Published: August 2015

The unadjusted public–private sector pay differential has attracted considerable political interest over many years. It has been used to justify changes to pay-setting arrangements and the imposition of pay restraint on the public sector. However, previous analyses have shown that a large part of the premium can be explained by differences in individual and employment characteristics. This chapter, drawing on the evidence of the British Skills and Employment Surveys, takes that approach a step further by additionally examining sector differences in the intrinsic quality of work which may further contribute to explaining the pay gap. The chapter challenges the suggestion that working in the public sector attracts a ‘double premium’ of better pay and better-quality jobs. Rather, it suggests that the public sector premium compensates for differences in the non-monetary aspects of work between sectors.

Keywords
public sector pay premium, compensating wage differentials, gender