Suresh Narayanan Comment on Wage Differentials in Malaysia: Public Employment, Gender, and Ethnicity

Abstract

The paper is motivated primarily by empirical observations elsewhere indicating that public sector earnings are, on average, higher than in the private sector. There is no theoretical framework guiding this. The authors have therefore overlooked several theories of public sector wage determination. The oldest, best known, and perhaps most pertinent to this paper is the work by Fogel and Lewin (1974), who argued that discretion in decision making and the political process in wage setting provide upward-biased wage rates for most government jobs. Thus, the Fogel-Lewin framework predicts that public sector wages will be higher than private sector wages for most job descriptions.