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Last updated: 9 May 1996
Average earnings in the public and private sectors
Please note: This document is for reference purposes only and is no longer considered by the APS Commission to be current. It may contain good practice advice and/or advice on the transitional arrangements between the 1922 and 1999 Public Service Acts.
The former Statistical Research and Development Unit of the Public Service Commission (now part of the Human Resource Planning Team of the PSMPC) undertook extensive analysis of several data sources from the Australian Bureau of Statistics on the relative earnings of employees in the public and private sectors, to determine whether there are systematic differences not accounted for by differences in skill levels.
The results of this work have now been published in summary form in State of the Service Paper No. 13 with the above title. This is available through the Australian Government Publishing Service or from the Commission. A detailed working paper on this topic is also available upon request (Working Papers in Statistics No. 1).
Inquiries may be directed to:
Australian Public Service Commission
16 Furzer Street
PHILLIP ACT 2606.
Executive summary
Articles in November 1994 discussed the gaps between average weekly earnings in the public and private sectors, and raised the suggestion that the salaries of public sector employees were relatively higher than would appear to be justified by recent increases in productivity and skill levels in the two sectors.
The Public Service and Merit Protection Commission (PSMPC) has undertaken extensive analysis of several data sources from the Australian Bureau of Statistics (ABS) pertinent to the relative earnings of employees in the public and private sectors, to determine whether there are systematic differences not accounted for by differences in skill levels.
Since the original work was undertaken the PSMPC became aware of research by the Commonwealth Grants Commission (CGC) into very similar questions because of their relevance to arguments about the continued inclusion of differences in labour input costs as a disability factor in determining States Grants. Its research, recently published, broadly supports the PSMPC's findings.
Conclusions
- In considering claims about the relative earnings of those in the public and private sectors, it should be borne in mind that the Australian Public Service (APS) represents only a small proportion of total public sector employment. Commonwealth employment accounts for only 22.4% of public sector employment and 6.2% of all employed wage and salary earners. Those employed under the Public Service Act 1922 comprise only about 9% of all those in the public sector.
- The Average Weekly Earnings survey (ABS Cat. 6301.0 & 6302.0) shows that there has been a steady pattern for many years for all categories of average weekly earnings to be slightly higher in the public than in the private sector. There has been no recent dramatic change. The gaps between public and private sector earnings are noticeably less for males than for females.
- From the survey of the Distribution and Composition of Employee Earnings and Hours (ABS Cat. 6306.0) and from a customised report from the ABS it can be seen that for both males and females the earnings of Commonwealth (general) employees are generally higher than for both public sector ('Other') employees and for private sector employees; that those in local government are generally paid less than those in the private sector; and that those in Commonwealth employment are generally paid a little less than those in the State and Territory government sector. The one exception is for full-time female adult employees, where those in local government are generally paid more than those in the private sector.
- In assessing any suggestions that public sector employees are 'overpaid' in comparison to private sector employees, it is necessary to take account of the relative skills and productivity and the occupational mix of the two sectors. In their article in Australian Economic Indicators John Preston and Louise May said that little of the change in the ratio of public to private sector earnings was attributable to changes in the occupational structure of the private and public sectors. However, they added that desirably 'the earnings of public sector employees should be monitored against the earnings of private sector employees with comparable skills and experience'.
- Over the past decade there have been substantial reforms and productivity improvements in both sectors. In order to determine whether there are systematic differences not accounted for by differences in skill levels the PSMPC examined the available data on educational attainment and occupation to provide an appropriate proxy measure of skill.
- The Survey of Labour Force Status and Educational Attainment (ABS Cat. 6235.0) does not show employed persons by institutional sector, but the breakdown by industry group lends support to the suggestion that higher average earnings in the public sector largely reflect a higher general level of skill.
- Detailed cross-classifications of data from the 1991 Census of Population and Housing by broad occupation group, industry sector (Commonwealth, State, local government, private) and highest level of educational attainment were also examined to obtain a proxy measure of the relative skill levels in each sector. Despite the fact that the Census data are now somewhat dated, and the limitation that a significant number of persons have one or more of the attributes in the 'inadequately described', 'not applicable' or 'not stated' categories, the data show fairly conclusively that there is (or at least there was in 1991) a higher proportion of graduates and diplomates in State and Territory employment than in the Commonwealth, which has a higher proportion than the local government or private sectors. State and Territory employment also has the largest proportion of professional and paraprofessional employees, followed by the Commonwealth.
- Thus it appears that much of the difference in earnings between the public and private sectors is due to generally higher earnings in State public services, where there are higher proportions of professional and skilled staff, and earnings are generally higher than in Commonwealth employment
