Abstract
The global economic crisis, which had a strong impact on virtually all states of the world, brought additional challenges to the public sector. The governments had to choose between two alternatives: to decrease public expenditure by adopting austerity measures (option chosen by most EU Member States) or to increase public investments, in an attempt to stimulate economic growth (alternative preferred and supported by the US and Great Britain). The paper at hand aims to analyze the public expenditure policy in Romania, as a result of the economic conditions imposed by the crisis, with a focus on the relationship between the incomes collected from taxes on labour and the public expenditure with the personnel employed within public institutions. We shall analyze and compare the figures regarding public expenditure for the wages of persons working in the public sector in the years prior to the crisis and following the adoption of the austerity measures. At the same time, we shall analyze the corresponding numbers regarding the amounts collected from taxes on labour. The goal of the paper is to identify the possible connection between the reduction of personnel expenses and the decrease of the budgetary deficit, which was the intended purpose of the austerity measures in the field of public employees' salaries. Since the labour tax is computed on the basis of the salary earned, we expect both the expenses with the personnel and the amounts collected from labour tax, to decrease. However, this decrease will be in different percentages. The paper will analyze if the final balance between expenses with salaries and labour tax is positive or negative, in other words, if the austerity measures helped improve the budgetary deficit or deepened it. The final part of the research focuses on a comparative analysis between the EU Member States, with respect to the levels of taxation on labour, the percentage of labour tax in the GDP, and the public expenditure with the personnel, in an attempt to show if there are certain similarities or differences between EU and/or NISPAcee States.
Highlights
We performed a simulation of the hypothesis of cancelling the decision to reduce public sector wages, in the conditions of maintaining the increase of the VAT level with 5 p. p. and we demonstrated that, in this case, the deficit of the general consolidated budget would have fallen within the limit agreed with the International Monetary Fund (IMF)
Still, cutting the public sector wages may have adverse effects of salary constraints, which may refer especially to the reduction of the moral responsibility or the decrease of professional competence, which we consider crucial for increasing the efficiency of public administration, including for the increase of the budgetary collections which would support the wages, which, in their turn support moral responsibility and professional competence
Corrected depending on the total index of consumption prices, public expenditure recorded a real negative growth of 30.67%. This appears a positive fact, but this reduction is not corroborated with an increase of investments generating economic added value and, it cannot be considered a
Summary
The global economic crisis which began in 2008 originated as a crisis in, and of, the financial sector. The crisis in the financial sector lead to a crisis in the rest of the economy, globally, as the banks stopped lending to people and companies, and so the level of spending and consumption by the private sector fell. The debut of the economic-financial crisis in Romania was recorded at the beginning of the second semester of year 2008. At the beginning of year 2009, Romania officially admitted being in economic crisis, which became the subject of public debates. The government claimed that the fundamental objective of the loan was represented by the desire to preserve jobs, to relaunch and credit the economy, such as, indirectly, to ensure the payment of salaries and pensions in Romania. The recession increased the payment of unemployment and other benefits and services Both the fall in taxes and the rise in benefits increased government deficits (see Fig. 1)
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