Public Sector Wage Premium in Canada: Evidence from Labour Force Survey

Although previous research has pointed to a public/private sector wage gap for men and women in Canada, the extent of this gap has not been measured in recent years. Using data from the Canadian Labour Force Survey for September 2008, and using an endogenous switching regression framework to control for self‐selection, I find that both men and women earn a wage premium in the public sector in Canada, although the premium is higher for women. The pure wage premium or economic rent that public sector workers receive relative to their counterparts in the private sector is $1.09, or 5.4 per cent for men and $3.15, or 20 per cent for women. An analysis of selection in the pubic/private sector reveals that public sectors workers are ‘positively selected’ on observables and consist of the ‘cream of the crop’.