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Wage comparisons between public and private employers are always a topic of interest since both sectors seek to offer competitive packages to attract talented workers. Generally speaking, talent has come to the conclusion that private sector jobs pay better while public sector jobs offer more benefits. Interestingly, this pattern does not prove to be true in Michigan where public sector jobs often pay more than the private sector. In a surprising twist, Michigan’s public sector salaries outpace those in the private sector, further challenging the conventional wisdom on job compensation.
Figure 1 shows that average annual salary for both State and Federal government jobs are significantly higher than private sector jobs in Michigan. Over time, the average annual salary for private sector jobs in Michigan has increased but nowhere near as much as State and Federal jobs. Between 2021 and 2022 average annual salary for private sector jobs in grew 5.1%, the highest of the three categories, while Federal earnings increased only 1.9%. As of 2022, the average annual salary for State employees has almost reached the same amount as Federal jobs. Part of the reason for this trend is a decline in Federal pay as well.
In 2015 and 2016 there was a significant difference between average annual salary for State and Federal jobs in Michigan but over time the gap has narrowed. This could partially be due to some “outlier” State employees who have an incredibly high salaries, thereby pushing up the averages for all State employees. To cite one example, the head football coach of Michigan State University, Mel Tucker, has an annual salary of $5.56 million.
Figure 1: Average Earnings between Public and Private Sector 2015-2022
Source: Points Consulting using U.S. Bureau of Labor Statistics and Federal Reserve Bank of St. Louis, Average Hourly Earnings; FederalPay.org, OPM; OpenPayrolls.com, State Employee Salaries by Year
Figure 2: Annual Payroll Growth Rate between Tri-County Region and Other Sectors, 2016-2022
Source: Points Consulting using U.S. Bureau of Labor Statistics and Federal Reserve Bank of St. Louis, Average Hourly Earnings; FederalPay.org, OPM; OpenPayrolls.com, State Employee Salaries by Year, Tri-County Regional Planning Commission
Payroll growth in the Tri-County Region has generally mirrored trends in Michigan's private and public sectors but contrasted with Federal government patterns. In 2020, Federal Government payrolls grew by 9.2%, while the Tri-County Region saw a 0.5% decline. By 2022, however, the Tri-County Region outpaced national growth, with payrolls increasing 9.8%, compared to a 1.9% rise in Federal Government jobs.
While salary across the three sectors varies, how many people are employed in each sector shows a completely different picture. Figure 3 shows that the private sector has significantly higher employment growth over time compared to the public sector in Michigan and the Federal Government.
Figure 3: Percent Change in Employment Growth between Sectors 2015-2022
Excluding 2018 and 2020, employment in Michigan’s private sector has consistently outpaced State and Federal jobs in annual growth. The private sector experienced the sharpest decline during the pandemic but has shown a stronger recovery since 2021 compared to Federal and State employment. While Michigan Government and Federal jobs often offer higher pay, Michigan’s private sector provides a significantly larger number of employment opportunities, making it a more accessible option for job seekers.
Figure 4: Percent Change in Employment between Different Sectors, 2020 to 2022
Between 2020 and 2022, employment in both the public and private sectors in the State of Michigan increased, while Federal employment declined. However, private sector jobs in Michigan experienced significantly higher growth, increasing 9.5%, compared to the more modest growth in public sector jobs. Although government jobs tend to offer higher pay, the data suggests that the private sector may provide greater opportunities for employment due to its faster growth rate and potentially larger job market.
