The research in this paper investigates whether New Jersey public employees are overpaid at the expense of New Jersey taxpayers. This research is timely. The governor and the editorial board of the New Jersey Star-Ledger, the state’s largest newspaper, claim that public workers earn substantially higher salaries than average workers in the private sector, and the gap in benefits is even wider. Consequently, they are promoting public employee pay freezes, benefits reductions, and major revisions to the rules of collective bargaining as the antidote to the overpayment blight.

The data analysis in this paper, however, indicates that New Jersey public employees, both state and local government employees, are not overpaid. Comparisons controlling for education, experience, hours of work, organizational size, gender, race, ethnicity, and disability reveal no significant difference between the private and public sectors in the level of employee compensation costs on a per hour basis. However, public employees, particularly higher level professional employees, have fewer opportunities to work overtime than those who work in the private sector. Therefore, on an annual basis, full-time state and local employees are under-compensated by 5.88% in New Jersey, in comparison to otherwise similar private-sector workers.