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Gross salaries are, on average, 36% higher in the Spanish public sector than in the private sector, according to a report by the Bank of Spain. The report also shows that between 2005 and 2012, workers in the public sector tended to be older, more skilled and more likely to work full time, with consequent implications for salary levels.
According to the Spanish Labour Force Survey, in 2012 around 15% of the Spanish working population worked in the public sector (in Spanish). In February 2015, the Bank of Spain published a report on salary differences (in Spanish, 287 KB PDF) as part of its monthly Economic Bulletin. The report examined the reasons why, on average, public sector wages are higher than in Spain's private sector. It analysed a collection of anonymous micro-data extracted from administrative registers in the social security system for 2005–2012 (in Spanish). The data cover 4% of the registered population (around 1.1 million people) aged between 25 and 54.
The study showed that gross salaries for 2005–2012 were 36% higher in the public sector than in the private sector. This does not take into account other characteristics of the workers studied, such as age or education level. The data analysed also showed that the salary gap between public and private sectors increased from 35% in 2005 to 39% in 2008 and then gradually fell from 2008, reaching 31% in 2012. This decline was caused by the reduction of public sector salaries due to the economic crisis and public budget cuts.
According to the research, employees in the public sector are on average older, have higher educational levels and more seniority, and are more likely to work full time. These features could help explain salary differences between public and private sectors.
In order to assess how these variables affect salary differences between public and private sectors, the authors of the study carried out linear regressions where salaries were linked to observable characteristics such as age, region, professional category, seniority, type of contract, working time and company size. The results showed that the difference in the average salary decreased from 36% to 20.5% (for 2005–2012, after adjusting for the effect derived from observable characteristics). This means that more than one-third of the salary gap is linked to the different characteristics of public sector and private sector workers.
It was also necessary to consider that some characteristics which affect workers’ salaries, such as motivation and ability, are not easily observable. Thus, econometric techniques were applied in order to adjust for the effects of non-observable characteristics. It was concluded that the average salary gap decreased from 36% to 10% (after adjusting for the effect derived from observable and non-observable characteristics). In 2012, in particular, and once the observable and non-observable differences were taken into account, the gap between public and private salaries was 5%. This suggests that a substantial part of the salary gap between the workers in the public sector and the workers in the private sector is linked to their different characteristics (both observable and not observable).
However, these differences are not homogenous for all salary ranges, and have not been constant. For men and for women, the data indicated that salary differences vary among the different salary levels. Results showed that the salary gap was smaller for the percentile of workers with the highest salaries. In 2012, once the observable and non-observable differences were taken into account, the difference between public and private salaries was 5%. However it is important to note that at the highest salary levels, there was almost no difference between public and private salaries in 2012.
After considering the observable and non-observable features typical of workers in the public sector and workers in the private sector, the salary gap between them is seen to decrease considerably from 36% to 10%. The report concludes that around three-quarters of the difference between average salaries in the public and in the private sectors between 2005 and 2012 can be explained by the different features that characterise workers in each sector. These data are said to be similar to the results obtained in other countries.