty and improve the transition from poor to non-poor if they impact the head of the household rather than the non-head; this is because the head of the household is less likely than a non-head to lose his/her covered sector employment due to a minimum wage increase and because those heads that do lose covered sector employment are more likely to go to another paying job than are non-heads (who are more likely to go into unpaid family work or leave the labor force).     

The effects of wage compression on unemployment and on the intersectoral distribution of employment: a dynamic model

A two-sector economy is modeled in a dynamic general equilibrium framework. If the steady state emerging in the absence of a minimum wage exhibits unemployment, the imposition of a binding wage floor lowers employment in the service sector without affecting employment in manufacturing. The wage differential between the two sectors shrinks and the quality of the service improves, but unemployment increases. In contrast, if this steady state exhibits full employment, a binding (but relatively low) minimum wage may bring about a more egalitarian income distribution and upgrade the quality of jobs in the service sector, without creating unemployment.     

On Kin Groups and Wages in the Ghanaian Labour Market

A common feature of African societies is that individuals belong to kin groups which impose reciprocal obligations upon their members. In the modern economy, where large scale production is required, forms must employ multiple kin groups. In such cases kin groups will try to favour their own members in the assignment of good jobs. We analyze the effects of kin group patronage in the modern sector. We set out a model in which kin group favouritism is shown to give rise to a wage premium for the largest kin group. We then use an unusually rich data set from Ghana to test for kin group favouritism, empirically distinguishing it from 'taste for discrimination'. We find that in the private sector there is no evidence for kin group patronage and earning functions (corrected for selection into the various sectors) reveal that workers are paid according to their human capital attributes. By contrast, public sector workers are rewarded for their credentials and membership of the right kin group, not for their productive characteristics. The kin group premium is about 25 percent and is statistically robust to alternative specifications.     

The government wage bill and private activity

We estimate the macroeconomic effects of public wage expenditures in U.S. data by identifying shocks to public employment and public wages using sign restrictions. We find that public employment shocks are mildly expansionary at the federal level and strongly expansionary at the state and local level by crowding in private consumption and increasing labor force participation and private sector employment. Similarly, state and local government wage shocks lead to increases in consumption and output, while shocks to federal government wages induce significant contractionary effects. In a stylized DSGE model we show that the degree of complementarity between public and private goods in the consumption bundle is key for explaining the observed heterogeneity.     

Pre-crisis reforms,austerity measures and the public-private wage gap in two emerging economies

This paper analyzes crisis adjustments of the public and private sectors in two emerging market economies, Croatia and Serbia, during the 2008–2011 period. It focuses on public-private wage gaps at the onset of and during the crisis, decomposed into structural and composition effects using an extension to the Oaxaca-Blinder method based on Recentered Influence Function (RIF) regressions and reweighting. The main results indicate that at the beginning of the crisis public sector workers in both countries enjoyed a significant wage premium, with the premium in Serbia being about three times higher than in Croatia. During the crisis, both countries experienced a similar increase of the premium, with Croatia reaching the size of gap usually estimated for EU countries, while Serbia stayed largely ahead. The results also show that the wage distribution in the public sector is more compressed than in the private sector in both countries, which is further exacerbated by the crisis. Despite the introduced austerity measures, public sector workers continue to enjoy well-protected and privileged jobs in terms of wages relative to their private sector counterparts. Structural reforms undertaken prior to the crisis played a decisive role in determining the countries’ responses to the crisis.     

The decentralisation of employment relations in the British public sector

The aim of this article is to investigate differences between the British public and private sectors in terms of the decentralisation of employment relations. Drawing on data from the 1998 Workplace Employee Relations Survey, the article arrives at three main conclusions. First, the analysis reveals that while local‐level managers in both sectors have similar levels of responsibility for employment relations issues, those in the public sector are, on the whole, significantly less likely to be able to exercise authority. Second, the results indicate some marked variations in practice within the public sector, with managers in education having the greatest level of authority. Finally, the article explores the extent to which differences in local‐level authority between the public and private sectors can be explained by higher‐level collective bargaining, and the presence of higher‐level personnel specialists. These factors have only a partial influence, and do not fully explain why local‐level employee relations managers in some areas (notably health) are less able to exercise authority than their counterparts in the private sector.     

Identification issues in the public/private wage gap,with an application to Italy

This paper reviews some of the standard assumptions that are imposed in order to estimate the average public/private wage gap and that are mainly related to the possible selection of the sector. There are two contributions to the existing public/private wage gap literature. One is a better understanding of the identified parameters: standard estimators identify a local effect (LATE), which in general cannot be generalized to the entire population, as instead is almost always done. The other is the partial identification of the population average treatment effect, with an instrumental variable. To the best of my knowledge, this is the first paper in this literature that employs bounds. The technique is applied to male workers in Italy. For compliers, LATE estimates a wage advantage from working in the public sector greater than 30%. This return is within the narrowest bounds on the population average treatment effect that are consistent even with a much smaller gap (about 15% or more).     

