Policy, Planning, and Reosarch
WORKING PAPERS
Publc Sector Management
and Private Sector Development
Country Economics Department
The World Bank
October 1988
WPS 113
Public Sector Pay and
Employment Reform
Barbara Nunberg
Overstaffed bureaucracies afflicted by eroding salaries, demor-
alization, corruption, moonlighting, and chronic absenteeism
are often unable to carry out the key tasks of economic recovery.
What should the Bank do about it?
The Policy. Planning, and Research Complex disuibutes PPR Woiing Papers to dissaninate the fndings of woik in progess and to
enoourage the exchange of ideas among Bank staff and all othems inteest in development issues These papens carry the names of
the authors, reflect only their views, and should be used and cited accordingly. The findings. interpretations, and conclusions are the
authors own. They should not be attributed to theWorld Bank, its Board of Directors, its managemet, or any of its member countries.



Plo,Pnling, and Research
Pubilo Sclof "    ap nt
and Private Sector Development
Four types of problems affect public sector pay     economic and sector work to address these prob-
and employment:                                    lems. In its efforts to support reform of public
sector pay and employment, the Bank should:
Too much spent on wages in the public
sector (and too little on supplies and mainte-        * Systematically analyze the politics of the
nance).                                             reforn process, and more fully research key pay
and employment issues (such as nonwage
* Overstaffed bureaucracies.                     allowance systems and supplementary benefit
schemes).
• The erosions of public service salaries -
with individual wages too low despite the high        * Allow flexibility (and some country auton-
overall budg,et for salaries.                       omy) in designing reform, so a country will
"own" its own reform.
e Too small a gap between high and low
wages -  which constrains the govemment's             * Look beyond short-term reform to such me-
ability to hire and keep qualified personnel at the    dium-term issues as redeployment, retraining,
middle and upper levels.                            and pension and severance obligations.
The Bank has used strucural adjustment            * Recruit personnel specialized in pay and
loans, technical assistance projects, and country   employment operations or offer specialized
training to Bank staff.
This paper is a product of the Public Sector Management and Private Sector
Development Division, Country Economics Department Copies are available free
from the World Bank, 1818 H Street NW, Washington DC 20433. Please contact
Jayne Cheeseman, room N9-057, extension 61703.
The PPR Working Paper Series disseminates the findings of work under way in the Bank's Policy. Planning, and Research
Complex. An objective of the series is to get these findings out quickly, even if presentations are less than fully polished.
The findings, interpretations, and conclusions in these papers do not necessarily represent official policy of the Bank.
Copyright © 1988 by the International Bank for Reconstruction and Developmenttlhe World Bank



PhBLIC SECTOR PAY AND EMPLOYMENT POLICY ISSUES IN BANK LENDING:
AN INTERIM REVIEW OF EXPERIENCE
CONTENTS
Page No.
Summary and Conclusions ...................................... i-iv
I.    INTRODUCTION       ............................................             1
II.  OVERVIEW OF BANK OPERATIONAL EXPERIENCE IN PUBLIC
PAY AND EMPLOYMENT REFORM          ...............................          2
A.  IDENTIFYING THE PROBLEM          .............................          3
A.  LENDING INSTRUMENTS         .................................    4
C.  OPERATIONAL APPROACHES          ..............................    6
Salary Restraint        ...................................           6
Employment Reforms        .................................           7
Severance and Redeployment          .........................    9
Changes in the Salary Structure   ......................   10
Non-Wage Mechanisms for Attracting and
Retaining High-Level Personnel   ......           ...............   11
D.  OPERATIONAL TECHNIQUES   ..........          ......................   13
Prerequisites to Reform:Data Collection,Computerization,
Civil Service Census, Functional Review  .....            .........   13
Civil Service Censuses   .............        ..................   13
Functional Reviews . ...................................   14
Data Collection and Computerization of
Personnel Management Functions           ......     .............   15
Diagnostics and Studies   ...........         ...................   15
Institutional Arrangements   .........         ..................   15
III. ANALYSIS OF PAY AND EMPLOYMENT IN BANK
RESEARCH AND CESW   .........................................    17
A.  COUNTRY ECONOMIC AND SECTOR WORK  ......             ................   17
B.  BANK AND IMF RESEARCH .................................   17
IV.  ISSUES IN PUBLIC PAY AND EMPLOYMENT REFORM  ....... .........   19
-  The Context of Reform:  The Importance of Politics                      19
- Redeployment .20
- Timing of Reform .21
- Information Gaps .21
- Types of Bank Interventions:
Suitability for Reform .22
- Internal Bank Coordination .23
- Bank Staff Capacity .23
- Supervision .24
V. CONCLUSIONS .24



-2-
TABLES
1.  Bank Operations: Employment/Pay Components
(Approved as of February 1987)    .....    ................  27
2.  Bank Operations with Employment/Pay Components
(Under Preparation as of February 1987)   ....  .........  28
3.  Countries with Bank Operations in Public Sector
Pay and Employment   .......     ...........................  29
4.  Country Economic and Sector Work on Pay
and  Employment  ......................................  30
5.  Major Diagnosed Problems for Countries with Bank
Employment/Pay Interventions   .....     ...................  31
6.  Bank Operations with Employment/Pay Components
By Lending Instrument (As of February 1987)   .........  32
7.  Bank Operations BrokEt' Down by Pay and Employment
Components (Approved or under Preparation as of
February 1987)   .........    .............................  33
REFERENCES  ............   ...............................    34



