Wage Bargaining and the Efficiency Dividend in Public Enterprises

Abstract

AbstractAn important aspect of the process of microeconomic reform is the improved operational efficiency of public trading enterprises. This paper argues the importance of appropriately distributing the efficiency dividend amongst the key players including the owners (ie., Governments which expect greater dividends), producers of the output (ie., workers and management who expect greater wages and salaries) and consumers (who expect better quality output at lower prices). The paper first evaluates the currently available measures of the efficiency dividend in public enterprises, including factor productivity and performance indicators. It then demonstrates that inappropriate use of these measures by management and/or workers during the wage bargaining process can lead to misunderstanding of the extent of the dividend and how it should be distributed. This in turn can undermine the reform process. Amongst the conclusions reached are that single factor productivity measures should not be used during the wage bargaining process.