Study: Public workers underpaid vs. private peers

State and local government employees are undereducated and overpaid relative to their private-sector peers is truly an urban myth in New England, a pair of Massachusetts researchers say.

In fact, state and local government workers actually are underpaid given that they are equally educated and experienced as their counterparts in the private sectors, according to University of Massachusetts researcher Jeffrey Thompson and John Schmitt, of the Center for Economic Policy Research.

The wage penalty for state and local government workers in New England is close to 3 percent, according to their new study, The Wage Penalty for State and Local Government Employees in New England.

"If you simply compare the wages in the public and private sector, you end up learning more about the skill levels of those workers than about the sector where they work," Thompson says in a statement announcing the study findings. "All that comparison tells you is that state and local government workers in New England are more highly educated and more experienced than their counterparts in the private sector. But once you properly control for education and experience, it becomes evident that public sector workers get lower wages."

More than half of state and local government employees in New England have a four-year college degree or more, and 30 percent have an advanced degree. By contrast, only 38 percent of private-sector workers have a four-year college degree or more; and only 13 percent have an advanced degree.

In New England, the typical state and local worker is also about four years older than the typical private-sector worker.

The wage gap becomes more significant at higher-paid professional levels. The lowest paid government workers do earn slightly more than their private counterparts (in other words, the state tends to pay its lowest-wage workers better than, for example, Wal-Mart does), but for engineers, professors, and the like, the wage penalty for working for a New England state or local governments rises to almost 13 percent.

These wage differences are also found across workers with different levels of education: high school graduates in the state and local sector in New England, for example, have a small wage premium (less than 2 percent) relative to the private sector, while those with bachelor's degrees experience a wage penalty of 7 percent.