This study examines differences in average weekly earnings between public-sector and private-sector employees in Australia. In the 1990s, average weekly earnings of full-time public sector employees were higher than for full-time private sector employees by 10 to 15 percent for males and 20 to 25 percent for females. A variety of decomposition tests are applied to examine the sources of this intersector difference in average weekly earnings. The tests generally show that higher average weekly earnings of public-sector employees are wholly explained by intersector differences in productivity-related characteristics of employees and job characteristics in each sector. Copyright 1998 by The Economic Society of Australia.