Second Quarter 2018: A Comparison of Private-and Public-Sector Wages

by Erik Knoder

January 10, 2019

Although most comparisons of private- and public-sector wages use annual averages or wages by industry, looking at the individual wages available from these unemployment insurance records provides a different and interesting picture. Most people are aware that the private sector is larger than the public sector, and that the range of wages that workers receive is quite wide. But seeing these differences in graphs can be surprising. Two important things to note are that wage records for Federal employees are not available, and that no single individual’s wages are presented due to confidentiality laws.

The range of wages paid to Oregonians is so wide that it is difficult to show in one graph. The graphs below start with a detailed look at most workers then zoom out to look at all workers in the second quarter (April through June) of 2018 who were covered by unemployment insurance.

The first graph shows the wage distributions for each percentile of state government, local government, and private-sector workers. (The graph was actually made using one-tenth percentiles to show more detail.) Two obvious results are that most state government workers made more than most local government and private-sector workers, and the lines are not horizontal, some workers made more than other workers.
Also note that towards the top percentiles of workers, the lines cross. About 72 percent of state government workers earned more than local government workers, but the top 18 percent of local government workers earned more than state workers. About 92 percent of state government workers earned more than private-sector workers, but the remaining 8 percent earned more than state workers. And finally about 96 percent of local government workers earned more than private-sector workers, but the remaining 4 percent earned more than local government workers. Workers with wages above the 99th percentile are not shown in this graph in order to show more detail for the lower wage 99 percent of workers.

Although looking at wages by percentile of workers makes it easier to compare workers and wages, it hides the fact that there are many more private-sector workers than public-sector workers. The second graph shows wages by the actual number of workers. There are many more private-sector workers than either state or local government workers. There are also more local government workers than state government workers. Additionally, the highest paid group of state workers had an average quarterly wage of about $83,000, but some local government and private-sector groups made more than this and are shown as hitting the $100,000 maximum shown on the graph.
The higher-wage workers, those making more than $100,000 in the quarter, were excluded in order to show more detail for the lower-wage workers. Also, just representative samples of workers are used due to the difficulty of graphing wages for millions of Oregon’s workers.

A main purpose of this second graph is to show that a very small number of high-wage earners causes the lines to become nearly vertical. And also that most workers don’t earn these high wages; the lines do have curved sections that show wage variation. This detail is difficult to see in the last graph that includes the very high wage earners.

The last graph shows wages for all the previous workers plus the wages for the very high wage earners. Although most of the information is the same as in the second graph, it appears quite different due to the significant difference in wages between the top earners and most workers.
First, note the relative size of the different sectors. The private sector has about 46 times as much employment as state government and it has more than eight times as much as local government. Although a relatively large private sector may make for a very dynamic economy, it contributes to Oregon’s economic sensitivity to recessions – the public sector in Oregon simply isn’t large enough to provide much economic stability in downturns.

Secondly, note that wage variation is very much dominated by a small number of private-sector workers. The top group of private-sector workers has quarterly earnings in excess of $6 million. Although top state and local government workers make wages that many of us would envy, the high wages are confined to the private sector. Local government includes state universities, and The Wall Street Journal recently reported that the highest paid public employee in 39 states was a basketball or football coach. The paper reported a University of Oregon coach as Oregon’s highest paid public employee, but even the coach’s salary was dwarfed by top private-sector wages.

Wages vary for many reasons. The public and private sectors differ by the types of occupations they employ and the tenure, education, and experience of their workers. But one simple difference is the number of hours employees work. In the second quarter of 2018 state government workers averaged about 34 hours per week of work versus 29 hours for local government workers and 27 hours for private-sector workers.

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