Public employment and “bad” inequality

I’ve been thinking about income inequality recently and I’ve just noticed something about public employment and inequality. In general, a ceteris paribus, public sector workers obtain a wage premium. In short, two identical workers (same characteristics) will not have identical wages if one of them works in the public sector. In Canada, that wage premium stands at roughly 10%. It ought to be mentionned that this it does not include the value of employment security and non-cash benefits (retirement funds payments).

If someone is paid a 10% premium above what productivity would justify (considering age, experience, education, marital status), taxpayers must end up paying the bill. Hence, there is a transfer from private sector workers to public sector workers which is not at all linked to productivity. This creates a form of inequality. An inequality which is morally offensive because it is not an inequality resulting from merit. It is an inequality that results from the greater ability of public sector unions to lobby for working conditions improvements which are not justified by productivity growth.

In the debate about inequality, why is nobody considering this form of inequality?

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