Public Sector Wage Research Articles

Resource rents, ethnic fractionalization and redistributive public sector employment

The resource curse literature often posits that public employment in resource-rich economies tends to be large, driven by motivations beyond public goods provision. One set of theories attributes this phenomenon to (ethnic) clientelism, but lacks robust empirical support. Another set of theories challenges the notion of (ethnic) clientelism, suggesting that the expansion of public sector employment serves as a form of social insurance in the absence administrative tools to redistribute income. This study diverges from the conventional story of an invariably positive association between resource abundance and public sector employment. Instead, I show that the positive correlation between resource abundance and public sector employment only holds when ethnic fractionalization is low. In countries with high levels of ethnic fractionalization, the relationship weakens and can even reverse. This is because an increase in public sector employment tends to dilute public sector wages, diminishing the attractiveness of public sector jobs as clientelist rewards. The empirical analysis supports this claim: when ethnic fractionalization is low, more resource rents correspond to higher public sector employment and lower (or even negative) public sector wage premiums; when ethnic fractionalization is high, the opposite holds: more resource rents correspond to fewer public sector jobs but larger public sector wage premiums.

The Influence Of Job Evaluation On The Wage Bill In Public Sector Organizations

Public service is the main driver of growth for most developing countries. It is a key component because it facilitates the delivery of services to the citizens. However, despite the efforts to grow the economy and deliver quality services, there are challenges with the costs associated with ever-increasing public sector wages. Although a well-paid public sector could be more efficient, the wage bill should be maintained at fiscally sustainable levels to enable the achievement of development goals. Kenya like other developing countries has been grappling with the management of costs associated with wages in the public sector, which were growing at an alarming rate. This is mainly because of the large number of employees, arbitrary determination of wages and implementation of the Constitution of Kenya, 2010. This study will seek to examine the influence of human resource strategies for managing the public sector wage bill in Kilifi County, Kenya. The study will particularly focus on human resource strategies such as job evaluation, total rewards, and performance-related pay and their influence on the management of the public sector wage bill in public sector organizations within Kilifi County. These public sector organizations are expected to be implementing these strategies although the degree of implementation may be varying. The study will, therefore, seek to find out the extent to which their application influences the management of the wage bill costs to a manageable level. The study will also examine the theories associated with wage management. The theories of equity, efficiency wage, and public sector motivation will be examined to determine their influence on the management of wages in the public sector. Questionnaires will be developed and self-administered to the human resource management professionals in the public sector organizations. This will enable the Researcher to capture perceptions of the application of these strategies in their organizations. Their in-depth understanding of the human resource strategies being studied will be useful to the study. The study design will be a survey of the 52 government organizations within Kilifi County thus the target population for the survey will be a census of the 52 public sector organizations. The sampling method applied will be purposive thus the HR professionals will be the respondents. The data collected will be analyzed using analysis of variance (ANOVA) which will be used to establish the relationship between the independent variables and the dependent variable. The findings of the study will be presented in the form of tables, charts and statistical measures such as an analysis of variance

Follow the leader? The long‐run interaction between public and private sector wage growth in the UK

AbstractWith one‐fifth of the UK labour force employed in the public sector, public sector pay and its interaction with private sector pay is an important driver of the macroeconomy. Using new data on sector‐level earnings and sector–industry‐level pay settlements, this paper addresses the fundamental question of which sector leads and which follows in terms of earnings determination. We find that in the long run, public sector wages adjust to wages set in the private sector, maintaining a consistent relationship. We further find that there can be significant wage spillovers from the public sector to the private sector in the short run. These tend to be more pronounced for private sector industries that are domestically facing, characterized by low worker bargaining power, or reliant on public sector inputs. This paper's findings have important implications for macroeconomic policy that aims to balance inflationary forces and fiscal funding pressures.

Who’s the boss? Exploring public and private wage growth leadership in state-level education and health industries in Australia

ABSTRACT Public sector wage research has evolved beyond the estimation of public sector wage premiums to investigating the nature of interrelationships between public and private wage patterns. This article seeks to extend this wage leadership research to investigate intra-industry linkages and spillovers between public and private sector wage growth in Education and Health industries, using Australia as a case study. The research employs vector error correction models to encompass tests for full wage adaptability, long-run and short-run wage leadership. Results show that the public sector is the long-run leader in all models, regardless of industry and alternative jurisdictions’ public sector wage setting policy. Our findings have important policy implications for public sector wage setting practices, demonstrating that wage policies which may be based on political motivations can have widespread effects on the private sector.

