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Civil Service Modeling: Simplifying
the Complexities of Civil Service Pay
and Employment
Why Model?
Two Dominant Approaches to Civil
Service Pay and Employment Reform
Macro-Analysis: The Meat-Axe
Approach?
2. Micro-Review: The Bean-Counting
Perspective
1.
Macro-Analysis to determine appropriate
size and cost of civil service

How it works:
o Gross criteria to gauge nature and extent of reform
needed
o (Wage bill/GDP; government employment per
capita; salary compression ratios, public-private
wage relativities)

Pros and Cons:
o Broad-brush reform guidance but over-simplified
basis for government policy and lending terms and
conditions
Micro-Reviews (Functional Analysis) to
determine staffing and incentive levels

How it works:
o Bottom-up scrutiny of individual organizational
units’ objectives, tasks, and resource
requirements

Pros and Cons:
o Accurate picture of on-the-ground reality
o Inconsistent methodology – wide variability in
quality
o Hard to do – takes forever
o Difficult to sum up parts: challenge to build
coherent civil service strategy for whole based on
micro- unit-based details
Both approaches left big problems unaddressed

Low Government Policymaking Capacity for
CSR
 CSR-P&E Reality Hopelessly Complex
o Competing Sectoral Considerations
o New Wrinkles: Decentralization
o Conflicting Government Objectives (Social Welfare
vs. Fiscal Prudence)

Flimsy Empirical Basis to Donor-Country
Dialogue (Discussion often on different
pages)
What is the CS-P&E Model?
Civil service modeling as middle-range analytic
tool to bridge gap in existing approaches

Uses country customized data to render the
key attributes of current P&E situation
o Pay and grading arrangements
o CS employment numbers
o Sectoral/ministerial geographical particulars

Establishes reform objectives and
parameters– “Five-year CSR vision”
o Wage bill envelope
o Compression ratio and salary levels
o Public-private relativities
What is the CS-P&E Model?
Civil service modeling as middle-range analytic
tool to bridge gap in existing approaches

Simulates reform options – calculating and
demonstrating costs of alternative policy
measures
o assumptions about timing and extent of
retrenchment or retirements
o implications of different levels of pay raises
o altering sectoral employment levels (teachers,
health workers)
The Joys of the Model

Provides governments with hands-on tool for
plotting realistic reform strategy with concrete
targets
 Sorts out wheat from chaff – focus on big
picture
 Raises level of dialogue with donors (and
donor understanding of issues)
 Helps policy makers combat special pleading
of sectoral interests
The Woes of the Model

Cannot (should not) render all detailed characteristics
of individual country CS reality (Trade-off between
simplicity/clarity and accuracy)
 Garbage in-Garbage Out (Poor data mean targets
may be off)
 Cannot make hard decisions for policy makers
 Haven’t dealt with some critical issues (pensions
variables hard to incorporate)
 Cannot replace good establishment management
systems (HR database, tight payroll controls, etc.)
 Cannot provide detailed information for reform
implementation (for retrenchment; severance
package design, etc. – consultancy needed)
East Asia Experience
Pilots in 6 Countries: Capacity Building Grant from
ASEM
Cambodia
Timor Leste
Philippines
Mongolia
Indonesia
Thailand
Cambodia: The situation

Wage bill low by international comparators (US$ 52.4
million, 1.7% of GDP in 1999), but revenue
projections missing targets set by Fund
 Very low average wages (4 times less than national
minimum wage) and very compressed from top to
bottom, 2:1
 Census being carried out, but meanwhile no accurate
information on numbers, placement, skills of
employees
– estimated 164,000 civil servants (14 civil servants per 1000
population)
Cambodia: The problem

Pressure from Fund to maintain wage bill
 Higher salaries necessary to attract more skilled civil
servants
 Fund’s solution: cut employment immediately
(yesterday), but clueless about how much
– arbitrary target of 15%, allowing across the board 10% wage
increase

Our solution: provide targets for salary adjustment
and decompression, wage bill envelope, and
rightsizing options through modeling exercise over
several months
Cambodia: Reform options


Raise salaries, but keep wage bill constant, by
retrenchment (see chart on costs of employment)
Different degrees of salary increases will mean
different retrenchment imperatives
East Timor: The Situation


New country with no parameters -- wage bill
envelope, salary scale, numbers and types of civil
servants (and functions and structures) all still to be
determined
U.N. organization acting an interim government
– setting wage precedents with its own staff
– setting up structures, rules and budgets over next few fiscal
years, with various binding consequences for East Timorese
government when constituted 2002-3.
– donor group meeting in Lisbon end-June to determine East
Timor’s immediate future
East Timor: The Problem

With little private sector activity, fluctuating prices and
fluid labor market -- and invasion of expatriate
assistance -- setting civil service pay and
employment rules is an arbitrary exercise
East Timor: Reform options

Budget planning assumptions
– GDP conjectured at pre-ballot levels (US$ 300 million)
– Revenues (donor-funded and later own-sourced) 15% of
GDP
– Expenditures set even with revenues (US$ 45 million)

Pay and employment assumptions
– Employment 15,000 (about half of Indonesian civil service in
East Timor province)
– Wage bill 65% of total expenditure (high by international
standards)
– Salary scale -- only information on basic wage from cost of
living study
– Compression ratio of between 4:1 and 7:1
East Timor: Short to middle-range approach

Determine salary scale
– using Indonesian comparators
– find reservation wage for benchmark jobs through quick and
dirty comparator pay survey
– cost of living study for living wage

Determine wage bill by affordability and international
comparators
 Try to match up rough functions and structures and
staffing
 Use above and international comparators to
determine staffing numbers
 Simulating future civil service pay and employment
scenarios (Australian Dept of Finance providing
assistance for modeling exercise)
Results
Cambodia
 Govt. and donors on same page (single
sheet)
 Govt. proposed better – though not
satisfactory – P&E strategy
 Pinpointed analytic work agreed upon
 Bank placing CSR at center of PRSC