RIPEC Releases Study on Public and Private Sector Compensation in RI

Today, the Rhode Island Public Expenditure Council released a report comparing compensation in Rhode Island for a number of occupations between the public and private sectors, and across New England and the United States at large.

The report uses data from the Current Population Survey and the Bureau of Labor Statistics to examine both the composition of, and compensation patterns in the public and private sector workforces in Rhode Island, New England and the United States.  Education, age, wage and salary data were extracted from the Current Population Survey data, while total compensation was calculated using estimates provided by the Bureau of Labor Statistics.  The report provides a broad overview of workforce composition and compensation across the two sectors and examines eight specific occupations that represent a range of educational requirements and pay grades.

The report’s findings were consistent with other analyses of public and private sector wages.  Specifically, the public sector has higher compensation levels than the private sector on average.  However, the public sector also tends to have higher levels of education and be slightly older.  Moreover, jobs in the public sector tend to be concentrated in higher-paying professions (such as teaching and nursing) when compared to the private sector, where jobs tend to be lower-paying (e.g. cashiers and retail salespersons).  In addition, the report finds that benefits play a larger role in public sector compensation when compared to the private sector – largely driven by health care and retirement costs.  At the same time, it appears that firm size has an effect on the percent of total compensation accounted for by benefit costs, although the specific mix of benefits varies between the public and private sectors.  

Another finding of the report – consistent with other analyses of public and private sector compensation – is that higher-paid occupations such as lawyers and IT professionals appear to face a larger wage penalty in the public sector, compared to lower-wage occupations.  While public sector benefits mitigate the impact of this wage gap, it raises questions about the state’s overall personnel structure.  Specifically, the ability of state and local governments to attract and retain top talent in the context of a government that is affordable to the taxpayer.  As such, the report points to the need for a larger discussion of government reorganization.  Reevaluating service delivery and government structure is a necessary step towards both long-term fiscal sustainability and a more effective and efficient system of governance in the Ocean State

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