SUMMARY AND CONCLUSIONS
In the wake of the severe economic crises of recent years, many
developing countries have begun to confront the difficult task of making
their public sectors more productive. The need to reform public pay and
employment policies has come to be seen as an important element in meeting
this challenge. National economic adjustment strategies, often with
support from the International Monetary Bank and the World Bank, have
increasingly focused on these issues. Attention to public pay and
employment stems in part from the pressure placed by fiscal constraints on
the wage bill, which in many countries constitutes a major share of public
expenditures. Concern has also been prompted by the growing recognition
that conditions of pay and employment may be key inhibitors of government
performance. Indeed, overstaffed bureaucracies afflicted by eroding salary
scales, pervasive demoralization, corruption, moonlighting, and chronic
absenteeism are often unable to carry out the essential economic policy and
management tasks that are a key part of emergency economic recovery
programs.
In response to these conditions, the Bank's involvement in public
pay and employment reform has grown rapidly. The character and extent of
Bank interventions have varied and Bank policy objectives have not always
been consistent, however. Also, diverse types of lending instruments and
analytic techniques have been utilized. Bank activities in this area have
generally been ad hoc and have preceded the formulation of systematic
policy guidance. Moreover, the rapid expansion of Bank work on pay and
employment has not allowed time for considered analysis of the potential
effectiveness of the various approaches taken. This has been exacerbated
by an insufficient exchange of experience by Bank staff working in this
area.
This paper offers an interim review of the Bank's experience with
public sector pay and employment reform. Its aim is to establish what has
been done and what has been learned to date. The review has limited
objectives: It seeks to inventory and analyze Bank operational work in
selected countries and to provide a brief guide to bank research and policy
work on this subject. The review covers the period between 1981 and
February 1987. The paper tries to draw attention to issues that have
emerged in the early phases of these activities and make some tentative
suggestions about directions for future Bank work rather than draw
definitive conclusions about the impact of these efforts. The review
covers only the Bank's experience with pay and employment policy issues in
central governments (generally with particular reference to the civil
service). For the most part, this focus excludes reforms undertaken on the
level of individual state enterprises or through wholesale reforms of state
enterprise sectors. Pay and employment issues that have been addressed on
an individual sectoral level ( e.g. in an individual ministry of
agriculture) are also excluded from the survey.



- ii -
Between July 1981 and February 1987, public employment and pay
issues in central governments figured prominently in 45 Bank lending
operations in 24 countries. West Africa accounted for more than one-third
of these operations; Latin America and the Caribbean had sligntly more than
one-fourth; and the rest were distributed fairly evenly among East Asia,
South Asia, EMENA, and East Africa.
Despite a heterogenous sample of countries and cases examined,
four principal types of problems were identified as characteristic of the
group as a whole: excessive public sector wage bills; surplus numbers of
civil servants; erosion of public service salaries; and, wage compression.
The principal instruments used by the Bank to address these problems were
structural adjustment loans, technical assistance projects, and country
economic and sector work. A variety of operational approaches were
utilized. The most sweeping approach has been to call for reduction of the
wage bill tuLrough salary restraint. Freezing wages is usually at best a
temporary solution and tends to reinforce inequities or wage compression
within salary structures. Employment reforms which aimed at cutting
numbers of civil servants included: efforts to eliminate phantom workers or
ghosts; elimination of officially sanctioned posts; retrenchment of
temporary workers; enforcement of retirement rules; a freeze of initial
recruitment and/or prevention of guaranteed entry into the civil service of
university graduates; and voluntary retirement of surplus workers. The
most difficult political step taken by governments is the actual dismissal
of civil servants. The political impact of this action is sometimes
mitigated by public education programs or competency testing. Although the
Bank has, in some cases, encouraged civil servant reduction, such as the
design of severance benefits or redeployment and retraining schemes. These
factors may significantly influence the outcome of reforms.
Where low public sector salaries and wage compression posed a
problem in attracting qualified staff to central government, the Bank
sometimes recommend selective upward wage adjustments, with varying degrees
of success. Other mechanisms for attracting higher level personnel were
also explored. These included senior executive services, the use of local
consultants, secondment from public enterprise3, and compensation through
non-wage allowance and benefits systems.
Some of the operational techniques financed by the Bank to carry
out the above reforms included improvements in the data collection capacity
of personnel management systems, civil service censuses, functional reviews
of whole governments or selected ministries, diagnostic studies of various
aspects of pay and employment issues in the civil service.
The institutional arrangements for pay and employment reform have
varied, but in general, reform efforts located in more autonomous
institutions with greater access to higher levels of government have a
better chance of succeeding.



- iii -
Much of the Bank's work on public pay and employment reform has
been carried out through country and economic sector work in the form of
Country Economic Memoranda (CEM). Country Economic and Sector Work may be
either the precursor to Bank lending in this area, or it may constitute
policy dialogue which becomes the main mechanism for Bank-country relations
on this issue. The Bank has also financed research on public pay and
employment. This research has focused predominantly on Africa and has
provided an analytic framework for dealing with the economic aspects of pay
and employment rerorm. This paper suggests that future research should
attempt to: expand the data base through in-depth studies of pay and
employment problems in specific countries; undertake comprehensive studies
of government service incentive systems, including analysis of salary
structures, career paths, non-wage allowance and pension systems, and
relevant tax provisions; review severance scheme experiences; study the
political and social consequences of pay and employment reform, and review
case studies of employment and pay experiences in individual sectors and
public enterprises.
The paper raises a number of issues for consideration and offers
conclusions based on its findings, including the following:
- Political factors are crucial to the success of pay and
employment reforms. Systematic analysis of the politics of the
reform process, largely absent from Bank sector work, needs to
be incorporated into CESW and in direct preparation of Bank
projects.
- Governments must feel full "ownership" of reforms, and thus a
style must be struck which allows for the appropriate mix of
Bank leverage and country autonomy in design of these programs.
- Bank pay and employment operations have tended to take a short
term perspective, ignoring issues of redeployment, retraining
and pension and severance obligations. The Bank should take a
more comprehensive approach that considers all stages of the
reform process and makes more specific provision for
implementation over the medium term.
- Conflicting objectives relating to goals of fiscal soundness,
bureaucratic efficiency of developmental strategies need to be
clarified from the outset of Bank operations and should be
discussed and coordinated with the IMF to ensure program
coherence.
- Bank operations are being carried out in the absence of adequate
information about key pay and employment issues. Bank sponsored
research and CESW should be expanded to examine such aspects as
non-wage allowance systems, labor market absorptive capacity and
supplementary benefit schemes such as social security programs,
to name a few.



