Earnings of Public Sector and Private Sector Employees in Australia: Is There a Difference?*

This study examines differences in average weekly earnings between public sector and private sector employees in Australia. In the 1990s average weekly earnings of full‐time public sector employees were higher than for full‐time private sector employees by 10 to 15 per cent for males and 20 to 25 per cent for females. A variety of decomposition tests are applied to examine the sources of this inter‐sector difference in average weekly earnings. The tests generally show that higher average weekly earnings of public sector employees are wholly explained by inter‐sector differences in productivity‐related characteristics of employees and job characteristics in each sector.