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Measuring Government Employment & Wages*

Systematic and comparable information on public sector employment and pay is rare and
generally controversial. As Heller and Tait (1983:35) remarked in 1983, "It is surprising and
depressing how little information is readily available on public sector employment and pay." The
situation has improved little since then. This is not to say that data on government employment
and pay does not exist – it does – but in this field especially, establishing the basis for a
comparison is a complicated and time consuming endeavor.

Statistics need to be credible. Yet government employment statistics of any reliability simply don’t
exist in many countries. Where reliable data do exist, important definitional questions arise. Public
employees can be disaggregated according to their occupation, their employment status, and/or
according to who pays their salary. These criteria produce a complex array of cross-cutting public
employment categories and many gray definitional areas. (Figure 1 below provides a visual
representation.) Countries differ in what they consider to be government employment, and
therefore the same terminology is often used to refer to different categories. For example, some
countries include teachers and/or health workers in the civil service, while others do not. Some
include paramilitary personnel among civilian employees because they have a role in maintaining
public order, while other countries consider them military personnel. Some countries consider
local government employees paid from the central budget as local government staff, whereas
others designate these as central government staff.

International comparisons are still more complicated for government wages than they are for
employment. Indeed, the existence of various in-kind benefits in different countries makes it
impossible to ensure that differences in monetary compensation adequately reflect differences in
total compensation. Even when comparisons are limited to monetary compensation there are
serious difficulties. Whether wage rates are derived from independent surveys or from official
information on pay scales, it is impossible to treat non-wage allowances and other monetary
benefits uniformly because certain sources will include them in the wage package while others
capture only the basic salary. Budgetary figures on the overall wage bill paid for through the
central budget are generally reliable because monetary allowances are usually captured in the
central government budget and properly classified under the wages and salaries item of the
budget.

Despite all of these difficulties, international comparisons, used with caution, provide interesting
information regarding employment levels and wage adequacy. The data presented in this site can
provide pointers for further analysis. However, they cannot replace in-depth country specific
study, and should not be used in isolation as the basis for policy recommendations.

*
This paper is an amalgam of two Web pages on the Administrative & Civil Service Reform site:
“Cross-National Data on Government Employment & Wages,”
(http://www1.worldbank.org/publicsector/civilservice/cross.htm) authored by Giulio de Tommaso,
and “Aggregate Employment & Wage Bill Concerns”
(http://www1.worldbank.org/publicsector/civilservice/wageconcerns.htm), authored by Ismail
Radwan.
Figure 1: The Main Components of Government Employment.

Employment data
The public employment data compiled by Amit Mukhejee and Giulio de Tommaso cover both full-
time and part-time employees, for the most recent year available. Whenever possible, the
differences in employment status are highlighted in the country notes that accompany the data
tables. The employment categories used in this data set appear in boldface type in Figure 1
above. They are defined as follows:

Total Public Employment: includes both state-owned enterprise (SOE) employees and
General Government.

State-Owned Enterprise (SOE) employees: employees of enterprises that are majority


owned by government.
General Government: refers to employment in "all government departments offices,
organizations and other bodies which are agencies or instruments of the central or local
authorities whether accounted for or financed in, ordinary or extraordinary budgets or
extra-budgetary funds. They are not solely engaged in administration but also in defense
and public order, in the promotion of economic growth and in the provision of education,
health, cultural and social services." (International Standard of Industrial Classification of
All Economic Activities (ISIC), Series M No. 4, Rev 3- 1990)

Within General Government we have distinguished six mutually exclusive categories:

 Armed Forces: covers all enlisted personnel (including conscripts) and professional
military. Where possible, administrative employees of the Ministry of Defense have
been excluded and are accounted for as Civilian Central Government employees.

 Civilian Central Government (excluding education, health, and police): includes


central executive and legislative administration in departments directly dependent on
the Head of State or the Parliament, together with all other ministries and
administrative departments, including autonomous agencies. Education, health, and
police employees paid by central government are accounted for separately.

Reference is occasionally made to Consolidated Central Government. This category,


consistent with data originating from the IMF, corresponds to Civilian Central
Government including Education, Health, and Police employees. Thus, it is
equivalent to "Total Civilian Central Government" in Figure 1.
 Subnational Government (excluding education, health, and police):
encompasses all government administration employees who are not directly funded
by the central government. It includes municipalities, as well as regional, provincial,
or state (in federal systems) employment. The distinction between Central and
Subnational Government employment is budgetary, not geographic. If central
government agencies are geographically dispersed, but without changing their
ultimate sources of finance, then the staff in those agencies are included in the
Central Government tally.
 Health employees: covers medical and paramedical staff (doctors, nurses, and
midwives) and laboratory technicians employed in government hospitals and other
government health institutions at all levels of government. Where possible,
administrative employees working in the health sector have been excluded and are
accounted for as Civilian Central Government or Subnational Government
employees, as appropriate.
 Education employees: covers primary, secondary public education employment.
Where possible, administrative employees of the Ministry of Education or local school
systems have been excluded.
 Police: includes all personnel - whether military, paramilitary or civilian - that exercise
police functions. This includes corps like Gendarmerie and Carabinieri. However, as
a matter of convention, it does not include border guards. Police employment data
have been included, when readily available, but have not been gathered
systematically. If a number for police is not available, these public employees are
captured in the Civilian Central Government or Subnational Government categories.

