Pay, Productivity, and the Public Sector: The Case of Electrical Engineers

Much disagreement over the status of public pay arises from the comparisons made. governments compare equivalent jobs while economists compare equivalent workers. We pursue a compromise: we apply the economists' model of salary determination of statistically equivalent workers to a sample restricted to people in equivalent jobs-electrical engineers in the public and private sectors. We also explicitly consider the possibility that privatesector workers are more productive than comparable publicsector workers. We find that public-sector workers indeed may be less productive, but these differences do not explain the pay gap: public-sector workers still earn less than comparable workers in the private sector. Workers in the defense contracting sector also appear to be less productive than comparable workers in the nondefense private sector, but there are no pay differences between these sectors.