- iv -
No single lending instrument could be identified as most
suitable for bringing about desired changes in pay and
employment systems. Indeed, flexibility in operational approach
and style is required. Although SALs have been found effective
for stimulating reform, one-shot conditionality is probably less
appropriate than serial cot.,itionality supported by an
institutional infrastructura provided either through specific
SAL components, companion technical assistance projects or
medium-term sectoral support projects with institutional
development components.
- Given the staff intensive character of pay and employment
operations, appropriate arrangements for supervision and staff
time allocation need to be devised.
- Given the complex and multi-disciplinary nature of pay and
employment operations, specialized training for Bank staff
and/or recruitment of personnel with the appropriate skills may
be required.
- Although the Bank has taken a lead in the area of public sector
pay and employment reform, the experience of outside
institutions and of individual developed and developing
countries themselves needs to be examined more thoroughly.



PUBLIC SECTOR PAY AND EMPLOYMENT POLICY ISSUES IN BANK LENDING:
AN INTERIM REVIEW OF EXPERIENCE
I. INTRODUCTION
In the wake of the severe economic crises of recent years, many
developing countries have begun to confront the difficult task of making
their public sectors more productivs. The need to reform public pay and
employment nolicies has come to be seen as an important element in meeting
this challerge. National economic adjustment strategies, often with
support from the International Monetary Fund (IMF) and the World Bank, have
increasingly focused on these issues. Attention to public pay and
employment stems in part from the pressure placed by fiscal constraints on
the wage bill, which in many countries constitutes a major share of public
expenditures. Concern has also been prompted by the growing recognition
that conditions of pay and employment may be key inhibitors of government
performance. Indeed, overstaffed bureaucracies afflicted by eroding salary
scales, pervasive demoralization, corruption, moonlighting, and chronic
absenteeism are often unable to carry out the essential economic policy and
management tasks that are a key part of emergency economic recovery
programs.
In response to these conditions, the World Bank's involvement in
public pay and employment reform has grown rapidly. The character and
extent of Bank interventions, however, have varied considerably from one
country or operation to another. Bank policy objectives have not always
been consistent, and the types of lending instruments and analytic
techniques utilized have been diverse. For the most part, in fact, Bank
activities in thiis area have been ad hoc in nature and have preceded the
formulation of systematic policy guidance. Moreover, the rapid expansion
of Bank work on pay and employment has not allowed time for considered
analysis of the potential effectiveness of the various approaches taken.
This has been exacerbated by a minimal exchange of experience by staff
working on pay and employment issues.
This paper offers an interim review of the Bank's experience with
public sector pay and employment reform. Its aim is to establish what has
been done and what has been learned to date. The review has limited
objectives: It seeks to inventory and analyze Bank operational work in
selected countries and to provide a brief guide to Bank research and policy
work on this subject. The review covers the period between 1981, when
significant Bank involvement in this area could first be documented, and
February 1987. Given the preliminary stage of most Bank initiatives in
public pay and employment reform, relatively little can be definitively
concluded about the impact of Bank efforts. Instead, the paper tries to
draw attention to issues that have emerged in the early phases of these
activities and make some tentative suggestions about directions for future
Bank work.



-2-
The review covers only the Bank's experience with pay and
employment policy issues in central governments (generally with particular
reference to the civil service). For the most part, this focus excludes
reforms undertaken on the level of individual state enterprises or through
wholesale reforms of state enterprise sectors. Pay and employment issues
that have been addressed on an individual sectoral level (e.g., in an
individual ministry of agriculture) are also excluded from the survey. The
decision to exclude a potentially rich body of data on these subjects from
the present study derives simply from the need to limit the review's scope.
To the extent that pay and employment reforms in other spheres overlap with
central government initiatives and can be captured through anecdotal
evidepce, however, they may be touched upon in the present discussion. The
review covers Bank activities both in direct lending and in Country
Economic and Sector Work. Inclusion under one of these categories required
either that a substantial portion of CESW be devoted to public pay and
employment issues or that some specific recommendation or direct action
regarding these issues be embodied in the conditionality or project
component of a Bank lending operation. Thus, cases in which general Bank-
country policy dialogue on pay and employment questions was not accompanied
by any documented follow-up are not treated here. It is important to note
as well that many Bank initiatives have taken place in the context of
ongoing country programs, often in the midst of IMF agreements. It is
sometimes difficult to draw a sharp line dividing Bank, country, and IMF
activities. Finally, pay and employment reform experiences in developing
countries where there has been on IBRD intervention in this area are also
excluded from the sample.
Section II of this paper begins with an overview of the main
characteristics of Bank involvement in public pay and employment issues.
This overview considers common problems, lending instruments used to
address these problems, recommended policy reforms and institutional
arrangements, and actual operational techniques utilized. Section III
briefly reviews country economic and sector work and research performed
within the Bank on public pay and employment issues. In section IV, major
issues that have emerged in Bank work are highlighted. The fifth and final
section draws some tentative conclusions about Bank activities and suggests
directions for future work.
II. OVERVIEW OF BANK OPERATIONAL EXPERIENCE IN PUBLIC PAY
AND EMPLOYMENIT REFORM
Between July 1981 and February 1987, public employment and pay
issues in central governments figured prominently in 45 Bank lending
operations in 24 countries. (Tables 1 and 2 show approved and proposed
operations respectively). Africa accounted for more than one-third of
these operations; Latin America and the Caribbean had slightly more than
one-fourth; and the rest were distributed fairly evenly among Asia and
EMENA. (See Table 3) In addition to direct lending, public pay and
employment issues have also received substantial treatment in Country and
Economic Sector Work products; approximately 20 Country Economic Memoranda
included significant discussions of (and made concrete policy