It should be noted that the different functions individual countries impart to their government, and
the difficulties that result in classifying employees, complicate the calculation of these data.

Wage Data
The following definitions are used for the Mukherjee/de Tommaso data set that soon will be
posted on the Administrative & Civil Service Reform website. Please note, however, that statistics
on pubic finance are often incomplete, untimely, and non-comparable.
Central Government Wage Bill: The sum of wages and salaries paid to civilian central
government and the armed forces. Wages and salaries consist of all payments in cash,
but not in kind, to employees in return for services rendered, before deduction of
withholding taxes and employee pension contributions. Monetary allowances (e.g., for
housing, transportation) are included in the wage bill. Pensions are not. For the sake of
comparisons, this number has been expressed as:
1. a percentage of Gross Domestic Product (GDP). The GDP measure is the sum of
value added by households, government, and the enterprises operating in the
economy.
2. as a percentage of total government expenditure. Total central government
expenditure includes all nonrepayable current and capital expenditures, and
excludes government lending or repayments to the government.

Average Government Wage: represents the ratio of the Central Government Wage Bill
(defined above) to the total number of central government employees. Non-monetary
benefits (e.g., free meals, transportation) and expected future benefits (e.g., pensions)
are not included in this wage measure. It should be noted, however, that in some
countries these benefits make up a significant share of a public employee's total rewards.

Where a specific source is listed, the authors have used numbers already available.
Where a source is not listed, the government wage figure is the result of estimations on
the part of the authors, and therefore demands an extra degree of caution.

Average Government Wage to per capita GDP: is calculated by dividing the Average
Government Wage by the GDP per capita estimate. This is meant to convey information
about the condition of an average central government employee in relation to living
standards in that country. However, this measure fails to capture the real conditions of
central government employees to the extent that in-kind and intangible benefits (e.g.,
housing, trips abroad) are a important part of the total rewards these employees receive.

Compression Ratio: the ratio of the highest salary to the lowest on the central
government's main salary scale. This definition differs from the one recently adopted by
the OECD, which measures wage compression in OECD countries as the mean of ninth
decile salaries divided by the mean of first decile salaries. The OECD's approach ensures
that a handful of salaries will not dramatically skew the compression ratio. The method
used in this database provides a suggestive indication of wage policy difficulties but can
not be used to develop policy proposals as it can be strongly influenced by a few outliers.
Although it is not included in this database, a country-specific and class-specific
compression ratio can be identified and tracked over time by taking the average
remuneration of personnel in the top salary grade to average remuneration of personnel
in the bottom salary grade of the relevant class of civil servants. This can serve to track
changes over time in a given country but it has no cross-country comparability. All
compression ratio approaches can be misleading if there are significant monetary
allowances not captured in the calculations, or if the perceived value of non-monetary
rewards represents a significant proportion of total rewards.

Average Government to Manufacturing Wage: the ratio of Average Government Wage


(defined above) to the manufacturing wage (defined by the ILO). This measure while
advantageous because readily available, presents a bias as manufacturing workers tend
to be blue collar workers while central government employee tend to be white collar
workers. The comparison tends to show central government wages in a better light than
they should. T he Manufacturing sector is composed of workers employed in the areas of
manufacture of food products and beverages, tobacco products, textiles, wearing
apparel; dressing and dyeing of fur, tanning and dressing of leather; manufacture of
luggage, handbags, saddlery, harness and footwear; manufacture of wood and of
products of wood and cork, except furniture; manufacture of articles of straw and plaiting
materials; paper and paper products; Publishing, printing and reproduction of recorded
media; manufacture of coke, refined petroleum products and nuclear fuel; 24
Manufacture of chemicals and chemical products; rubber and plastic products;
Manufacture of other non-metallic mineral products; Manufacture of basic metals;
Manufacture of fabricated metal products, except machinery and equipment; Manufacture
of machinery and equipment NEC (not elsewhere classified); manufacture of office,
accounting and computing machinery, electrical machinery and apparatus NEC;
manufacture of radio, television and communication equipment and apparatus;
Manufacture of medical, precision and optical instruments, watches and clocks; motor
vehicles, trailers and semi-trailers; other transport equipment; furniture; manufacturing
NEC; Recycling.

