Earnings differential between public and formal-private sectors

The study recognizes that the formal economy, public or private, need the relevant human resource to ensure growth and development of an economy. Any significant disparities in earnings between these two sectors for workers of identical productivity-related characteristics have the potential effect of denying the low paying sector of the quality labour it would need. Using data from the 4th Ghana Living Standard Survey, the study revealed that gross earnings differential existed and was in favour of public sector workers. The study went further to investigate whether the disparities in earnings were "justified", that is as a result of differences in productivity-related endowment or not, that is constituting "real" premiums. Using Blinder-Oaxaca decomposition technique to decompose gross earnings differentials, results showed that when productivity related endowments are controlled for, public sector workers enjoy premiums in all three sectors: about 60 percent (highest) in agriculture; about 55 percent in industry, and about 51 percent in service sector. Earnings were found to rise with an increase in educational level in both public and formal-private sectors.