What we’ve been reading about public sector employment and wages

This reading list is based on the September 2021 edition of the Knowledge4Jobs newsletter, curated by the World Bank’s Jobs Group and the Social Protection & Jobs Labor & Skills Global Solutions Group. Click here to sign up for the Knowledge4Jobs newsletter.

The public sector employs roughly one-third of the global workforce and nearly half of all formal sector workers in low-income countries.  Moreover, public sector employees’ wages have an impact on pay setting in the rest of the economy. Public sector employees, in general, receive more generous compensation — both higher wages and larger benefits — compared to similar private sector employees. And the public sector is a relatively larger employer of women than the private sector and offers fairer, though still lower, wages compared to men.  This has important implications for economic opportunities for women.

However, if appropriate policies are not implemented, positive gains from public sector employment may exacerbate existing worker inequalities and increase labor rigidities.  For example, in cases where public sector employees receive a higher compensation premium than private sector employees, this can crowd out job seekers in the private sector and lead to skill shortages in the private sector.

In this reading list, we feature publications that contribute to the small but rapidly growing body of knowledge on public sector employment and its implications for state capacity and service delivery. Finally, we present a selection of articles that discuss the broader jobs agenda as well as COVID-19 related articles.

Essential Readings

The Worldwide Bureaucracy Indicators is a cross-national dataset on public sector employment and wages that will help governments make more informed decisions on interventions. Read the World Bank Bureaucracy Lab’s report outlining main findings and methodology. (World Bank, August 2021)

Public sector employees enjoy a significant wage premium over their private sector counterparts, and the disparity is greater in low-income countries. (Finan et al, National Bureau of Economic Research, December 2015)

When the public sector is compared to only the formal private sector, the earning premium in the public sector disappears. (Gindling et al, World Development, February 2020)

The public sector hires disproportionally more women than men in the United States, the United Kingdom, France, and Spain. (Gomes & Kuehn, IZA, October 2019)

Broader Jobs Agenda

Promoting productive jobs, facilitating the shift in economic activities, and improving the skills of the workforce will assist Indonesia in creating better jobs after COVID-19. (Wihardja & Cunningham, World Bank, June 2021)

This report aims to inform Somalia's economic policy dialogue and broader debate about the types of reforms needed to stimulate growth and job creation. (World Bank, June 2021)

A practical guide for measuring labor: The Living Standards Measurement Study ( guidebook advises statisticians and survey practitioners on the accurate measurement of employment and work in the context of multi-topic household surveys. (Durazo et al, World Bank, August 2021)

This paper’s findings suggest that both intra- and inter-sectoral reallocation have become important drivers of aggregate labor productivity convergence. (Dieppe & Matsuoka, World Bank, September 2021)

COVID-19 Related Articles

The labor market impact of COVID-19 lockdowns: Evidence from Ghana. (Schotte et al., IZA, August 2021)

To document the impact of the pandemic by occupation, gender, and family status, this paper examines real-time data on employment, unemployment, labor force participation, and gross job flows. (Albanesi & Kim, American Economic Association, 2021)

Women with children under the age of six account for nearly a quarter of the unanticipated COVID-19 employment loss. (Melinda Pitts, Federal Reserve Bank of Atlanta, September 2021)

There is evidence of a significant employment recovery in developing countries between the second and third quarters of 2020, but it stalled in the fourth quarter. (Newhouse & Weber, World Bank, September 2021)