Average Government to Financial Sector Wage: the ratio of Average Government


Wage (defined above) to the financial sector wage (defined by the ILO). This measure
while advantageous because readily available for a large number of countries presents a
bias, as financial sector employees tend to be on the high end of white collar
employment. Accordingly the ratio of these two indicators has tended to show average
central government wage in a worse light than it should. Financial sector includes
Financial intermediation, Insurance and pension funding, except compulsory social
security; and Activities auxiliary to financial intermediation.

Average Government to Private Sector Wage: The Average Private Sector wage
corresponds to the weighted average wages for all private sector activities in the
economy. It is a very difficult estimate to get for a large sample of countries, and is
generally taken from World Bank and/or other institutions' analyses of the private sector.

When do employment and pay conditions need to be reformed?


There are no hard and fast metrics for deciding when to reform public sector pay and
employment. The correct framework is a level of pay consistent with the operation of a motivated
and professional public service at a scale the country can afford on a sustained financing basis.
Comparisons with GDP and population are useful only as guides to judgment. On that very
tentative basis, reformers can assess the relative size and influence of government employment
and the public sector wage bill through some of the following measures:
 Public sector wage bill as % of GDP: This ratio can vary between 5% and 25%, with
many countries around the 10% mark. The ratio depends on the relative involvement of
the state in the economy. Developing countries tend to have smaller governments relative
to GDP and consequently a lower ratio.
 Number of government employees as % of total population: Reformers are
interested not only in the size of the wage bill but also in the number of public servants.
Governments acting as an "employer of last resort" have often taken on large numbers of
public servants in the lowest grades on meagre wages. These are often the most
unproductive government employees, but the extent of such a problem will not be
immediately apparent by examining the wage bill alone.
 Number of government employees as % of total employment: This metric is similar to
the preceding one, but it corrects for developing countries (especially in Africa) that have
a relatively high proportion of children in the population, leading to a relatively low public
servant to population ratio.
 Public sector wage bill as % of total public sector spending: In order to deliver
quality public services, governments will need to spend money on goods and services as
well as wages and salaries. As a rule of thumb, when this ratio rises over 25%,
governments risk reducing their effectiveness by squeezing non-wage expenditure such
as goods and services, maintenance, and capital expenditure. In practice, this means
that hospitals will lack medicines, schools will go without textbooks, etc.
 Average government wages compared to per capita GDP: In order to recruit quality
staff, encourage productivity and avoid corruption, governments in developing countries
must pay their employees at least a living wage. This ratio provides an important indicator
of whether government employees are under or over-paid in comparison to the prevailing
standard of living. A larger numbers of dependants, the relative scarcity of trained labour,
and low standards of living imply that this ratio will tend to be larger in developing than
developed countries. However, this does not mean that government employees are over-
paid.
 Recruitment growth rate: When government recruitment grows faster than GDP,
revenue or population growth it is clear that either financial stability (growing deficits) or
future performance (through reduced wages or reduced non-wage expenditure) will be
jeopardised.
 Military spending: Governments that spend an inappropriate proportion of their total
budget on the military sector are likely to be jeopardising future development objectives.
In such situations, a country's budget might show that development related spending (on
health, education, social safety nets, basic infrastructure etc.) is being crowded out by
high and growing defense spending which has little justification. Countries that employ
more soldiers than health and education personnel could perhaps improve their
development outcomes through a reduction in military personnel expenditure. There are
no hard and fast rules however, and it should be noted that the objective of the World
Bank's work is not to assess military expenditure, but to assess a country's efforts in
funding development expenditures. See the attached informal briefing notes - and click
here for a link to the World Bank Post-Conflict Reconstruction site. You may also click
here for a recent discussion of donors' roles.

These percentages or ratios should be compared to the average for the county’s region, as well
as with countries at similar levels of development in other regions. It is important to note that
policy recommendations cannot be "read off" the employment and wage statistics. A complete
picture needs to be built up and discussed with all relevant stakeholders before designing an
appropriate employment and wage reform agenda.

Any review of public sector employment should begin with the most comprehensive measure
possible. Artificially reducing the scope of the public service, for instance excluding the armed
forces, risks overlooking the very areas that may be in need of reform.

