Authors: Prof. David Blackaby, Prof. Philip Murphy, Nigel O’Leary and Anita Staneva, Swansea University

Day One – Tuesday 25th June

Strand – Labour Markets

Session Three: 4.30pm – 6pm

Recent evidence from the Institute of Fiscal Studies (IFS)  revealed a public/private sector pay premium of around 8% and  found substantial differences  in the region pay premium. However, the IFS study does not control for  a number of  factors which have been found to influence  pay, including organisational size, job tenure and managerial responsibilities. Without controlling for these factors  the IFS work may over estimate the size of the public/private sector pay differential.. The current paper uses data from the Labour Force Survey (LFS) over the period 1994-2012 to examine the UK public-private wage differential and to assess regional variation in the differential over time. For the regional analysis in order to increase the sample size a three year rolling window of data is used.

The UK LFS data has a number of  characteristics not used by the IFS which have been found to significantly influence earnings and these characteristics are added to the earnings equation and their influence on the public/private sector pay premium  examined. When these additional controls (organisational size, job tenure and managerial responsibilities) are included pay differences are reduced significantly.. The estimated public sector premium is also found to be  higher for women than for men. Quantile regression analysis also reveals that  the pay gap is wide at the lower end of the pay distribution than at the top, which may have implications for recruitment and retention of more skilled and experienced employees in the public sector.

Please click here to download presentation.