Fiscal Expenditure Multipliers in South Africa: is there a crowding-out effect?

Returning an economy to fiscal solvency from episodes of large deficit requires efficient composition of national spending. It is for this reason that empirical inquiry concentrated on disaggregated expenditure components has gained relevance in the recent past. This paper employs an Autoregressive Distributed Lag Model (ARDL) to establish the size of fiscal expenditure multiplier. This paper uses time series data of disaggregated fiscal components ranging from 1982 to 2020. The results show positive but smaller (less than one) multipliers for all the disaggregated fiscal expenditure variables in the long run. Most importantly, the results show that the public sector wage bill, which takes the largest share of overall government expenditure, has a smaller multiplier compared to the rest of the expenditure items, indicating a possible crowding out impact. Effective management of the public sector wage bill and efficient budget allocation must be prioritized both in the long-run and short-run. This can be achieved by prioritizing growth-enhancing expenditures whilst keeping the public sector wage bill moderate.

Theoretical Review of Pay Restructuring in Uganda's Public Service Health Sector

This article examines the impact of wage reforms on service delivery, financial stability, managerial efficiency and donor influence and focuses on the public health sector in Uganda. Like other reforming countries, Uganda also implemented salary structure reform for various reasons, but the most important ones were to pay civil servants a living wage, make remuneration transparent, align the salary structure with the single-spine structure and consequently increase the number of employees motivation and efficiency in service delivery. The study analysed research articles, policy documents, reports, and media coverage on pay changes for public health workers. Key findings show that the original goal of wage reforms, such as the single-spine structure, has not been achieved; several pay scale structures were reintroduced. Different service models are used to calculate wage. Similar cadres of civil servants receive different salary grades; and wage allocation receives more funding than other areas, such as development and supplies. The results suggest that salary increases affect allocations in other important areas but do not always result in public health workers' commitment to service. Compromise and negotiation have played an important role in public sector wage restructuring. A review of wage reforms implemented across Uganda's public sector will be based on the recommendations and issues addressed in this study. The study provides crucial benchmarks with regard to wage reform strategies that promote diversity in the public sector and the distribution of authorities. This study is unique because it focuses on wage restructuring in the public sector to align practices with policies. Although based on a review of relevant documents, it was conducted for the first time in Uganda

Public sector employment rigidity and macroeconomic fluctuation: A DSGE simulation for China.

Public sector employment in China has exhibited pronounced non-cyclical characteristics, with a recruiting scale and wage level showing limited responsiveness to economic fluctuations. The allure of civil service jobs in China has seen a significant resurgence post-COVID-19, with an observable increase in demand among educated job seekers for stable government positions amid growing economic uncertainties. This study investigates the implications of public sector employment rigidity on macroeconomic stability using a dynamic stochastic general equilibrium (DSGE) model integrated with search and matching (S&M) theory. Simulations incorporating alternative government job policies reveal that non-cyclical public employment exacerbates macroeconomic cyclical fluctuations. The low elasticity of public sector wages with respect to corporate wages fosters stable expectations among workers regarding the future value of government jobs, increasing the perceived value of the current state of unemployment. This leads job seekers to voluntarily remain unemployed, reducing labor supply to firms. Meantime, it preserves workers' bargaining power with firms, reinforcing wage stickiness and undermining the stabilizing role of price adjustments in employment. Hypothetical scenario analyses indicate that adopting a pro-cyclical wage policy for the public sector can mitigate the obstacles of wage cuts for firms, stimulate the creation of new jobs during economic downturns, and consequently reduce the magnitude and duration of rising unemployment rates. In contrast, maintaining a non-cyclical public sector wage may not prevent a continuous rise in unemployment or a worsening economic situation, even with expanded sector recruitment. This finding holds significant relevance in the context of the post-COVID era characterized by an economic slump and employment tension, providing theoretical support for establishing a transparent and flexible wage adjustment mechanism in the public sector that is linked to market conditions.

The effects of public sector employment on the economy

Public sector jobs are established by governments to directly provide goods and services. Governments, however, may also choose to regulate the size of the public sector in order to stabilize targeted national employment levels. However, economic research suggests that these effects are uncertain and critically depend on how public wages are determined. Rigid public sector wages lead to perverse effects on private employment, while flexible public wages lead to a stabilizing effect. Public employment also has important productivity and redistributive effects.

