Dundee Discussion Papers in Economics 202: The public-private sector wage differential: gender, workplaces and family friendliness

This study examines the role of individual characteristics, occupation, and workplace features accounting for differences in hourly earnings between male and female fulltime employees in the public and private sectors. Using new linked employee-employer data for Britain in 2004, we find that the nature of the public private pay gap differs between genders and that of the gender pay gap differs between sectors. The analysis shows that essentially none of the gender earnings gap in both the public and private sector can be explained by differences in observable characteristics. Decomposition analysis further reveals that the contribution of differences in workplace characteristics to the public private earnings gap is sizeable and significant. Whilst the presence of performance related pay and company pension schemes is associated with higher relative earnings for those in the private sector, the key workplace characteristic for the public private pay gap is the presence of familyfriendly employment practices. Increased provision is associated with higher relative earnings in the public sector for both men and women.