Determinants of Income Inequality in Selected Public and Private Sectors in Southwest Nigeria.

Abstract

This study investigated the determinants of income inequality in the public and private sectors of Southwest Nigeria, focusing on education, work experience, wage structures, government policies, and economic factors. Motivated by rising wage disparities in Nigeria’s formal labour market, the study examined how structural conditions, institutional frameworks, and sectoral differences reinforce income gaps. The research drew on Human Capital Theory, Labour Market Segmentation Theory, Efficiency Wage Theory, Institutional Theory of Wage Determination, Structuralist Theory of Income Distribution, and Political Economy Theory, providing a multidimensional lens to understand the interactions between individual qualifications, labour market divisions, institutional influences, and macroeconomic factors. A comparative cross-sectional design was employed, targeting employees from state government ministries and parastatals (public sector) and commercial banks, microfinance institutions, and insurance firms (private sector) across Lagos, Ogun, Oyo, Osun, Ondo, and Ekiti States. From a total population of 403,710 employees, a sample of 450 respondents was selected using multistage sampling. Data were collected via structured questionnaires administered both physically and online. Analysis was conducted using descriptive statistics, the Gini coefficient, correlation, variance inflation factor, multiple linear regression, and diagnostic tests. Findings revealed that education (β = 0.152, p = 0.002) and wage structures (β = 0.198, p = 0.001) significantly increased income inequality, while work experience (β = 0.078, p = 0.058) and government policy (β = 0.064, p = 0.148) had positive but insignificant effects. Economic factors also significantly exacerbated disparities (β = 0.139, p = 0.005). The results suggest that income inequality in Southwest Nigeria is a multidimensional issue shaped by qualifications, sectoral pay practices, institutional inefficiencies, and macroeconomic conditions. The study recommends reforms in education, wage harmonization, labour market regulation, and economic management to promote equitable income distribution and inclusive growth.