Presented to: Presented by: World Bank Staff Ranjana Mukherjee - - PowerPoint PPT Presentation

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Presented to: World Bank Staff PREM Knowledge & Learning Week Washington, DC April 19-20, 2007 Presented by: Ranjana Mukherjee Senior Public Sector Specialist PREM South Asia Region The World Bank

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On the one hand On the one hand … …

Governments take on new functions as they

modernize

New ministries, departments and agencies are

created

Wage expenditure crowds out public investment programs O&M of existing resources, affecting service

delivery

Unsustainable wage bills come in the way of meeting

HIPC conditions

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… … on the other hand

• n the other hand …

…

Civil service pay is generally considered lower

than that in private sector, see

http://www1.worldbank.org/publicsector/civilservice/development.htm

Low pay

discourages talented persons from joining the civil service Said to encourage corruption Disincentive for high quality service delivery

If the government can’t hire and pay teachers

and health staff, how will human capacity be built?

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A A ‘ ‘model model’ ’ sustainable wage bill? sustainable wage bill? Cross Cross-

• national comparisons are very

national comparisons are very difficult to make difficult to make … …

17% 2005-06 Sri Lanka 7% 2005-06 Pakistan 4% 2006-07 India 17% 2005-06 Bangladesh 27% 2005-06 Afghanistan Employees’ compensation as %

• f central Gov.

expenditure Fiscal year SAR country

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Government employment (1990s) Government employment (1990s)

0.9 0.9 1 1.2 1.4 1.8 0.3 0.7 0.8 0.7 0.9 2.5 0.8 1 5.1 1.1 1.6 3.4

1 2 3 4 5 6 7 8 9

Africa Asia ECA LAC MENA OECD

Percentage of population Central Government Local Government Teaching and Health

From Working Paper Series 1771. Government Employment and Pay in Global Perspective

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What is counted in the wage bill? What is counted in the wage bill?

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 (budget)

Percent of Recurrent Expenditure Manpow er Services Transfers Total

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Central Govt. Central Govt.’ ’s wage bill s wage bill as proportion of GDP (1990s) as proportion of GDP (1990s)

2 4 6 8 10 12

Africa Asia ECA LAC MENA OECD

Regions

% of GDP

From Working Paper Series 1771. Government Employment and Pay in Global Perspective

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Tracking upward pressures on the wage bill Tracking upward pressures on the wage bill

Wage bill = Σ(number of employees) X (each employee’s compensation)

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Number of employees: Number of employees: Civil Service size as % of population (1990s) Civil Service size as % of population (1990s)

1 2 3 4 5 6 7 8 9

Africa Asia ECA LAC MENA OECD

regions

% of population

From Working Paper Series 1771. Government Employment and Pay in Global Perspective

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Number of employees is affected by Number of employees is affected by

Number of ministries, departments &

agencies

Establishment control Transfer from projects / capital budget Cross-checking between HRMIS and FMIS Civil service census Shape of the civil service pyramid

Wage bill = Σ(number of employees) X (each employee’s compensation)

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Retrenchment Retrenchment – – one

• ne-
• time reduction

time reduction rarely successful in core civil service rarely successful in core civil service

Involuntary – soft and hard options Voluntary – Golden hand shake, expensive Even when well-funded retrenchment is hard to

administer

No recent Bank support for retrenchment and

severance in core civil service – only in SoEs

Earlier big-bang retrenchments have resulted in

rehiring and avoidable expense

Wage bill = Σ(number of employees) X (each employee’s compensation)

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Upward pressures on compensation Upward pressures on compensation

Compression ratios & allowances Inflation indexation Unions’ negotiation powers

Institutional mechanism for regular review

Defense Ministry Wage bill (outside Bank

scrutiny)

Wage bill = Σ(number of employees) X (each employee’s compensation)

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Compression ratios affect wage bill rise Compression ratios affect wage bill rise from allowances from allowances

8% 250 230 1: 7: 15 9% 205 185 1: 5: 10 14% 160 140 1: 3: 5 Wage Bill increase Wage Bill after $20 wage increase to all Wage Bill Compression Ratio

Assumed distribution of civil servants: 85% in unskilled / low skilled jobs, 10% in technical / middle; 5% in managerial Starting compensation: $100 for un / semi –skilled, $300 for middle level; $500 for top level managers

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Civil Service distribution among levels Civil Service distribution among levels affects wage bill rise from allowances affects wage bill rise from allowances

5% 8% 1: 7: 15 7% 9% 1: 5: 10 11% 14% $20 to everyone 1: 3: 5 70 - 20 - 10 85 - 15 - 5 Distribution Distribution Wage Bill increase Allowance / raise to all Compression Ratio

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Civil Service Pension Civil Service Pension – – closely related to the wage bill closely related to the wage bill

Attractive incentive for civil servants –

alongside job security

Pay as You Go from current revenues Trends in Pension Reform Reduce pension liability Advance funding or cost sharing with

employees

Pension portability http://www1.worldbank.org/publicsector/civi

lservice/pension.htm

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Q&A Q&A