May 29, 2003 Below the Surface of the Civil Service Wage Bill 1

How much are we payingto be served?

Components of Civil Service Pay

May 29, 2003 Below the Surface of the Civil Service Wage Bill 2

Why worry about this ?

During 1970s and 80s, wage bills ballooned as governments took on new functions, and new ministries, departments and enterprises were created

Now, governments need to downsize. At the same time they need to hire more teachers, doctors, and nurses

Civil servants are paid from public funds. So, their wages need to be

Transparently set Fair within the civil service

May 29, 2003 Below the Surface of the Civil Service Wage Bill 3

Central government wage bill as percentage of GDP

0

2

4

6

8

10

12

Africa Asia ECA LAC MENA OECD Overall

Central Government Wages and salaries

May 29, 2003 Below the Surface of the Civil Service Wage Bill 4

Wages & Salaries for Sub-national governments

Sub-national  employment is often over 50 percent of the total in federal counties

Services key for poverty alleviation are delivered and managed by sub-national administrations

Worldwide trend of greater administrative decentralization

See http://www1.worldbank.org/publicsector/civilservice/subnational.htm

May 29, 2003 Below the Surface of the Civil Service Wage Bill 5

0

0.5

1

1.5

2

2.5

3

Albania Azerbaijan Bolivia Brazil India Indonesia Malaysia

Sampled Countries

prop

orti

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f C

entr

al G

ovt.

Exp

endi

ture

Central Govt. Wages& Salaries

State Govt. Wages &Salaries as % ofCentral

Local Govt. Wages& Salaries as % ofCentral

Wages and Salaries Expenditure of different levels of government

May 29, 2003 Below the Surface of the Civil Service Wage Bill

Who are we talking about?

May 29, 2003 Below the Surface of the Civil Service Wage Bill 7

General government employment as % of population

0

1

2

3

4

5

6

7

8

9

10

Africa Asia ECA LAC MENA OECD

Central Sub-National Education Health Military

May 29, 2003 Below the Surface of the Civil Service Wage Bill 8

Base pay

Step-like structure Usually uniform across government for a particular

level Raises/ increments in pre-determined amounts

depending upon seniority / merit Subject of bargaining between employees’ unions and

government Cited to compare wages in public and private sectors

May 29, 2003 Below the Surface of the Civil Service Wage Bill 9

Allowances

Purpose is to encourage employees to accept positions in remote / hardship areas, or accept additional /difficult / risky tasks

Taxed when paid in cash, not when paid in kind

Proportion in total compensation

May 29, 2003 Below the Surface of the Civil Service Wage Bill

Keep in mind

in OECD base pay is rarely below 90% of personal emoluments

allowances in developing countries can be very high

allowances not always easily traceable in the budget

intangible benefits can be significant

May 29, 2003 Below the Surface of the Civil Service Wage Bill 11

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Ran

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DryMedium

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5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

Rupiah

Average Individual Total Compensation in the Civil Service by Rank and Agency Moisture Level

Dry

Medium

Wet

Allowances can lead to significant wage distortions

May 29, 2003 Below the Surface of the Civil Service Wage Bill 12

Pension Attractive incentive for civil servants – alongside job security

pre-dates the establishment of national social security schemes for private sector workers

Benefits are usually paid from general revenues, raising government consumption

Rising, in our client countries- ratio of pensioners to covered employees liberal early retirement programs to reduce wage bill

expenditures Trends in civil service pension reform

Reduce liability Cost sharing with employees Pension portability

See http://www1.worldbank.org/publicsector/civilservice/pension.htm

May 29, 2003 Below the Surface of the Civil Service Wage Bill 13

PAKISTAN Contribution of allowances to the total wage bill

Aggregate wage bill highly sensitive to changes in allowances

10% increase in the 3 major allowances amounts to 2.5% increase in the aggregate wage bill

May 29, 2003 Below the Surface of the Civil Service Wage Bill

The advantages and risks of modeling pay options

Advantages

Bring rigor

Allow government to "answer back“

Risks

Can imply a spurious precision

Can make it look too easy

Do not take into account future pension costs.

May 29, 2003 Below the Surface of the Civil Service Wage Bill

How are they rewarded?

contractually-provided

monetary in-kind

non-contractual/intangible

baserewards

1. base wage/salary 2. health insurance 3. job security,prestige, socialprivileges

currentrewards

allowances

4. transportation,housing, meals,telephone, travel,cost-of-living

5. transportation,housing, meals,travel

6. trips abroad,training

future expectations 7. pension 8. housing, land,etc.

9.reputation,re-employment afterretirement

contractually-provided

monetary in-kind

non-contractual/intangible

baserewards

1. base wage/salary 2. health insurance 3. job security,prestige, socialprivileges

currentrewards

allowances

4. transportation,housing, meals,telephone, travel,cost-of-living

5. transportation,housing, meals,travel

6. trips abroad,training

future expectations 7. pension 8. housing, land,etc.

9.reputation,re-employment afterretirement

personal emolument

s

contractually-provided

monetary in-kind

non-contractual/intangible

baserewards

1. base wage/salary 2. health insurance 3. job security,prestige, socialprivileges

currentrewards

allowances

4. transportation,housing, meals,telephone, travel,cost-of-living

5. transportation,housing, meals,travel

6. trips abroad,training

future expectations 7. pension 8. housing, land,etc.

9.reputation,re-employment afterretirement

total compensati

on