Public v private: the highest-paying employer for your job type

Some workers are more likely to earn a high salary in a government role, while others are better off in a private company. See how your role stacks up.

Government workers have as much as double the likelihood of a well-paying job – but experts say the tight labour market may now be moving the dial in the opposite direction and shrinking the decades-long “public sector premium”.

Newly released 2021 Census figures reveal workers across the board – from managers and professionals through to tradies, community service workers, admin staff, salespeople, drivers and labourers – are more likely to earn at least $1000 a week if they are employed by a national, state or local government rather than a private company.

This is more than Australia’s median personal income of $805 a week, including both full-time and part-time workers.

WHERE TO SEND YOUR RESUME

The pay gap is most evident for community and personal service workers, with only 29 per cent earning at least $1000 a week in the private sector, compared to 76 per cent of those in federal government roles. 

They are followed by sales workers, who have the highest likelihood of earning $1000-plus in state and territory governments (69 per cent) and the lowest in the private sector (29 per cent).

Meanwhile, federal government departments have the largest portion of well-paid technicians and tradespeople, and clerical and administrative workers, while state and territory governments take the lead for machinery operators and drivers, and local governments are most likely to pay well for labourers.

The difference between employers is less significant for managers and professionals.

MORE TO THE NUMBERS

SEEK senior economist Matt Cowgill says it is true that average earnings are higher in the public sector, but there are also other factors to consider.

“ABS survey data shows that employees in the public sector earn an average of $1647 per week, compared to $1277 in the private sector,” he says.

“But we have to take care to compare apples with apples. The Census data shows that public sector workers are more likely to work full time (77.8 per cent) than those in the private sector (62.7 per cent).

“When we compare average earnings just for full-time workers, the gap’s a lot smaller – $1936 in the public sector versus $1725 in private.” Cowgill says people with tertiary degrees typically earn more than those without and public sector workers, on average, have a higher level of educational attainment.

“In the private sector, 35.1 per cent of workers have a bachelor’s degree or higher and among federal and state government workers the figure is 72.6 per cent,” he says.

“Once we take account of differences in the hours of work, qualifications, and other factors that affect pay, the gap between the public and private sectors is … a fairly modest 5.1 per cent.”

Indeed’s Callam Pickering says lower skilled workers typically earn more in the public sector than with private employers. Picture: Supplied

Job site Indeed’s senior economist for Asia Pacific Callam Pickering says the public sector wage premium has been around “for decades”, particularly at the lower end of income distribution.

“Lower skilled workers do tend to earn a lot more in the public sector,” Pickering says.

“The wage premium seems to disappear when you get to the very high-income earners. The best you can do in the private sector is going to be better than you can do in the public sector, but the worst (pay) in the private sector is worse than what you can have in the public sector.”

SHORTAGES PUSH UP SALARIES

The salary tide may be turning, however, as private companies compete for talent in the tight labour market, which has only become worse since Census night last year.
In the year to the June quarter, the private sector had a slightly higher wage price increase (up 2.7 per cent) than the public sector (up 2.4 per cent), according to the Australian Bureau of Statistics.

There is more opportunity to renegotiate your salary in the private sector – especially in the tight labour market. Picture: iStock

SEEK data also shows advertised salaries have grown “much more robustly” among private companies.

“Advertised salary growth in the private sector fell sharply in 2020, but rebounded from mid-2021,” Cowgill says.

“Advertised salaries in government kept growing at a modest pace in 2020, and that pace has slowed a little since then.

“There’s a bidding war for talent, and government is largely sitting on the sidelines.”

Pickering says jobseekers are in a “really favourable position” in being able to determine where and how they work – and how much they are paid.

“In the public sector, it’s very difficult to bargain for higher wages or better benefits (because) it’s highly regulated, with pretty strict salary bands,” he says.

“The private sector is a very different matter.”