Comparative Study of the Factors Associated With Wages and Wage Differentials of Graduate Employees Between Public and Private Sectors in Sri Lanka

Abstract

The main objective of this study is to analyze the differences in earnings between the Public and Private sector graduate employees in Sri Lanka using a sample of 1,421 graduate employees derived from the secondary data in the Sri Lanka Labour Force Survey, 2018. The study used the Endogenous Switching regression model to comparatively study the hourly log earnings between public and private sector graduate employees and their wage differentials under employment switching behavior. The model concludes that being male, being an urban resident, having a non-arts degree, having managerial or professional employment, have significant positive relationships with the earnings of both private and government employment while having post-graduate employment increases earnings only in the public sector. Age squared has an impact on public sector earnings showing increasing returns. Selecting government employment was positively affected by age and being married while being male, being urban and having a non-arts degree have a significant negative association with that, according to the selection function. According to the conditional predictions of the model, switching from the public sector to the private sector will increase earnings of graduates while switching from the private sector to the public sector reduces their log hourly earnings. However, graduates are still willing to move from the private to the public sector, as a result of other nonwage benefits that ensure employment and income security. Reforms in the private sector regarding non-wage benefits including attractive social and employment security options aligned to decent work goals under sustainable development goals are needed to increase attraction towards private sector jobs among Sri Lankan graduates.