How Important Are Competitive Wages? Exploring the Impact of Relative Wage Rates on Employee Turnover in State Government

Abstract

In recent years, public management research has made great strides in explaining the drivers of employee turnover in the public sector, with key findings related to the role of employee loyalty, organizational satisfaction, person-organization fit, and compensation. This article contributes to this growing body of literature by assessing the influence of a previously untested driver of employee turnover at the state level of government: public—private wage equity. Contrary to conventional wisdom, results suggest that public—private wage equity does not significantly influence voluntary separation rates, whereas state government unionization and the average age of state government employees are found to be indirectly related to voluntary separation. Results also point to the potential implications of ethnicity, gender, and public service motivation in state government employee turnover and provide key insights for those seeking to further understand the impact of reduced expenditures on public sector wages and shifting age distributions in public sector employment.

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