Flexible Working Practices In the Public,Not-For-Profit and Commercial Leisure Sectors In SCotland

Public sector leisure managers in the UK have been struggling, since the extension of compulsory competitive tendering to leisure management in 1989, to reconcile the conflicts between becoming more consumer led and satisfying the needs of the ‘recreationally deprived’. Rationalization has ensured that a fundamental priority for managers has been the introduction of more cost-effective working practices. This article examines the diversity in employment practices across the three sectors of the leisure industry, that is, the public, not-for-profit and private sectors. The case study evidence presented found clear differences between the sectors. Although managers in not-for-profit leisure facilities have more freedom to use greater flexibility in employment practices as compared with their public sector counterparts, they are still somewhat constrained by having to meet the social objectives set by their Board of Directors. Private sector managers were found to be providing the highest proportion of full-time jobs, although they offered lower conditions of employment. This was made possible by the funding certainties created by regular monthly/annual customer memberships.     

Are public sector personnel managers the profession's poor relations?

This article is concerned with differences between personnel practitioners in the private and public sectors. Drawing on survey and interview data from practitioners in both sectors, the authors report that public sector practitioners are less well‐qualified and are paid less than their private sector counterparts. Very few practitioners move between the sectors, suggesting the existence of separate and self‐contained career structures. It is argued that this is not a separation of equals, and is maintained partly by the existence of a system of myths and stereotypes which have the effect of discouraging able professionals from entering the public sector. The article considers the reasons for the continuing differences and the separation, particularly in the light of public sector reforms which might have been expected to have diminished them. The implications for personnel management in the public sector and for the personnel profession in general are then discussed.     

WHAT HAS 20 YEARS OF PUBLIC–PRIVATE PAY GAP LITERATURE TOLD US? EASTERN EUROPEAN TRANSITIONING vs. DEVELOPED ECONOMIES

This paper surveys the literature on public–private sector pay differentials based on 20 years of research in transitioning countries of Eastern Europe (EE) and compares the results with estimates obtained from developed market economies. The majority of empirical studies from EE economies found evidence of public sector pay penalties during the period of economic transition from a communist to market‐based economy. In developed economies, however, the average differential is usually around zero or positive. The public sector pay inequality reducing effect relative to the private sector is greater in transitioning economies than in developed economies. Nevertheless, there is evidence that the sign of the public sector pay gap as well as the relative public sector pay distribution change with the progress of economic transition towards those usually observed in developed economies. Different pay‐setting arrangements between private and public sectors and competition for workers seem to be major arguments for the existence of systematic pay differences between the two sectors.     

Minimum wages,wages and employment in various sectors in Honduras

This paper contributes to our understanding of the impact of minimum wages on labor markets of developing countries, where there are often multiple minimum wages and compliance is weak. We examine how changes in more than 22 minimum wages over 1990–2004 affect employment, unemployment and average wages of workers in different sectors, defined by coverage under the legislation. The evidence suggests that minimum wages are effectively enforced only in medium and large-scale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a relatively large reduction in employment of ? 0.46%. We find that public sector wages emulate minimum wage trends but the higher cost of labor does not reduce employment there. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed; yet, higher minimum wages may create more unemployment. We conclude that (even under our upper bound estimate of the effect on the wages of workers) the total earnings of workers in the large-firm covered sector fall with higher minimum wages in Honduras, which warrants a policy dialogue on the structure and level of minimum wages.     

Singing the same song: translating HRM messages across management hierarchies in Australian hospitals

The management of expatriation has grown in importance as the numbers of multinational companies has grown significantly since the 1970s. However, public and non-government sector organizations have long traditions of managing expatriates. This paper presents the results of research that compared the manner in which Australian private, public and non-government sector organizations selected their expatriates. The results confirm the numerous reports in the international human resource management (IHRM) literature that, in private sector organizations, selection is carried out largely on the basis of technical competence, with minimal attention being paid to the interpersonal skills and domestic situations of potential expatriates. The limited role of HR managers in this process is also identified. The selection practices of public sector organizations reflect the merit selection policies of this sector. The non-government sector organizations' selection practices differ markedly from those of the organizations in the other two sectors, in that psychological testing is widely used and the family is treated as a unit and included in the selection process.     

Convergent and divergent country trends in coordinated wage setting and collective bargaining in the public hospitals sector

Drawing on the findings of research in the public hospitals sector in five European countries 1 —France, Germany, the Netherlands, Norway and the UK—this article assesses the character of change in wage setting and collective bargaining. It demonstrates the diversity of national arrangements by comparing key characteristics: (i) the bodies of collective representation (unions, professional associations and employer bodies); (ii) the degree of integration with the wider public sector framework; (iii) coordination (or competition) with the private hospitals sector; and (iv) the practice of à la carte provisions within individual hospitals. Despite national varieties of wage setting and collective bargaining, each country sector faces similar tensions—most notably the opposition between public (labour market) rules and health (product market) rules, and pressures to segment or integrate employment conditions by labour force group. By examining the nature of change in institutions for wage setting and collective bargaining in each country, the article contributes to our understanding of the extent of coordination and change of public sector wage setting and describes three scenarios: fragmentation (Germany); continuity (France and the Netherlands); and reconstruction (the UK and Norway).     

