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February 2017 Policy Study, Number 17-4


Iowa's Privileged Class: State-Government Employees


Why We Measure the Pay Gap



Public Interest Institute looks at the Pay Gap rather than a direct comparison of private-sector and government-sector wages to preclude some of the difficulties that arise when directly comparing the two amounts.  These difficulties were discussed in a 2005 study by Dave Swenson and Liesl Eathington of the Department of Economics at Iowa State University:


First, the private sector is much larger and has a much more diverse array of jobs than the public sector.  Simply on the face of it, one has to assume that the “average” jobs in the public sector and the private sector are substantively different.  Second, the private sector has a large number of part-time and partial-year jobs, while the public sector primarily employs persons full-time and year-round.  Having a substantially higher fraction of part-time, part-year jobs in the private sector, many of which are likely to be earning at the bottom of society’s pay scale, reduces the average wage.  Third, there are historically substantial differences in the mean qualifications of workers in the private sector and in the public sector.  In the private sector, there are proportionately more workers with only a high school diploma or less, while the public sectors employ proportionately more workers with college degrees.  Fourth, many public-sector employees do very different tasks than private-sector employees.  The private sector does not have judges; the public sector does not have investment bankers.[18]


The argument is often made that state-government workers are paid more because they are generally more highly educated than the average private-sector worker, and state-government workers are typically full-time employees.  However, if this is true in Iowa, it is also true across the United States. 


The differences that exist between private-sector and government-sector jobs are not unique to Iowa; these differences exist in all states.  If government-sector jobs in Iowa are substantively full-time and year-round and require more education, is this not also true of government-sector jobs in other states?  If Iowa’s annual average wage for private-sector employees includes a larger number of part-time employees than does the state-government-sector, this is also true in every other state.  Iowa’s state government may include judges and football coaches and university physicians — but so does the government of every other state.


If Iowa has a Pay Gap because of these differences, every other state should have a Pay Gap of a similar size.  But Iowa’s Pay Gap is larger by far than any other state.  These differences may explain, in part, why there is a Pay Gap, but they do not explain why Iowa’s Pay Gap is so much larger than that of other states or why it is the largest in the nation!


Another difficulty encountered in making state-to-state comparisons is the variation in cost of living between locations.  However, the cost of living is the same in each state or location for private-sector workers and government-sector workers.  Thus, in comparing the Pay Gap rather than a direct comparison of pay levels from state to state, differences in cost of living are not a factor.




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