- 3 -
recommendations about) public employment and pay issues. (Table 4 shows
countries for which significant Country Economic and Sector Work in this
area was performed). Public pay and employment policy reform was also the
subject of a growing bcoly of Bank executed research. (The bibliography
attached to this review contains specific citations to this research).
A. IDENTIFYING THE PROBLEM
The countries examined here are diverse, not only in terms of
prevailing conditions of public employment, but also with regard to the
Bank interventions they have experienced. Despite this heterogeneity, four
principal problem types can be identified as characteristic of the group as
a whole:1
(i) Excessive Rublic sector wage bills. Excessiveness is a
subjective   quality, one for which no clear measurement
methodology exists, and no standardized approach is applied
throughout the Bank. In general, the wage bill is measured
against one of the following: the overall government budget;
overall government revenues; GDP; or total recurrent
expenditures. The latter measure is perhaps the most common, and
the degree to which non-personnel recurrent expenditures (such as
those for supplies and maintenance) diminish in relation to
personnel expenditures is taken as a key signal that the wage
bill is inappropriately high.2
(ii)  Surplus Rublic servants.  Although obviously related to the size
of the wage bill, the appropriate number of civil servants is
often derl-ed ad hoc from the proportion of public servants to
the overall population, to the modern sector labor force, or from
somewhat casual observati˘ns of "too many people sitting around
doing nothing." Sometimes the rate of expansion of public
employment, especially when disproportionate to GNP or overall
labor force growth rates, is taken as a warning signal of surplus
numbers in government.  Clearly, the definition of what
constitutes "too many" in the public sector must consider the
relative role of the state in the economy, the level of a
country's development, and the relative importance of the state
as a primary source of political patronage and social welfare.
To identify a personnel surplus, most Bank staff rely upon the
indicator cited above; that is, insufficient operating budgets
for supplies and maintenance.3
(iii)  Erosion of Rublic service salaries.  In many countries the level
of real public sector salaries--and particularly civil service
salaries--has eroded substantially over time. The result is
remuneration that is too low either to sustain lower echelon
1/ Table 5 classifies countries surveyed according to these four problems.
2/ A thoughtful but inconclusive discussion of this measurement issue is
found in Peter S. Heller and Alan A. .ait, Government Employment and
Pay: Some International Comoarisons, IMF, Occasional Paper No. 24,
Washington, D.C., 1983.
i/ A comparative discussion of this issue, using data from developed and
developing countries, is also provided by Heller and Tait, op. cit..



-4-
workers above the poverty level or to attract and retain skilled
manpower. Real remunerations are significantly affected by the
rate of inflation and the regularity and nature of salary
adjustments. Declines in real wages are often cushioned by
elaborate allowances or non-wage benefit structures that in some
countries have become an increasingly important part of the
overall compensation package. A pervasive irony afflicts many
countries; i.e., the overall salary bill is too high while wages
are too low. This dilemma is the product of years of trade-offs,
given fiscal constraints, in favor of hiring growing numbers of
employees at diminishing salaries. Wage erosion is particularly
a problem where there exists an alternative market for public
servants, either through a better paying parastatal sector, a
domestic private sector with higher salaries and benefits or an
international market to which highly skilled public servants may
migrate.
(iv) Wage comgression. In many of the cases under examination,
increasing compression of the ratio of top to bottom salaries has
been identified as a serious constraint on governments' ability
to attract and retain qualified personnel at the middle and
higher levels. Wage compression is partially a function of
expansive employment policies as discussed above, but in some
countries it may also derive from regime preferences for
egalitarian salary structures. This, in turn, may hinge on the
ideological character of the regime or the degree to which its
political support is drawn trom the lower socioeconomic strata.4
B.  LENDING INSTRUMENTS
The Bank's principal instrument for promoting public employment
and pay reform has been some form of policy-based lending, principally
through Structural Adjustment Loans. Between 1981 and 1987, twenty-three
SALs had public employment and pay components. Conditionality relating to
public employment and pay was also included in Reconstruction Import
Credits and one Imports Program Credit. Thirteen Technical Assistance
Loans with public employment and pay components were directly linked to
SALs. An additional five free-standing TALs also included significant
public employment and pay components. (Table 6 classifies pay and
employment operations by region and lending instrument.)
Bank promotion of public employment and pay reforms has also
occurred through Country Economic and Sector Work. Some of this work took
the form of sector studies in anticipation of specific Bank projects (e.g.,
diagnostic studies in Mauritania and Senegal). Other CESW dealing with
public employment and pay issues was carried out through the preparation of
country economic memoranda. In several instances, coverage of these issues
in a Country Economic Memorandum (CEM) preceded or was accompanied by
i/ Recent Bank research has discussed these problems for African cases.
See, especially, David Lindauer, Oey Meesook, and Parita Subsaeng,
Government Wage Policy in Africa: Summary of Findings and Policy
Issues, CPD Discussion Paper No. 1986-24, April 1986.