Wage Spillovers across Sectors: Evidence from a Localized Public-Sector Wage Cut

Wage Spillovers across Sectors: Evidence from a Localized Public-Sector Wage Cut

PUBLIC SECTOR WAGE PREMIUM IN POLAND: A HUMAN CAPITAL APPROACH

Aim: The aim of the article is to estimate the value of the public sector wage premium. It is an important issue both in the area of wage management in an organization and labor market performance. Methods: The research method is based on measuring the rates of return on human capital in the public and private sectors. It assumes that human capital is a function of the cost of living, education, and work experience. The average value of human capital was calculated in a model sample of employees in the public, private, and total sectors in each of the analyzed periods. In order to calculate the rate of return, its value was compared with the average wage in each of the sectors. Results: The results indicate the existence of a small average negative public sector wage premium in Poland. However, in some periods, the observed wage gap widens signifi­cantly, reducing the wage competitiveness of the public sector. The results of measuring the return on human capital of employees of both sectors is about 8% per year. Conclusions: The paper’s findings can be used to optimize the wage policy and analyze wage competitiveness in public sector entities. The paper contributes to the sector wage differentials literature by developing an original methodology based on a human capital rate of return and also contributes to the research paradigm on normative return on capital. Findings in the second field are consistent with the concept of an 8% economic constant of potential growth.

THE PROBLEM OF MOTIVATION IN CIVIL SERVANTS IN THE RUSSIAN FEDERATION

Currently, the civil service is receding into the background in the opinion of promising qualified personnel due to a large number of restrictions and low wages, in this regard, there is an outflow of employees from the civil service to the commercial sector, where wages are much higher. This problem requires a lot of attention, since it is the professionalism of the state apparatus staff that will determine the effectiveness of their activities, which will directly affect the socio-economic development of the state. The purpose of the study is to develop recommendations to improve the ways of motivating civil servants in Russia based on the analysis of the Russian motivation system and foreign experience in stimulating civil servants. Materials and methods. The work used analytical and expert methods, comparative legal analysis, generalization of Russian and foreign experience in stimulating the work of civil servants. Materials of legislative acts, scientific literature, and expert publications were used in the study of the incentive system. Study results. The article analyzes material and non-material methods of motivating civil servants, it examines the reform carried out in the Russian Federation in the field of monetary maintenance of civil servants. The salary structure of civil servants in foreign countries and in the Russian Federation is analyzed, the possibility of introducing a similar foreign system into the Russian public sector wage system is considered. Reforming the remuneration system is important in motivating civil servants; therefore, at the state level the work is underway to improve the salaries of civil servants. To date, the basis for reforming the monetary maintenance of civil servants is made by an increase in the fixed part in their salary structure, while financing the increase in the fixed part will be carried out at the expense of budgetary funds. In general, according to experts, this should revitalize the personnel in the civil service of the Russian Federation, which will increase the efficiency of public administration and stimulate the human resources potential in public authorities. Problems in the system of motivation of civil servants of the Russian Federation were also identified and mechanisms were developed to help solve them. Conclusions. The article proposes measures to improve the methods of motivating civil servants used in Russia, which can affect the quality and efficiency of their work, and the analysis of mutual influence of the proposed incentive methods will make the management process in a public authority more effective, this should lead to increased motivation and involvement of civil servants in order to retain them in public service.

The new political economy of public sector wage-setting in Europe: Introduction to the special issue

This special issue (SI) brings the industrial relations scholarship on the public sector into dialogue with the comparative political economy (CPE) literature on growth models/regimes. While the former has paid great attention to the public sector, in CPE the public sector has been analysed less, and mostly as subaltern to the export-sector’s actors, interests and institutions. We posit that the public sector matters for CPE in its own right for three reasons. First, the state remains today the single largest employer in virtually every European economy, providing incomes to a large segment of the middle class. Second, public employers’ wage bill – one of the largest items of governments’ current expenditures – is funded by the taxpayers. Hence, public sector wage policy is fiscal policy, ultimately pursued by public/political employers. Third, public employers are simultaneously public managers and political sovereigns acting in the shadow of hierarchy. Case-study contributions to the SI detail how these insights matter within different European growth regimes: (1) the Mediterranean demand-led growth regime (France, Italy, Spain and Portugal), (2) the German export-led growth regime, (3) the Nordic balanced growth regime (Denmark and Sweden) and (4) the FDI-led Eastern European growth regime (Czechia and Slovakia).

