Trends in Public–Private Pay Parity in State and Local Governments

Abstract

Have state and local governments (SLGs) achieved pay parity with the private sector? The answer depends on how one defines parity. Using a standard labor economics model on U.S. Census data from 1990 to 2014, we find different patterns if we focus on pay, on pay plus benefits, or on total compensation within an occupation. All approaches indicate that pay is higher in local than in state governments and that Blacks, Hispanics, and employees without college diplomas earn higher pay in SLGs than in the private sector. In contrast, Whites, Asians, and college graduates are less likely to enjoy higher pay working in SLGs than in the private sector. Unsurprisingly, states with more liberal and Democratic legislatures pay public employees better, relative to workers in the private sector.