-5-
policy dialogue between Bank and country about pay and employment issues.
This occurred, for example, in Thailand and Sri Lanka. In the latter, such
dialogue contributed ultimately to the initiation of a reform process and
iater to the initiation of a Bank-financed (UNDP-executed) Technical
Assistance project.
Structural Adjustment Loans varied in the depth of their treatment
of public employment and pay issues. A few SALs merely set global
reduction targets (determined in collaboration with the IMF) for the
overall wage bill without specifying a strategy to reach these targets.
Sometimes the inclusion in a SAL of such conditions was intended to
encourage the continuation of government actions already taken.
In most cases, however, the Bank did specify the means by which
the overall wage bill might be reduced. In these cases, conditionality was
introduced to restrain salaries; freeze or reduce employment; carry out
studies on some aspect of employment and pay in the civil service or public
enterprise sector; or raise civil service salaries.5   (Table 7 shows main
pay and employment components for Bank operations.)
In general, TALs took a somewhat different approach to public
employment and pay issues, often providing support for longer term, more
comprehensive reform efforts. Nine TALs sought to strengthen institutions
and procedures or to collect information that would provide the foundation
for more radical employment and pay reforms at som later date. As might
be predicted, TALs that were closely linked to SALs provided shorter term
institutional support for employment and pay policy conditionality than did
free-standing Technical Assistance Projects not directly connected to the
structural adjustment process.
Although central government (civil service) reform was the
exclusive focus of most pay and employment components for countries
surveyed, approximately 11 operations dealt at least peripherally with pay
and employment issues in public enterprise sectors. Turkey's SALs II-IV,
for example, were aimed primarily at reforming pay and employment
structures in state enterprises. In general, though, most of the Bank
operations surveyed treated public enterprise employment issues only
peripherally as an adjunct to those of central government. In most
countries examined, state enterprise salaries and benefits were higher than
those of the central government but lower than those of the private sector.
(Costa Rica was a notable exception.) Given the natural drain of skilled
civil servants to the parastatal sector, the principal question addressed
in several Bank interventions was whether to encourage the alignment of
civil service and state enterprise salary and benefit systems or to
separate them, allowing state enterprise salary structures to operate more
autonomously, thus approaching market conditions. One Bank operation
2/ It is worth noting that on occasion the IMF, which appears generally to
have prescribed wholesale wage reduction without significant attention
to the detailed mechanisms by which this reduction might take place,
also became more involved in recommending concrete strategies to achieve
the desired objective. In Guinea and the Gambia, for example, actual
employment reduction targets and timetables were set as part of Fund
programs.



- 6 -
recommended the alignment of civil service salary scales with those in
State enterprises, and six operations recommended separating them.6
C. OPERATIONAL APPROACHES
Although there has been considerable variation from one reform
to another, in general the substantive approaches to pay and employment
issues taken in Bank operations have tried to address the main problems
outlined above. The Bank has sought to reduce the wage bill, lower overall
employment numbers, promote the maintenance of civil service salaries at
levels ensuring the availability of competent government workers, and
decompress salary structures so that talented managers do not leave for
private, parastatal, or international jobs. In its pay and employment
operations, the Bank has pursued the multiple, sometimes conflicting
objectives of promoting fiscal constraint and improved efficiency in
central government.
Salary Restraint
The most sweeping approach taken by the Bank (and the Fund) to
public pay and salary reforms has been to call for a reduction of the wage
bill, frequently through explicit prescriptions for salary restraint.
Three Bank operations have followed this approach, usually by recommending
an across-the-board freeze in public sector salaries. Eight countries have
taken this action on their own or with strong urging from the IMF.
Experience with wage freezes has been mixed. Some countries have frozen
wages temporarily but quickly raised them when the immediate pressure was
relieved. Others deferred action or indeed were unable to reduce wages at
all. Still others imposed wage freezes that were insufficiently radical to
effect the desired total wage bill reduction. Despite major public pay and
imployment reform efforts in Senegal, for example, structural wage drift
took place, nonetheless. Although a wage freeze was enacted in 1981, the
overall wage bill continued to increase by about 7 percent per annum in
real terms due to automatic advancement within the civil service and
consequent pay increments. Freezing wages, in addition, cuts the living
standards of public servants and tends to reinforce the erosion of real
salaries in rapidly inflating economies. In the Central African Republic,
for example, public servants' purchasing power declined so dramatically as
a result of successive wage freezes between 1982 and 1985 that the urban
economy of the capital, where goxernment employees were an important
consumer block, was adversely affected. Finally, across-the-board freezes
lock in place whatever inequities or wage compression exist within the
salary structure.7
i/ For a more thorough review of this and other issues related to pay and
employment in stete-owned enterprises in Africa, see Sunita Kikeri,
"Management Compensation Systems for Public Enterprises in Sub-Saharan
Africa," forthcoming, 1987.
1/ Depending on the extent of non-wage benefits in the compensation
package, wage freezes may affect different levels of the civil service
differently. Such allowances and in-kind benefits constituted from 10
to 70% of compensation in the cases examined.



