Download Civil Service Financial Model

Modeling Civil Service
Pay & Employment Strategy
in East Asia
Using the Civil Service
Financial Model:
A Rapid but Comprehensive
Approach to Civil Service
Reform
Why does East Asia need civil
service pay and employment
reform?
Most East Asian governments have managed their wage
bills well over the last three decades
Government wage bill as a % of GDP
12
10
China
Indonesia
Korea, Rep.
Malaysia
Philippines
Thailand
Vietnam
8
6
4
2
0
1970
1974
1978
1982
1986
1990
1994
Public sector employment levels have also been relatively
well-managed in the region
Total government employment as % of total population 1980-1998 for
selected Asian countries
China
Indonesia
Korea
Malaysia
Philippines
Thailand
Vietnam
6%
5%
4%
3%
2%
1%
0%
1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998
The crisis highlighted the
need for better civil
services
Need for
performance
orientation
Remedy
politicization
and clientelism
Need to
professionalize
bureaucracy
Promote civil
service
accountability
Merit-based
recruitment
and promotion
Tight budgets place
greater emphasis on
ensuring pay and
employment practices
result in efficient
service delivery
Increased political
voice, demands for
accountability, and
emphasis on reducing
corruption
The crisis has prompted a new
look at improved civil service
management
How do we assess East Asian
civil service management?
The pace of modernization varies
– most countries could do better
Ratings of civil service management institutions
Good practice criteria
China
Indonesia
Korea,
Malaysia
Philippines
Thailand
Rep. of






Politically neutral civil service






Legislated, merit-based procedures
















Competitive pay






Public consultation on priorities










Specific legislation governing the
civil service
for personnel management
Clearly defined institutions to
develop and coordinate civil
service policy
Simple, monetized, transparent,

and fair compensation
and service standards
Overall

Note: Ratings are classified as High 
, Medium , and Low 
.
Source: Nunberg, Reid, and Orac 1999.
Given the tight, post-crisis fiscal
constraints, progress on civil service
management may require pay and
employment fundamentals to be
adjusted.
How can governments navigate a
sensible but timely course of reform?
Macroanalysis to
determine
appropriate
size and
costs of the
civil
service
The Civil
Service
Financial
Model can
provide an
essential policy
tool for
governments
wishing to plot
a realistic civil
service reform
strategy
Micro
functional
review to
determine
staffing and
incentive
levels in
the civil
service
The Civil Service Financial Model
1
Plugs in desired attributes of
future civil service
2
Reconciles with current
empirical reality and sets targets
3
Models reform program of costs
and timing for reaching goals
Anyland: Reform Scenario A
0. 1 2
5000
4500
4000
3500
0. 1
3000
2500
2000
0. 08
1500
1000
500
0
GS1
GS2
GS3
GS4
GS5
GS6
GS7
GS8
GS9
GS10
GS11
GS12
GS13
GS14
0. 06
Employment – no change
0. 04
200000
180000
160000
140000
0. 02
120000
100000
80000
0
60000
1 998
1 999
2000
2001
2002
2003
2004
2005
2006
2007
2008
40000
20000
0
GS1
GS2
GS3
GS4
GS5
GS6
GS7
GS8
GS9
GS10
GS11
GS12
GS13
GS14
Salaries – increase to 90% of private sector
levels over 10 years
Personnel spending as a proportion of GDP
increased from 2.25% to 2.75%
Anyland: Reform Scenario B
5000
0. 1
4500
4000
0. 09
3500
3000
0. 08
2500
2000
0. 07
1500
1000
500
0. 06
0
GS1
GS2
GS3
GS4
GS5
GS6
GS7
GS8
GS9
GS10
GS11
GS12
GS13
GS14
0. 05
Employment – hiring freeze
3% attrition over 10 years
0. 04
200000
0. 03
180000
160000
0. 02
140000
120000
0. 01
100000
80000
0
60000
1 998
1 999
2000
2001
2002
2003
2004
2005
2006
2007
2008
40000
20000
0
GS1
GS2
GS3
GS4
GS5
GS6
GS7
GS8
GS9
GS10
GS11
GS12
GS13
GS14
Salaries – increase to 90% of private sector
levels over 10 years
Personnel spending as a proportion of GDP
decreased from 2.25% to 1.5%
Situation
• Low wage bill
(1.7% GDP)
• Very low average
wages (2.5 time
less than national
minimum wage)
• No accurate
information on
remuneration,
placement, skills of
employees
Problem
Reform options
• Pressure from a
certain IFI to
contain wage bill
• World Bank
solution: provide
targets for salary
adjustment,
decompression, wage
bill envelope and
rightsizing options
through modeling
exercise offering
options for different
salary increase /
rightsizing options
• Higher salaries
necessary to attract
more skilled civil
servants
• This IFI’s
solution: cut
employment
immediately
Situation
Problem
• New country
with no parameters
• Setting civil
service pay and
employment rules
is an arbitrary
exercise
• UN organization
acting as interim
government
• Budget planning
and pay and
employment
assumptions must
be made
Reform options
• Determine wage
bill envelope
• Determine salary
scale
•Determine staffing
numbers
• Simulate pay and
employment
scenarios
Government ends up with:
• A tool to facilitate policy formulation
• A vehicle for dialogue among key
stakeholders
• Ongoing capacity for pay and
employment monitoring