Public vs. private sector

Let’s take a look at the difference in income of salaried workers in public vs. private sectors. Like last posting, I use the data from Household and Budget Survey in 1999 in urban areas.
A salaried worker in private sector earns about 10.7m Rials and spends about 23.9m Rs. Public sector workers earn more and spend more (18.3 and 39.9m respectively). But the percentage difference of income and expenditure for private sector is slightly more than that of public sector (122% for private sector vs. 112 for public sector). These numbers almost reject my hypothesis of “hidden” rent in public sector. There are some rents in public sector but it is not hidden. They simply get more money and similar to their counterparts in private sector have other sources of income.
One concern about the difference between income in public and private sectors is that the percentage of higher educated workers is higher in public sector than private one. Only 15 percent of college graduates work in private sector. Considering that 54 percent of salaried workers are in private sector it is clear that college graduates are more interested to public sector. Taking education into account, the data reveals the same result for non-college-graduate workers but not for college graduates. Public sector pays more to less educated workers (16m vs. 10m in private sector) but interestingly, slightly less to educated workers (22.4m vs. 22.2m in income and 56m vs. 50m in expenditures).
While my theory that there is a “hidden” rent in public sector is rejected, the above discussion support “transparent” transfer from government to its employees. This transfer in the case of highly educated workers is simply offering a job to them with almost the same salary as their counterparts in private sector but in the case of less educated workers, it appears as high wage rates. If we assume that private sector pays as much as the marginal productivity, then government payment system is not efficient.
This result may change slightly with entering other variables like experience and more precise measures of education but I believe that the core will remain untouched.