Statistics on the number of public servants should be compiled:


1. Historically: to show how staffing patterns have changed over time
2. By Ministry/Department: to match spending to declared priorities
3. By cadre: to identify areas of traditional overstaffing – e.g., drivers, secretaries
4. By salary grade: to facilitate pay reform

Data can be obtained from the following sources: payroll data, headcount exercises, budget
documents, Auditor–General’s reports, National Accounts, and Public Expenditure Reviews.
These documents are usually available from the Ministries of Finance, Planning or the employing
ministries. Other important bodies can include the Central Statistics Office and Public Service
Commission or their equivalents.

Key points to be kept in mind


When reviewing public sector wages at the aggregate level, it is important to note that salary
levels often vary significantly across the public sector - and particularly between the core civil
service and other groups. One particular disaggregation is between skill groups - often some
groups of staff are overpaid by comparison with private sector equivalents, and others underpaid.
Therefore the drivers of the wage bill need careful investigation. Which groups of staff account for
the larger parts of the totals - and what is the composition of their total rewards? The question of
discretionary and other allowances needs some investigation in that context.

Overstaffing is a relative concept. The issue is motivation and affordability rather than staff
numbers. Comparisons with GDP and population are useful only as guides to judgment.
Pensions should be considered at the same time as current year wage bill costs as the net
present values of pensions can be a significant motivator. See the Administrative & Civil Service
Reform Web page on Pension Arrangements. Pensions can act as an incentive for staff to remain
in otherwise underpaid jobs. Additionally, savings from retrenchment might need to be
significantly offset by the costs of continuing pension liabilities.

Recommended readings

 Heller, Peter S., and Alan A. Tait. 1984. Government Employment and Pay: Some
International Comparisons. Occasional Paper No. 24. International Monetary Fund,
Washington, D.C.
 Kraay, Aart, and Caroline van Rijckeghem. 1995. "Employment and Wages in the Public
Sector: A Cross-Country Study." IMF Working Paper; WP/95/70. Fiscal Affairs
Department, International Monetary Fund, Washington, D.C.

 Lindauer, David L. 1988. "Government Pay and Employment Policies and Government
Performance in Developing Economies." Background paper for World Development
Report 1988, WPS 42, World Bank, Washington, D.C.

 Lindauer, David L., Oey A. Meesook, and Parita Suebsaeng. 1988. "Government Wage
Policy in Africa: Some Findings and Policy Issues." World Bank Research Observer 3
(January): 1-25.

 OECD (Organization for Economic Cooperation and Development). 1999. "Structure of


the Civil Service Employment in Seven OECD Countries." OECD, Paris.

 OECD (Organization for Economic Cooperation and Development). 1993. Pay Flexibility
in the Public Sector. Paris: OECD/PUMA.

 OECD (Organization for Economic Cooperation and Development). 1994 and 1997.
"Trends in Public Sector Pay: A Study of Nine OECD Countries 1985-1990." Occasional
Papers on Public Management No. 1. Paris: OECD/PUMA.

 OECD (Organization for Economic Cooperation and Development). 1994. "Senior Civil
Service Pay: A Study of Eleven OECD Countries 1980-1991." Occasional Papers on
Public Management No. 4. Paris: OECD/PUMA.

 OECD (Organization for Economic Cooperation and Development). 1998. "Wage


Determination in the Public Sector: A France/Italy Comparison."

 OECD (Organization for Economic Cooperation and Development). 1998. "Performance


Pay Schemes for Public Sector Managers: An Evaluation of the Impacts."

 OECD (Organization for Economic Cooperation and Development). Public Sector Pay
and Employment database (PSPE).
 Schiavo-Campo, Salvatore, Giulio de Tommaso, Amitabha Mukherjee. 1997. Government
Employment and Pay: a Global and Regional Perspective. Policy Research Working
Paper No. 1771. The World Bank, May.

 Schiavo-Campo, Salvatore, Giulio de Tommaso, Amitabha Mukherjee. 1997. An


International Statistical Survey of Government Employment and Wages. Policy Research
Working Paper No. 1806. The World Bank, August.

Suggested websites

CROSS-COUNTRY INFORMATION
 ILO (main page)
 ILO Labor Statistics Database (LABORSTA)
 Teaching Staff (UNESCO)
 WHO Estimates of Health Personnel
 WHO Europe Country Information
 SESRTCIC (Islamic countries)
 CIA World Factbook
 Economist Intelligence Unit
 IMF
 UNDP
 USAID
 OECD

COUNTRY-SPECIFIC INFORMATION
 Azerbaijan
 Bosnia and Herzegovina
 Croatia
 Cyprus (health statistics)
 Czech Republic
 Hungary
 Israel
 Jordan
o Employment
o Education
o Health Services
 Kyrgyz Republic (wages data)
 Latvia
 Lithuania (labor force survey data)
 Poland
 Saudi Arabia (civilian employment)
 Slovak Republic
 Slovenia
 Turkey
 West Bank and Gaza