Working in the public vs private sector

Like many students, I did a lot of extensive research on topics that don't come up in everyday conversation. However, I felt like a summary of my final research paper for my masters would be useful knowledge for you. It breaks down some of the pros and cons of working in the public or private sector. This information is based on Canadian and American literature, but I believe these takeaways are broadly applicable. I encourage you to go through the discussion questions at the bottom to connect this knowledge to your everyday experiences and career navigation:

Public Sector vs Private Sector Overview

The Public Sector: work for the public to support government objectives

• “Popular” for their retirement, health and job security prospects
• Pros: job security, benefits, purpose in work, higher average salary
• Cons: lower salary prospects, career advancement opportunities and “freedom” (i.e. bureaucracy)

The Private Sector: work for a company to generate revenue

• “Popular” for their income earning and job availability prospects
• Pros: higher salary prospects, increased job availability, “freedom” and career advancement
• Cons: Job security, lower relative benefits, lower average salary

Research Breakdown

Boston College Research Team (USA) - 2011

• Found private sector employees earn 9.5% more than public employees
• Pension and health insurance close compensation gap to approximately 4%
• Largest reason for higher private wages is due to highest tertile of earners (21% gap)
• Public sector job retention is around 6% higher vs. private sector jobs

Fraser Institute (Canada) - 2016

• Found that public sector workers earn 10.6% more than private workers
• Dropped to 7.2% when comparing unionized employees
• 89.3% of public sector employees have pension vs. 23.8% in private sector
• In these numbers, 93.7% have defined benefit pension in public vs. 45% in private sector
• ⅔ Canadians work in private sector vs. 20% in public sector
• Public sector employees retire around 2.3 years earlier
• Public sector employees are 0.5% likely to lose job vs. 3.7% likelihood in private sector
• Private workers in senior manager roles earn 6.2% more than public
• Found multitude of lower earning private sector jobs “brings down” sector average

Union Implications

• Fraser Institute suggests union prevalence in public sector can be connected to more benefits for employees
• 76% of Canadian public sector employees are in union or collective agreement vs. 19% in private sector (Statistics Canada, 2012)
• 34.4% of American public employees are in union or collective agreement vs. 6.4% in private sector (US Bureau of Labour Statistics, 2016)

Reflection

• Though more senior private sector workers have higher earning potential, a vast majority of general private workers may be compensated less in comparison to their public sector counterparts
• The increased prevalence of unionization in the public sector can be connected to increased benefits
• The security and benefits of public sector work may be appealing, but its relative salary cap in addition to rising costs of living can add appeal to private sector employment

Discussion Questions

• In this economy, do you think private or public sector work is the better option for work? Why or why not?
• At what point do job benefits and unionization not outweigh earning potential for you? Why or why not?
• What are valuable insights you’ve heard with navigating public vs. private work in your career?

If you'd like to learn more about things I studied during my masters program, feel free to connect with me on LinkedIn!