Rightsizing Brazil's Public-Sector Wage Bill

Abstract

Brazil's public-sector wage bill is comparatively high. It grows inertially and competeswith other spending. Rightsizing the wage bill could stimulate administrative efficiencyand bring more equity into a system where public employees earn more than private incomparable professions. Most importantly, however, a reform is necessary to comply withthe Federal government expenditure ceiling and the subnational fiscal responsibility rules.A reform should thus encompass all government levels, and all careers, and should aim toachieve a real decrease in salaries and lower employment. In the medium term, a reviewof the compensation structure should rationalize the multitude if wage grids, mergeallowances into the base wage, and align public sector compensation to private wages inlow-skilled professions.