Dale Belman, Ph.D. & John Heywood, Ph.D.
The setting of public sector compensation should command the attention of all citizens. The level of such compensation helps determine both the competence and efficiency of government services. Too high a level wastes the resources of state and local governments, depriving them of the opportunity to address other objectives or to reduce tax burdens. Too low a level makes it impossible for governments to attract quality workers needed to provide services that citizens demand. This study compares public and private sector compensation in Wisconsin and reaches several conclusions:
- The public sector in Wisconsin tends to pay more than the private sector for occupations at the bottom of the pay and skill hierarchy but tends to pay less than the private sector for occupations at the top of the pay and skill hierarchy. As a consequence, earnings in the public sector are less dispersed (show less range) than those in the private sector.
- The per-person earnings of the state and local sectors are substantially above those in the private sector. However, the state and local sectors consist disproportionately of occupations which generally receive higher earnings, even in the private sector. State and local governments also have a more educated workforce.
- After adjusting for the composition of the workforce (the mix of occupations and the levels of education, among other things), the extent of overpayment in earnings is, on average, modest for the state and nonexistent for the local sector.
- The public sector spends substantially more on fringe benefits than the private sector. The extent of the gap in benefit spending appears greater than for earnings. However, benefit comparisons are extremely difficult to make and more future attention should be applied here than to earnings per se.
