Government Pay And Employment Policies And Government Performance In Developing Economies

Excessive spending on public employment has contributed significantly to fiscal crises in many developing nations. Less visible, but also important for development, is the impact of pay and employment policies on government performance.

This report presents an overview of performance-related pay policies (PRP) for government employees in selected OECD member countries over the past two decades. Both the strengths and the weaknesses of PRP policies are assessed. The report explores ...

Government compensation and employment policies are important for the efficient delivery of public services which are crucial for the functioning of economies and the general prosperity of societies. On average, spending on the wage bill absorbs around one-fifth of total spending. Cross-country variation in wage spending reflects, in part, national choices about the government’s role in priority sectors, as well as variations in the level of economic development and resource constraints.

May 1997 An honest and competent civil service is essential for public sector efficiency and economic development. As a complex institutional challenge, civil service reform is worth doing only if it is done well. But even when circumstances are not ripe for genuine reform, governments and development institutions should keep a watching brief on civil service issues - recalling that the slide of many of today's failed states began, in part, with the degradation of their civil service. Schiavo-Campo, de Tommaso, and Mukherjee try to replace myths about government pay and employment with reliable facts from a survey of international, national, and primary sources for about 100 countries in the early 1990s. The study also outlines the general nature of civil service problems in the different regions. Nevertheless, while the facts are useful to flag possible problems and initiate a dialogue, recommendations for reform must be based on country-specific analysis. Globally, government employment is negatively associated with wages, and positively with the fiscal deficit (although the availability of financing is more important) and with per capita income (confirming Wagner's Law). But the global results stem almost entirely from strong results for Africa and Latin America. Civil service reform has suffered in the past from an overemphasis on retrenchment for fiscal reasons. Its true objective, for each country, is to achieve a civil service of the size and skill-mix, incentives, professional ethos, and accountability needed to provide public goods, help formulate and enforce the rules, and intervene to remedy market failures - as these government roles happen to be defined in the country in question. Civil service reform can begin with various diagnostic and fact-finding activities. The key measures concern rightsizing, incentives, and accountability. These are all relative notions: the right size of the workforce depends on the roles assigned to government; wage adequacy depends on private compensation levels; and strengthening of accountability must define accountability for what and to whom. When retrenchment is warranted, it must be carried out with great care to avoid skill reduction, demoralization, and lower-quality service. Adequate compensation is a must, and wage compression is to be avoided. But performance bonuses, popular in some advanced countries, have been only marginally effective in improving performance in developing countries, even in the private sector. And they can be dangerous in countries with ethnic, clan, or religious conflicts. Finally, improvements in accountability will most often require greater external openness and systematic feedback from service users. This paper - a joint product of the Office of the Chief Economist and Senior Vice President, Development Economics, and Europe and Central Asia, and Middle East and North Africa Technical Department, Public Sector Management and Information Technology Team - was produced as a background paper for World Development Report 1997 on the role of the state in a changing world.

The paper provides an overview of the main elements of pay systems that are typically used to remunerate government employees and, with reference to the experience of developed and developing countries, discusses structural issues frequently arising in the formulation of government pay policies: (1) the role of fringe benefits in the compensation system; (2) the pros and cons of a greater merit orientation in the pay system and of special pay schemes designed to remunerate staff at the professional and managerial level; and (3) factors determining internal pay differentials with special emphasis on the compressing effect of flat amount cost of living adjustments.

This book provides a comprehensive overview of the trends in performance-related pay policies (PRP) for government employees in selected countries over the past two decades and draws some lessons from these experiences. The report explores the various PRP designs and emerging trends, investigating the reasons why PRP policies are being implemented and how the policies operate concretely. The outcomes of PRP policies at individual and team levels are evaluated, and recommendations are made on what should be done or avoided with the implementation of PRP. This book is based primarily on twelve country reports that were presented at the OECD expert meeting in October 2003 which was attended by France, Germany, Italy, Spain the UK and other OECD member countries.

This supplement presents country case studies reviewing country experiences with managing wage bill pressures, which are the basis for the compensation and employment reform lessons identified in the main paper. The selection of countries for the case studies reflects past studies carried out by either the IMF or the World Bank in the context of technical assistance or bilateral surveillance (Table 1). These studies provide important insights into the different sources of wage bill pressures as well as the reform challenges governments have faced when addressing these pressures over the short and medium term. The studies cover 20 countries, including five advanced economies, six countries from sub-Saharan Africa, two countries in developing Asia, one country in the Middle East and North Africa, three countries in Latin America and the Caribbean, and three countries in Central and Eastern Europe and the CIS. The structure of each case study is similar, with each study starting with a presentation of the institutional coverage and framework for setting and managing the wage bill; a description of employment and compensation levels, including their comparison with the private sector; and a discussion of the challenges that motivated the need for reforms and, when applicable, the reforms implemented and lessons derived from these.