Public sector wage premium in Serbia: evidence from SILC data

Abstract

In many European countries, employees in the public sector have higher average wages than workers in the private sector. This difference can partially be explained by better characteristics of the workers in the public sector, such as higher level of education or more work experience. However, previous research shows that even after we control these characteristics, the public sector pays higher wages i.e. that, in many European countries, there is a public sector wage premium. In other words, workers in the public sector earn more than the workers in the private sector, for the "same" job. Historically, in Serbia, public sector wage premium went from significantly negative, i.e. higher wages in the private sector (in 1995), to moderately positive premium (in 2008). This paper aims to assess the wage gap between the public and private sector in Serbia, using Survey on Income and Living Conditions (SILC) data from 2013 and the wage decomposition methodology. In addition to providing new data on the gap in wages and public sector premium in Serbia, this paper aims to provide a better understanding of how different characteristics of the workers in the private and public sector affect the gap in wages. Results show that in Serbia, in 2013, average hourly wage in the public sector was by 33.4% higher than in the private sector. As public sector workers have higher levels of education and are more likely to work in better paid jobs than workers in the private sector, the estimated value of the public sector wage premium is 17.2%. The estimated value of the public sector wage premium in Serbia is relatively high, when compared to the other European countries