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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
on o
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
Ech
elon
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Ech
elon
II
Ech
elon
III
Ech
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IV
Ech
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V
Ran
k IV
Ran
k II
I
Ran
k II
Ran
k I
DryMedium
Wet
0
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