Do Relative Wages Matter for Public-Sector Retention?

We study how relative wages are associated with sectoral exit across public-sector branches in the Netherlands. Sectoral exit is defined as no longer being employed in the same public-sector branch one year later. Using administrative individual-job data from Statistics Netherlands covering 2013–2022, we apply one-to-one nearest-neighbor propensity score matching on individual and job characteristics to compare public-service workers with similar workers employed outside the focal branch. The resulting wage differential provides a relative earnings benchmark rather than a direct measure of each worker’s actual outside option. We subsequently estimate logit models and report average adjusted predicted probabilities of sectoral exit. We find that lower relative hourly wages are associated with higher probabilities of sectoral exit in national government, municipalities, police, the military branch of defense, and healthcare. In contrast, wage differentials play a limited role in water management, provinces, and the justice department. In education, higher relative wages are associated with higher probabilities of sectoral exit. These estimates describe conditional correlations and should not be interpreted as causal effects of wages on exit. This paper contributes to the literature by documenting heterogeneity in the relationship between relative compensation and realized sectoral exit across a broad set of public-sector branches.