A comparison of the wage structure between the public and private sectors in Japan

• We compare the wages in the public and private sectors in Japan.
• Size of the public sector wage premium depends on the choice of the comparison group.
• Wage gaps by gender and educational attainment are small in the public sector.
• Public sector's age–wage profile is steep.
• Regional wage differentials are small in the public sector.

This study compares the wages in the public and private sectors in Japan. In addition to comparing overall wage levels, we examine the differences in the wage structures, specifically, the relative wages by gender, age, education, and region. The size of the public sector wage premium depends crucially on the size of the private companies chosen as the comparison group. Wage gaps by gender and educational attainment are smaller in the public sector than they are in private companies. The public sector's age–wage profile is steeper than that of the private sector. Public sector wages are more compressed. In other words, the wages are relatively higher at the lower end of the wage distribution and relatively lower at the higher end. The regional wage differentials are smaller in the public sector. Here, the wage levels of public sector workers are relatively higher in rural regions and relatively lower in large metropolitan regions. To ensure the efficient provision of public services, it is inappropriate to compare only mean wages.