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Are public sector workers different?

Mirco Tonin and Michael Vlassopoulos, senior lecturers at the Economics Department of the University of Southampton, discuss their research on differences between public and private sector employees.

Understanding the characteristics of the workforce is an essential element for an effective management in virtually any organisation. This is particularly true for public sector organisations, as they operate in an environment where measuring performance is arguably more difficult than in the private sector. For instance, the services provided by public sector organisations (e.g. education, health care, law enforcement) are generally not sold to customers, so metrics like revenues or profits are usually not available. This limits the use of incentive schemes based on individual performance and makes a proper understanding of what motivates workers to perform their job effectively of first order importance in the public sector.

Of particular relevance is whether or not public sector workers are intrinsically motivated to carry out their job in order to serve the public interest, i.e. whether they are instilled with public service motivation. Also, it is important to know whether the public sector attracts workers who are particularly averse to risk-taking. Knowing these characteristics can then inform, for instance, the design of remuneration policies and the decision on whether or not to outsource public service provision to for-profit firms.

A study of elderly workers and retirees

To assess these issues, in a recent paper titled ‘Are Public Sector Workers Different? Cross-European Evidence from Elderly Workers and Retirees’, we compared public and private sector employees and former employees across 12 countries in continental Europe, using data from the Survey of Health, Ageing and Retirement in Europe (SHARE), a survey of people aged over 50. In particular, we used the likelihood of volunteering for a charity as a proxy for one’s public service motivation and the willingness to take financial risk as an indication of risk attitudes. We also looked at differences in terms of the propensity to trust others, political preferences, life and job satisfaction.

Focusing on older workers and on those in retirement has several advantages. First, the latter part of one’s career provides a better indication of sectoral choices, as younger workers may still be moving jobs. Second, retirees from the public and private sector face a similar environment in terms of, for instance, time availability.

Thus, the comparison of retirees is better suited to measure differences in preferences, while looking at current employees’ risks – confounding these with differences in the working environment (e.g. working hours, job security, career incentives, required effort, etc.)

Our findings

We found that there are indeed differences between public and private sector workers, but these differences are often explained by the fact that the public sector is more likely to employ workers who are more educated and less likely to perform menial tasks. Once we accounted for these different characteristics and compared like for like, most of these differences disappear.

In particular, when looking at pro-sociality, we found that working in the public sector increased the probability of volunteering by 3%, compared to an average propensity to volunteer of 16%, but when we netted out differences in education and profession, this gap disappeared.

This is true also when we focused on specific parts of the public sector like health and social care and public administration, while a difference persisted for public sector workers in education, who displayed significantly more pro-social motivation than comparable workers in the private sector. The same general pattern emerged with regards to trust, where the overall difference between the two sectors (with the workforce in the public sector being more trusting) disappeared when comparing workers with similar education and profession.

Regarding risk aversion, we found that after accounting for differences in the composition of the workforce, public sector employees were indeed more risk-averse, while no difference emerged between retirees from the two sectors. In terms of political preferences, we found evidence that public sector workers were more likely to lean towards the left. Regarding subjective well-being, retirees from the public sector were more likely to report high life satisfaction, while workers in the public sector are more likely to report high job satisfaction. 

Policy implications

There is a concern that the introduction of financial incentives to the public sector, such as performance-related pay, may attract workers who are more sensitive to monetary reward, but less motivated to contribute to the public good.

Moreover, public service motivation may be crowded out if public services are privatised or outsourced to the private sector.

However, our study suggests that – with the exception of the educational sector – the public sector is not particularly effective in attracting altruistically motivated workers, so these concerns may not be particularly relevant. Our finding that current workers in the public sector are particularly risk averse suggests, however, that incentives like performance-related pay may be less effective in the public sector compared to the private one.

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