-7-
Enmloyment Reforms
The use of salary restraint to control the size of the global wage
bill evades the question of the number of civil servants. Sometimes this
number is so large that even freezing wages does little to reduce
expenditure. Though wage freezes may be politically difficult for
governments to impose, they nonetheless appear to be more palatable than
reducing overall public sector employment itself. Hence (as discussed
earlier in this paper), most regimes prefer to expand employment at
diminishing wage levels.
Nonetheless, employment was frozen or even reduced in some cases
examined. Four countries froze employment, and in the case of 5 more the
Bank urged overall employment reductions. Ten countries actually succeeded
in cutting employment either through Bank programs or on their own.
Employment reform methods can be located along a continuum of
political difficulty. At the low difficulty end of this continuum is one
of the first actions usually taken, the elimination of ghosts. This is
generally accomplished through the execution of a civil service census and
the computerization, mechanization, and reconciliation of personnel
management records with those of the payroll (usually situated in the
Ministry of Finance). The effort to eliminate ghosts was an important part
of operations in 3 countries. Another measure incurring only moderate
political cost is the elimination of officially sanctioned posts wihich are
not currently filled. (This occurred in the Gambia). Next, temporary
workers (to whom the government usually has fewer legal severance
obligations) may be retrenched, as occurred in the CAR and Jamaica for
example. Several countries have enforced automatic retirement for those
reaching retirement age or the requisite years of service. This policy,
however, has not been without problems. In Senegal, for example, where
official retirement came between ages 55 and 58 or 30 years of service,
many employees retained their positions by falsifying records to conceal
their true age. The degree to which such automatic retirement policies
have a meaningful effect depends, too, on the overall age structure of the
civil service and on the pension costs generated by automatic retirement
programs. (In most African countries, the age distribution is skewed
toward those under 40 years of age.)
A freeze on recruitment is often the next step. Six countries
imposed recruitment freezes. In the CAR, recruitment was first limited by
a rule permitting the hiring of one functionary for every three dismissed.
This proved expensive, though, because it became commonplace to recruit a
higher level staff whenever three lower level ones were fired. The system
was subsequently modified to limit recruitment to a ratio of one franc of
hiring for every three francs of savings.
Another method of freezing recruitment is to prevent the
guaranteed entry of recent university or public administration school
graduates to the civil service. In some cases, entrance into the
university itself was blocked. Such steps were taken by the government of
the CAR through its adjustment program, but students and recent graduates
proved a powerful political force. Although guaranteed access to
government was abolished, many students entered government service as



- 8 -
interns, receiving only very modest subsistence stipends. Although they
were not hired officially as civil servants, many of these interns were
able to position themselves to be hired subsequently on a permanent, full-
salaried basis.
A more difficult step, both politically and administratively,
is the voluntary retirement of surplus workers. This is currently being
attempted in Guinea under a Bank SAL. Because voluntary retirement schemes
do not allow the government control over which employees leave or stay,
they carry the risk that the incompetent will remain and the more
enterprising will leave.
The actual dismissal of civil servants is politically the most
difficult step. Retrenchment, nonetheless, is taking place by various
mechanisms. In Guinea and CAR, justification for civil service cuts has
been based on competence testing organized by the Ministry of the Civil
Service but carried out by each individual ministry. The test itself has
provoked angry opposition. In the CAR, a Canadian consultant working with
the Livestock Ministry to develop a competence testing methodology was
attacked in his home by a mob of civil servants. (He was subsequently
provided with a bodyguard.) The exercise was only completed with the
support of the Minister of the Civil Service, who insisted that the testing
program continue as planned.  Despite these difficulties, however, such
testing schemes, like the functional reviews to be discussed shortly, may
provide the necessary technical rationale for dismissals and thus help
reduce the possibilities of retrenchments based on arbitrary criteria. In
the Gambia, where such testing has not taken place, Bank staff expressed
some fears - which apparently proved not to be realized - that employment
cuts might be based more on tribal or political considerations than on
purely functional requirements. Still, such testing schemes have yet to be
carried out on a wide scale.
The economic and political feasibility of employment cuts may
depend on the degree to which civil servants are currently benefitting from
government jobs and on the alternatives available to them outside the state
sector. If most government employees are currently engaged in moonlighting
activities providing significant supplementary income, the adjustment to
retrenchment will be easier. If, on the other hand, access to other legal
or illicit forms of income depends upon government positions, or if the
status acquired through those positions is esteemed for its own sake, then
the individual costs of retrenchment and the political costs to government
both rise. On this dimension Senegal, where non-salary allowances and
political influence figure importantly in the attractiveness of civil
service positions, appears to fall in the "high risk" category. In Guinea,
on the other hand, Bank staff report that despite the very high level of
government employment in the capital of Conakry (an estimate 95% of modern
sector employment is in the state sector), public employment reduction may
be facilitated because civil service salaries sank so low that they became
a relatively minor portion of most individuals' total income. Even non-
wage compensation such as rice rations became so insignificant that they
lost their attraction for many government employees.
The political costs of retrenchments may also be mitigated by
"public education" programs. In Guinea, French technical assistance



