Public-Private Sector Wage Gap in Australia: Variation along the Distribution

Abstract

Previous research on public-private wage differentials in Australia has focused on the mean of the conditional wage distribution. Using six waves of the Household, Income and Labour Dynamics in Australia survey, this study employs quantile regressions to examine whether the sectoral wage effect varies along the wage distribution. For females, public sector wage premiums are relatively stable for almost the entire distribution. For males, they decrease monotonically and are negative for the top half of the distribution. The decomposition results show that the observed differences in individuals and job characteristics explain a substantial proportion of the sectoral wage gap.b jir_773 362..390

Public–Private Sector Wage Differentials in Australia

“…Using data from the 14 waves (2001–2014) of HILDA, this paper investigates empirically the wage differentials between the public sector and the private sector in Australia. This paper is similar to Birch () and Cai and Liu () in the sense that we all focus on the sectoral wage effects over the full wage distribution. However, unlike Birch () and Cai and Liu (), we utilise the panel aspects of the HILDA data, which allows us to deal with the correlation between sector choice and unobserved heterogeneity by controlling for individual fixed effects (FE).…”

“…() conclude that the mean public–private earnings differentials can be fully explained by differences in individual characteristics and job characteristics between the two sectors, indicating that there is no public sector earnings premium in Australia. In contrast, Vella () and Cai and Liu () find that a significant wage premium remains for women, but men have no (Vella, ) or a negative (Cai & Liu, ) public sector premium once observable productivity characteristics are taken into account.…”

“…A number of studies examine the public–private pay gap in Australia (Vella, ; Borland et al., ; Birch, ; Cai & Liu, ; Siminski, ). For the most part the findings of the Australian studies are similar to those above.…”

Wage differentials between immigrants and the native-born in Australia

“…To increase the sample size and thus the accuracy of the estimated distribution, we followed others' footstep to pool six waves of the HILDA survey available at the time of writing this paper (e.g. Forbes et al, 2010;Cai and Liu, 2011). Another reason for pooling the data is that sufficiently large sample sizes are important in bootstrapping the standard errors of the decomposition results [7].…”

“…We included the union variable in the analysis not for capturing the effects of the entire workplace relations; rather, it is because unions have been found in numerous studies to have an impact on wages even after controlling for other variables (e.g. Cai and Liu, 2011).…”