The effect of the public sector on private jobs: Evidence from the West Bank

This paper estimates the short run effect of creating more public jobs on private employment in the occupied West Bank. Unlike most cited research, the results provide evidence that favors crowd-in effect both at the aggregate employment level and across sectors. A main contribution of the paper is to empirically explore the underlying mechanisms that drive the results. They include positive public employment effect on local demand, lack of public wage premium, as well as no effect on private wages. It turns out that an increase in the local labor force participation is a driving factor for the latter channel. Interestingly, the increase in labor force participation exceeds that of public and private employment, leading to an increase in the number of job seekers.     

A multiregional planning and forecasting model with special regard to the public sector

Despite the magnitude of the public sector and its rapid growth most multiregional economic models are lacking public sector content. The present paper aims at incorporating some of the roles of the public sector in the regional development. It is done within the framework of a multiregional optimization model for the allocation of private and public investment, production, employment (and population) over economic sectors and regions. By choosing appropriate objective functions, the model may be used for either planning or forecasting purposes. In the model the focus is on the public sector as a service and provision body and as a provider of public infrastructure. Its role as an agent for transfer payments is not stressed. The capacities of the model are illustrated by means of an example concerning Swedish regional development 1977–1983.     

Understanding wage restraint in the German public sector: does the pattern bargaining hypothesis really hold water?

German public sector wage restraint has been explained through the presence of a specific type of inter-sectoral wage coordination in the industrial relations system—that is, export sector-led pattern bargaining. First, as a literature-assessing exercise, this paper reviews the literature in industrial relations and comparative political economy (CPE) and finds that (i) the origins and mechanics of inter-sectoral wage coordination through pattern bargaining have never been laid out clearly; (ii) that the mechanisms of the pattern bargaining thesis have never been tested empirically; and (iii) that the CPE literature reveals an export-sector bias. Second, as a theory-testing exercise, hoop tests are performed to verify the pattern bargaining hypothesis. The key finding is that Germany cannot be considered a case of export sector-driven pattern bargaining, opening a new research agenda for the study of public sector wage setting centred on public sector employment relations, public finance, public administrations and the politics of fiscal policy.     

Sustainable procurement in Malaysian organizations: Practices,barriers and opportunities

The purpose of this study is to uncover the extent of sustainable procurement practices amongst procurement directors/managers employed in public and private sector organizations in Malaysia, a developing country where socialization is underpinned by religious beliefs. The results showed there is a significant variation in the adoption of sustainable procurement across the sectors with the private sector registering significantly higher levels of SP practices than their public counterparts. Lack of awareness posed the most significant barrier to sustainable procurement implementation regardless of organizations or sectors whilst improved working conditions, an organization׳s/council׳s/public image, and organizational efficiency and transparency provided optimal opportunities for implementing sustainable procurement practices. Finally this study identified the two new factors of religion and sense of humanity as influencing an employee׳s engagement in sustainable procurement practices.     

The returns to formality and informality in urban Africa

This paper addresses the questions as to the size and causes of earnings differentials in two urban African labor markets, those of Ghana and Tanzania. We have panel data so we can ask how far time invariant unobservables, market ability for short, matters in the determination of earnings. We also have information on whether the individual is own self-employed, self-employed with employees, a private or public sector wage employee and the size of the enterprise in which wage employees work or which the self-employed owns. We find, mirroring work on developed economies, that unobserved individual market ability is by far the most important factor explaining the variance of earnings. With controls for such ability the gap between private wage employment and civil servants is about 50%. With controls for enterprise size we find that wage employees earn the same as the self-employed in both Ghana and Tanzania. Enterprise size matters. At most half of the OLS effect of size on earnings can be explained by unobservable ability. Workers in the largest firms are the high earners with wage rates which exceed those of civil servants. These results all assume exogenous movement. We find evidence that endogeneity bias may be serious and may be understating the extent of both the size effect and the private sector wage (negative) premium. The implications of our results for understanding the nature of formal and informal employment in Africa are discussed.     

Minimum wage effects in a developing country

The available empirical minimum wage literature, which is mostly based on US evidence, is not very useful for analyzing developing countries, where the minimum wage affects many more workers and labour institutions and law enforcement differ in important ways. The main contribution of this paper is to present new empirical evidence on minimum wage effects for a large developing country, Brazil. Using a monthly household survey panel from 1982 to 2004 I find evidence of a wage compression effect for both the formal and informal sectors. Furthermore, I find no evidence of employment effects in either sector.