financed a public relations consultant who prepared an information campaign
(through radio and television broadcasts) that publicized and explained the
government's retrenchment plan. Bank staff observ'ng the effects of this
program were persuaded that it led to increased public acceptance of
employment reductions.
Severance and Redeglovment
Severance and redeployment arrangements for redundant employees
are an important aspect of retrenchment policies. So far, the Bank has
limited its direct involvement in this area to policy discussions with
governments contemplating sevsrance and redeployment schemes. For the most
part, these discussions have *aised more questions than answers. Most
countries have legal regulatory frameworks binding them to a particular
level of payments. The degree to which these legalities can be ignored
or modified depends largely on the nature of the political system.
Governments face difficult choices in weighing the political and economic
costs of severance policies. In Guyana, for example, a 24% reduction in
the public service in 1981-82 made 13,000 workers redundant in both the
civil service and public enterprises. Due to the heavy burden of severance
payments to fired individuals, these employment reductions had considerably
less salutory effect on the wage bill than had been hoped. Based on years
served, aggregate severance payments actually increased the wage bill for
several years. Under strong pressure from labor unions, the government was
forced to borrow to pay off workers, and in 1985 debt service reached an
unprecedented 65% of expenditures.
Whether to pay redundant civil servants a lump sum or to defer
payments over a phased period is also an open question. Deferred plans may
benefit governments, because they typically take advantage of currency
erosion through inflation and earn interest on the yet-to-be-disbursed
funds. Such plans may benefit employees as well, in so far as the
potential dissipation of a one-time lump sum payment is less of a danger.
In Guinea, a three option plan is being proposed. Voluntary retirees may
draw a salary with accompanying rice rations for 60 months, take 40 percent
in cash and the rest in regular salary payments, or they may take a share
of the severance allowance as a down payment on a new business enterprise.
Lines of credit to promote entrepreneurs in the private sector have also
been discussed in the Gambia and Ghana.
Although public enterprises are not the central concern of this
review, one interesting experience with compensation and severance is the
case of the Cocoa Marketing Board (COCOBOD) in Ghana, an experience which
may provide lessons for similar severance exercises now being contemplated
for Ghana's civil service.  COCOBOD recently laid off approximately 16,000
workers in 1986 at an overall cost (over a three-year period) of US
$20 million. This constituted an average individual payment of 11 years of
base salary (which, in fact, only made up 50% of total compensation).
Although COCOBOD felt itself bound by existing labor agreements to honor
this arrangement in a one-time up front payment, the President, alarmed by
the cost, intervened to insist on a deferred payment scheme over three
years. The first third of the settlement would be paid up front; the
second third would be paid one year later (with interest accruing to
government); and the third would be paid in the third year. With inflation



- 10 -
and foregone interest, the payments thus amounted to approximately four and
a half years' salary equivalent. The thrust (though not the specifics) of
this arrangement was part of the Bank's conditionality for its Export
Rehabilitation Project. The cut of 16,000 was made on an overall
estimated staff of 80,000 after a functional review carried out by the
COCOBOD directorate with the assistance of expatriate consultants financed
through the Technical Assistance Credit.8 Bank staff interviewed about this
action were convinced that the reductions would never have taken place
without outside assistance, as much for the active role the consultants
took in negotiating the plan with the various interested parties as for
their actual expertise in helping to design it.
Aside from indirect attention to severance payments, the question
of redeployment of redundant employees has not really been addressed by the
Bank or even, for the most part, by the countries themselves. Ghanaians
have discussed incentive plans to encourage redundant employees to take up
productive agricultural activities. In Guinea, some discussion has
focussed on the possibility of short-term labor-intensive public work
projects, but no action has been taken. In the Gambia, lines of credit in
combination with training for entrepreneurs have also been discussed. The
Bank's involvement in redeployment has gone furthest in Bolivia, where the
possibility of financing severance payments and an ambitious public works
program for redundant miners (laid off from the country's state-owned tin
enterprise) has been proposed. Such financing might be channeled through a
national social emergency fund, assisted by a free-standing Bank social
adjustment project.
Changes in the Salary Structure
The Bank has recommended selective upward adjustments in public
sector salaries in 5 countries. In many countries, public sector salaries
have eroded in comparison with increases in the consumer price index. This
erosion was damaging for all grades of the civil service, but it was
particularly insidious at the higher levels, especially when compared to
wages commanded by managerial personnel in the private sector or in some
cases with the parastatal sector (where perks and wages were better than
those offered by the central government). The result was the increasing
compression of the ratio between top and bottom grade salaries, resulting
in demoralization, corruption, moonlighting, and, where alternatives
existed, the flight of top and middle-level management from government
posts. Although in some cases modest wage increases had taken place in the
past, they were mostly instituted across the grade spectrum or were more
generous to lower echelon personnel. In Jamaica, for example, the Consumer
Price Index rose by over 450% for the period between 1972 to 1982, while
salaries for the three highest professional grades were increased between
40% and 85%. A simultaneous increase of over 350% for government-employed
casual labor reflected official policy of upgrading salaries at the lower
end of the scale at the expense of higher level staff. The awarding of
flat, across-the-board pay increases resulted in dramatic salary
compression and a large exodus of skilled and experienced professionals
from the civil service and, frequently, from the country itself. This
j/ The consultants had been financed originally for other activities but
were co-opted into working on this problem.



