Welsh Journals

11. PUBLIC-SERVICE-SECTOR EMPLOYMENT AND PUBLIC-PRIVATE WAGE DIFFERENTIALS: A RESEARCH NOTE Andrew Henley and Dennis Thomas Wales's relatively good performance in its manufacturing sector since the mid- 1980s has been well, if not entirely uncritically, documented, with attention focused on the successful attraction of foreign direct investment. By contrast, developments within the service sector, which dominates in terms of employ- ment, have been relatively neglected.2 This short paper treats one particular aspect of the service sector in Wales by focusing on the effects of employment growth in its public component. Designed as a research note, our paper draws on the results generated by a broader investigation of public-sector employment growth in British regions, which was initially motivated as an attempt to examine the effects of direct government employment creation on private-sector employ- ment, whether in terms of negative 'crowding-out' or positive multiplier effects.3 The paper begins with a general overview of the effects of direct govern- ment employment creation before outlining the significance of the Welsh public-service sector. We then briefly summarize the results of our ongoing research study which relate to the association between private- and public- sector employment and the estimation of public-private wage differentials, with particular reference to Wales. We conclude with some observations regarding the possible implications of increased executive and administrative devolution in Wales. OVERVIEW In all regions of Great Britain the public sector is an important source of employment, although its significance varies between regions, reflecting the relative underdevelopment of manufacturing and, in particular, private-service- sector activity. A contributory factor to this relative importance has been the