Comparing Benefits and Total Compensation between Similar Federal and Private-Sector Workers

Abstract

I integrate Current Population Survey data from 2005 through 2010 with data on a wide range of employee benefits to compare the cost of those benefits for federal employees and for workers in the private sector who have similar observable characteristics. Federal benefits were about 48 percent higher, on average, than the benefits received by similar private-sector workers, which led to roughly a 16 percent difference in total compensation (the sum of benefits and wages). Much of the higher cost of federal benefits stems from differences in retirement benefits. The government provides employees defined-benefits pensions and subsidized health insurance in retirement; arrangements that have become uncommon in the private sector. The distribution of compensation also differed between the sectors, such that less-educated federal workers tended to earn much more than their private-sector counterparts, whereas highly-educated workers tended to receive higher compensation in the private sector.

Comparing Federal and Private‐sector Wages Without Logs

“…Analyzing differences in overall compensation would involve quantifying the value of the fringe benefits—such as pensions or other employer contributions to retirement savings—provided in each sector. That issue is addressed for federal employees in Falk () and for employees of state and local governments in Gittleman and Pierce (, ).…”

Unexpected Pathways: Criminal Justice Career Options in the Private Sector

“…Falk (2012) found that employees with less education have more total compensation (i.e. health insurance, retirement packages) at the federal level than their counterparts in the private sector.…”

“…As employee education increases, the opposite becomes true. Individuals with a professional degree or PhD receive more total compensation in the private sector than at the federal level (Falk, 2012).…”

Not All Education Is Created Equal: How Choice of Academic Major Affects the Racial Salary Gap

“…Brown and Medoff (1989) found that larger employers, on average, pay higher salaries. Likewise, the public sector, on average, pays less compared with the private sector, especially in those occupations requiring a college degree or a postbaccalaureate degree (Falk, 2012; Keefe, 2012). Adding binary controls for employer size and for federal or state government employment, excluding higher education, the differential rises to 8.9%.…”