Sustainability of the Public Servant’s Pension Scheme in Sri Lanka

Despite the global trend towards defined-contribution pension schemes, many public service pensions continue to follow defined-benefit structures, imposing a significant fiscal burden. This paper analyses the main public sector pension scheme in Sri Lanka in a context where the population is ageing rapidly and the government faces strong fiscal constraints. The study aims to forecast the costs of the Public Servants’ pension scheme and quantitatively evaluate policy options for improving fiscal sustainability. The study extends the model of Rannan-Eliya et al. (1998) using detailed data on the number and age structure of pensioners as well as information on public sector wages, inflation, and GDP growth. The model’s output is validated using observed pension costs from 2016-2022, and projections and policy simulations are carried out for 2023-2027. The study finds that expenditure on the scheme is estimated to increase by 6% annually and 10% over the next five years in real terms. Reducing the generosity of pension payments, raising the retirement age, suspending gratuity payments temporarily, and reducing the replacement rate for new retirees result in significant reductions to the annual pension bill, although the latter two options are unlikely to be politically feasible.

Arms-length influence: Public sector wage setting and export-led economic growth in Czechia and Slovakia

Studies on the drivers of public sector wage setting (PSWS) within the broader political and economic conditions in Central and Eastern Europe are scarce. To fill this gap, the paper questions to what extent the export-led growth model, based on foreign direct investment as driver of economic growth, influenced PSWS in Czechia and Slovakia after the 2008–2009 crisis. The paper provides new evidence of the appropriateness of the growth model literature, integrated by consideration of global production chains integration, for understanding PSWS in CEE conditions. The analysis shows that PSWS followed institutional traditions and established practices that only indirectly related to the countries’ export orientation and integration into global production chains. The indirect growth model impact on PSWS in CEE conditions is channeled through a strong role of the statutory minimum wage, which serves as a wage benchmark both for the export sector and PSWS.

Public sector wage compression and wage inequality: gender and geographic heterogeneity

Abstract Studies of wage inequality concentrate on private wages. Public sector wages are typically assumed to contribute to the overall wage equality. We challenge this understanding in an analysis of the relative skill premium in the public versus private sectors. The analysis of heterogeneity across gender and geography is based on rich register data for Norway. The raw data confirm the relative wage compression in the public sector. However, this is a male phenomenon and only prevalent in large cities when unobserved worker and firm characteristics are taken into account. With identification based on shifters between private and public sectors and movers between city-size groups, wage setting for female workers in the public sector increases wage inequality in all regions, particularly in the periphery. The result is consistent with policies promoting the recruitment of high-educated female workers and the expansion of public services in the periphery counterbalancing the desired equality effect of public wages.

Effect of Global Oil Price Volatility and Exchange Rate Policy on Foreign Exchange Reserves in Iraq

Purpose: This paper offers simulations and forecasts of the ideal currency reserve measure in light of future shocks to the Iraqi economy due to the downturn in the international price of oil and the global economic shutdown triggered by the Corona pandemic.
 
 Theoretical framework: The Iraqi foreign exchange reserves have entered a cycle of sustained and accelerated degradation in recent years and hit alarming amounts in 2020, affecting Iraq's financial stability compared to other foreign currency reserves. According to figures from the Iraqi Parliament's Financial Commission, the Iraqi fund in the Central Bank of Iraq decreased, following removing the government's second loan by the end of 2020, to $35 billion. The Fitch Ratings Agency, on the other hand, has found that Iraq's plan to slash public sector wages and pension costs will delay the reduction of currency reserves as part of the attempt to lower financial imbalances and relieve financial pressures. However, it will be difficult to enforce and risk exacerbating social disorders. According to Fitch, by the end of August (15% of projected GDP for 2020), cash funding from the Central Bank of Iraq grew to 28.5 billion Iraqi dinars from 14.1 billion Iraqi dinars at the end of May.
 
 Design/methodology/approach: The study uses an analytical approach to show the fluctuations in oil prices and their impact on the fluctuation of oil revenues and the currency-selling window that the Central Bank of Iraq applies to its foreign reserves.
 
