Should Private Sector Pay Look More Like Public Sector Pay?

There's a big fight over a new study comparing public and private sector compensation in California. That fight is part of a larger battle over whether pension benefits are too generous for public workers here.

What struck me is what lessons the study had for the private sector in California. In particular, the study found far greater inequality in the private sector than in the public sector in the state, even when controlling for different kinds of jobs. Low-level and service workers were paid less in the private sector than they are for comparable work in the public sector in California. And highly-skilled and education workers -- those on the top end -- are paid far more in the private sector than the public sector.

This begs the question: what lessons could the private sector learn from the public sector about salaries? Because these findings on the private sector show evidence of two serious problems. The first is that working families in the private sector aren't making enough to make ends meet. The second is that pay at the highest levels of the private sector rises without any connection to performance or value creation for shareholders in private companies. The public sector seems to have solved some of these problems.

Of course, public and private are by their nature different animals, but a study like this should be the start of a big conversation about compensation across the board, instead of a narrow one about public pension benefits.

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