This study examines differences in average weekly earnings between public s
ector and private sector employees in Australia. In the 1990s average weekl
y earnings of full-time public sector employees were higher than for full-t
ime private sector employees by 10 to 15 per cent for males and 20 to 25 pe
r cent for females. A variety of decomposition tests are applied to examine
the sources of this inter-sector difference in average weekly earnings. Th
e tests generally show that higher average weekly earnings of public sector
employees are wholly explained by inter-sector differences in productivity
-related characteristics of employees and job characteristics in each secto
r.