 Findings: The systemic problem of worldwide petroleum price drops that provide longer-term estimates to estimate the decrease in petroleum prices on global oil markets explains the quick fall in Iraqi exchange reserve magnitude. Iraq's foreign reserves, mostly from oil exports, fulfill international standards. Iraq's exchange rate policy depends on the Central Bank's direct foreign currency sales. This approach reduces foreign money diversion from Iraq, preventing the central bank from maintaining exchange rate stability.
 
 Research, Practical & Social implications: The impact of foreign reserves on national financial stability is becoming more obvious as their function evolves from supplying fundamental transaction needs to fulfilling financial security criteria.
 
 Originality/value: The Iraqi dinar's value must be protected at all costs, hence the Central Bank of Iraq's foreign reserves are crucial. These reserves are affected by oil revenues, the main financier for it, and the window for selling the currency, which is the outlet for leakage from it.

Public sector wage bargaining and the balanced growth model: Denmark and Sweden compared

Denmark and Sweden are small open economies that rely on exports for economic growth. At the same time, these countries have some of the largest public sectors in the world and a high wage equality. With extensive collective bargaining and strong unions in both private and public sectors, coordination of wage setting is crucial for balancing competitiveness and real wage increases. This paper investigates how coordination between public sector and private sector wage setting in the two countries is achieved. Like other studies, we find that agreements in the manufacturing export sector set the pattern for public sector wage bargaining. However, we also find that institutional differences have significant distributive implications for public sector employees. In Denmark, wage increase disparities between the public and private sectors are automatically adjusted according to formalized procedures. In Sweden, no automatic adjustment exists, and coordination is instead based on tightly coordinated bargaining practices by unions and public sector employers. Surprisingly, we find most public sub-sector variation of wage increases in Denmark, whereas wage structures in Sweden have been very stable. We argue that timing of bargaining, level of private sector wage flexibility and politicization of public sector bargaining are key drivers for these distributional differences.

Same same but different? The Mediterranean growth regime and public sector wage-setting before and after the sovereign debt crisis

This paper analyzes the role of public sector wage-setting (PSWS) in Mediterranean countries before and after the Eurozone crisis. Extant literature suggests public sector wage inflation to be the norm in these countries due to the lack of institutional preconditions for wage restraint and the role of PSWS in shoring up the publicly financed domestic demand-led growth regime. Yet, the cases of France, Italy, Portugal and Spain do not to neatly fit these predictions, showing instead notable cross-country and intra-country diachronic variation. We provide an alternative account by treating PSWS as fiscal policy under EMU. Variation in PSWS outcomes before the Eurozone crisis is best explained in terms of the institutions governing PSWS. In France and Portugal, PSWS is highly centralized at the national level, and a strong Finance Ministry plays a central role in the oversight of PSWS to ensure budgetary discipline. To the contrary, Italy and Spain underwent processes of disorganized decentralization of PSWS through the 1990s and 2000s, leading to fragmented – and often clientelist – practices resulting in disorderly inflationary wage increases across the country. After the sovereign debt crisis, all countries relied on restrictive PSWS to support internal devaluation and fiscal adjustment, though with different intensity related to the country-specific problem load and external constraints.

Regulating Public Sector Wages in Times of Inflation and Constitutional Restraints

Purpose: The article discusses the impact of public sector wages and inflation on various aspects of a country’s socioeconomic development. Methodology: Using Slovenia as a case study, the article focuses on how inflation impacts collective bargaining and wage regulation in the public sector, as well as the role of constitutional fiscal restraints in collective bargaining in the public sector. The research employs qualitative methods and focuses on patterns in existing documents and empirical case studies, and a comparative method involving Hungary. Findings and Academic contribution to the field: The article examines the impact of inflation on collective bargaining and wage regulation in the public sector. It concludes that inflation, even with (some) constitutional fiscal restraints in place, can affect collective bargaining and wage regulation in the public sector, depending on the bargaining power of unions and employers and specific provisions outlined in collective bargaining agreements and wage regulations.

Effects of public sector wages on corruption: Wage inequality matters

The paper uses a new country-level, panel data set to study the effect of public sector wages on corruption. The results show that wage inequality in the public sector is an important determinant of the effectiveness of anti-corruption policies. Increasing the wages of public officials could help reduce corruption in countries with low public sector wage inequality. In countries where public sector wages are highly unequal, however, raising the wages of government employees could increase corruption. These results are robust to a wide range of empirical model specifications, estimation methods, and distributional assumptions. Combining increases in public sector wages with policies affecting wage distribution could help policy makers design cost-effective programs to reduce corruption in their countries.