A Critical Analysis and Understanding of Wage Differentials Between Public and Private Sector

Abstract

The study explores the intricate relationship between wage differentials and the diversity of occupations and industries within a country's economic landscape. The premise is that specific jobs, each requiring distinct skills, are remunerated differently, whether within the same industry or across diverse sectors. Economists acknowledge that individual wages are influenced by a complex interplay of employee and employer characteristics, yet the precise magnitude and dynamics of these effects remain elusive. This knowledge gap arises from the scarcity of microdata linking individuals to their respective workplaces and the inherent challenges in disentangling the contributions of employees and employers to wage differentials. To bridge this gap, the paper leverages microdata obtained from the Occupational Employment Statistics program at the Bureau of Labor Statistics, providing a comprehensive dataset encompassing over half a million establishments across all economic sectors. This dataset includes wage information for more than 34 million individuals engaged in over 800 distinct occupations. The aim of the study is to conduct a comparative analysis of existing wage differentials between the public and private sectors.