1. public employment (consequences on public – private wage differences)
1st Vienna Conference on Western Balkan Labour Markets
Vienna, April 2017
Vojin Golubovic

2. Some features of WB countries
Big public sector size
High share of public sector wage bill as % of government expenditures and GDP
Higher level of employment protection in the private sector (for some countries) compared to OECD average

3. Country
Share of the public sector employment
Share of public sector wage bill in total government expenditure
Share of public sector wage bill in the GDP
Albania
16.6%
24.2%
6.9%
Bosnia & Herzegovina
30.2%
27.5%
10.6%
Kosovo
32.6%
28.0%
8.0%
Macedonia
22.4%
18.6%
5.9%
Montenegro
30.4%
26.9%
9.3%
Serbia
28.4%
24.7%
9.8%
OECD
22.0%
14.7%
5.4%

5. Public-private wage differences?
Employees in the public sector have, on average, higher wages than workers in the private sector (European Commission, 2014)
Partially, these differences can be explained by the better characteristics of workers from the public sector (higher levels of education, more working experience, etc)
Public sector wage premium – what are the differences in wages for “the same job”, i.e. when we control for these characteristics?

6. EU (2010) (European commission, 2014)
Positive premium
Negative premium
Equal wages

7. Consequences of the public-private wage differences (EC, 2014)
distortions on the labour market (waiting in line for the job in the public sector, or ineficient government)
deteriorate the external competitive position
GDP growth and the overall economic efficiency
Austerity measures
Decreasing wages in the public sector is more efficent than other austerity measures

8. Public private wage differences in the WB
Comparative data not available for the whole public sector
We focus on the trends of the wages in three NACE activity sectors:
Public Administration and Defence; Compulsory Social Security (sector O),
Education (sector P)
Human Health and Social Work Activities (sector Q)
Compare them with the average wage

9. Available data on public-private sector differentials
Public Administration

10. Available data on public-private sector differentials
Education

11. Available data on public-private sector differentials
Health

12. Available data on public-private sector differentials
Summary – comparison to the EU average
Alb
B&H
Kos
Mac
Mon
Ser
Public administration
High
Highest
Moderate
Low
Education
Health

13. Public sector wage premium
No comparable data for all countries that would include the whole public sector
Review of the literature
Public-private wage gap
Simple difference in average wages between the sectors (expressed as the percentage of private wages)
Public sector wage premium
Difference in wages for the “same job”
Obtained using the microeconometric techniques

14. Public sector wage premium
Paper
Data
Wage gap
Premium
ALB
Shehaj, 2016
LSMS,
2012
30.5% women
15.5% men
4.4% women
4.3% men
KOS
HBS,
2011
21%, men
2%, men
MON
Avlijaš et al, 2013
LFS,
17% women
2% men
6% women
-1.7% men
MAC
46.3% women
32.6% men
16.4% women
12.9% men
SER
42.2% women
34.5% men
20.4% women
14.7% men
BOS
Djukic, 2009
Administrative data, 2008
55% total

15. Public sector wage premium
Public sector wage premium differs across the wage distribution in Albania and Kosovo (Shehaj et al, 2015) and Serbia (Vladisavljević, 2016)
Low wages
Significantly higher in public sector in all three countries
High wages
Higher in public sector (Serbia)
Equal in public and private sector (Albania)
Higher in private sector (Kosovo)

16. Wage settings and institutional factors
These institutional mechansims have been found to have an impact on the wage premium (EC, 2014)
Employment protection in the private sector
Higher protection of the private sector workers makes public employer pay higher wages
Public sector size
mopsonistic power of the state as the employer decreases the level of the public sector wage gap

17. Discussion Empl. protection Public sector size Public wage bill
Wage gap
Wage premium
Montenegro
2.88
30.4%
9.3%
17% f
2% m
6% f
-1.7% m
Kosovo
2.08
32.6%
8.0%
21%, m
Albania
2.49
16.6%
6.9%
30.5% f
15.5% m
4.4% f
4.3% m
Macedonia
2.29
22.4%
5.9%
46.3% f
32.6% m
16.4% f
12.9% m
Serbia
2.23
28.4%
9.8%
42.2% f
34.5% m
20.4% f
14.7% m
Bosnia & Herzegovina
2.58
30.2%
10.6%
55%
OECD Average
2.27
22.0%
5.4%
2.9% f

18. Discussion Accross the distribution (Alb, Kos, Ser) Low wages
Significantly higher in public sector in all three countries
The same mechanism: unions, minimum wage?
High wages
Higher in public sector (Serbia), equal (Albania), higher in private sector (Kosovo)
Differences only for the higher wages?
Public wages lower to avoid the image of high and unjustified spending of the government money (Giordano et al, 2011)

19. Conclusions
Alb, Kos, and Mon: higher public wages explained by LM characteristics (education, experience, etc.)
B&H, Mac and Ser, public wages significantly higher, and (although partially explained by the better LM characteristics) the public sector wage premium is significant and positive.
size of the premium in Mac and Ser among the highest in Europe (B&H probably even higher)
No evidence that private sector employment protection or public sector size explain the premium in WB
Differences in the wage formation at higher levels (political factors of the high wages determination?)

20. Thank you for attention