- 11 -
emigration translated into high vacancy levels in key ministerial posts.
For instance, one line agency reported a 57% vacancy rate in these posts,
and an average of 47% of top positions in core agencies were vacant. Often
the remaining positions were filled with marginally qualified staff. One
consequence of this salary restraint was the rapid growth in the creation
of parastatals (which could pay above civil service scales) to carry out
key government tasks. Parastatals took over core activities in areas such
as public works, statistics, and even national planning.
The record of the Bank in pushing for selective wage increases to
decompress wage structures and make the civil service more attractive to
skilled manpower has been mixed. In Bangladesh and Peru, efforts to
increase wages, with particular emphasis on higher level staff, were
largely unsuccessful. In Bangladesh, wages were raised, but lower echelon
staff received a 100% increase while higher level personnel received only a
50% increase and a reduction in non-wage allowances. Bank staff
interviewed stressed the need to press for greater reform through
continuing dialogue with the government in order to bring about more
fundamental change. In Peru, public pressure to keep the salary scale flat
was heeded by a newly elected populist regime. In Ghana, salaries were
raised, and the overall pay structure was decompressed from a top to bottom
level ratio of 2:1 to 5.6:1 during policy dialogue in preparation for the
SAL and companion technical assistance project. Although the Bank had
recommended that this decompression occur without growth in the overall
wage bill, several miscalculations on the part of government resulted in a
wage bill increase. In the case of Sri Lanka, policy dialogue in the
context of Country Economic and Sector Work and as a transition to T.A.
project preparation between government and the Bank led to a decompression
of top to bottom salaries from 4.2:1 in 1984 to 11.8:1 as of May 1986.
Finally, in Jamaica, the Bank encouraged the government to raise high-level
professional grade salaries in the civil service to 85% of those in the
public enterprise sector in order to attract and retain quality skilled
personnel. The plan was to achieve this increase over a three-year period
as part of the conditionality of SAL III. Although one incremental
increase was effected in 1984 just before the SAL was approved, a second
adjustment did not take place until late 1986. Even with this second
increase, higher management Civil Service salary levels still fall far
short of 85% of parastatal remuneration for most job categories, however,
and Bank staff have expressed concern that Government may not implement the
third round of promised adjustments due to political factors. These
delays in following through with this reform reflected heavy pressure on
government to pursue egalitarian employment policies and only superficial
government commitment to the proposed raises. It has also been suggested
that the government's efforts to improve the lot of higher level civil
servants were constrained in the wake of its bold redundancy actions taken
under the Fund stablization program. Approximately 20,000 government
employees were dismissed during the 1984-85 period - precisely when the
second salary increase for managers was supposed to take place.
Non-Wage Mechanisms for Attracting and Retaining High-Level Personnel
Compressed salaries and deteriorating working conditions have made
it difficult to attract and retain high level professionals in the civil



- 12 -
service and to keep those who remain honest and hardworking. While salary
decompression is one approach to this dilemma, continuing fiscal crises and
political constraints may make more steeply graded civil service structures
infeasible. Alternative solutions have been proposed and attempted in
several cases. One of these is the notion of a senior executive service or
corps. Modeled after the SES introduced in the United States in 1979, this
is a category of super-grade upper management government employees who are
paid salaries above thr highest level of the civil service. In return for
enhanced financial remuneration, they give up job security.9   The
possibility of instituting a modified version of SES has been discussed in
Ghana, and it was proposed as a component of the Public Sector Management
Technical Assistance Project in Peru. In the Peruvian case, government
resistance prevented the implementation of SES after loan approval. It was
to have been financed by a Bank-supported Foundation for the Development of
the Public Sector, which would have guaranteed salaries above the civil
service scale that were more competitive with the public enterprise sector
and closer to the private sector. The establishment of the Foundation was
a condition of loan effectiveness. A contractual arrangement between the
Foundation and Government to ensure the execution of the SES was a
condition of disbursement, but neither was ever fully activated. Within
other parts of government, the fear that the Foundation and SES would be
dominated by the ruling elite and that the Foundation would become a slush
fund for overpaid consultants raised insuperable opposition to the SES-
Foundation proposition. The fate of the proposal was sealed when a left-
leaning, urban-based populist party came to power criticizing the elitism
and corruption of the previous regime.
Other mechanisms for attracting qualified professionals
to government service Include local consultancies and secondment from more
remunerative parts of government, usually the publ'z enterprise sector. In
Ghana, an innovative special skills mobilization scheme to facilitate the
use of local consultants to fill critical government vacancies at topped-up
salaries is being financed through a Technical Assistance Project. On an
ad hoc basis, secondment has frequently been used to attract qualified
professionals to central government at salaries above civil service levels.
Another feature of many public compensation structures that
ameliorates salary erosion and compression is the non-wage allowance and
benefit system.  For many civil servants, wages may constitute as lit.le as
25% of the total compensation package. Non-wage benefits may include
housing or housing allowances, family and health benefits, and pension
plans. In some countries, (e.g., Senegal) premiums are paid for each
individual job category, often without clear functional justification.l0 In
Sri Lanka, an "exodus" allowance is paid to professionals who, it is
feared, might be lured away by the international market. In both Senegal
and Sri Lanka, as in other countries, the allowance system is complicated
2/ For an analysis of the United States experience, see, Robert W. Hartman
and Arnold R. Weber, The Rewards of Public Service: Compensating Top
Federal Officials, Brookings Institution, Washington, D.C. 1980.
I/ See Peter C. Bloch, "Wage Policy, Wage Structure and Employment in the
Public Sector of Senegal," CPD Discussion Paper, No. 1985-41, May,
1985" for a thorough treatment of non-wage benefits in Senegal.



- 13 -
and unevenly distributed, causing resentment among less favored civil
servants. To the extent that they moderate the effect of salary erosion,
however, allowances may, in the short term, be a necessary evil. In any
case, allowances are a big, permanent part of the pay system in many
countries and it is misleading not to take them into account. Although
some research has been carried out in the Bank exploring various facets of
non-wage benefit systems, Bank operational work has generally paid only
minimal attention to this issue.
The degree to which any of the above mechanisms can attract and
keep higher level personnel in government depends largely on the available
alternatives. In Guyana where professionals may make one-fourth the
salaries of their counterparts in neighboring countries, the prospects for
attracting qualified high-level personnel are dismal, especially given the
weak state of the economy. In other countries, however, non-material
incentives such as prestige, patriotism, or access to social and political
connections may motivate well-qualified individuals to take low-paying jobs
in government, assuming minimally acceptable conditions for subsistence.
D. OPERATIONAL TECHNIQUES
This section delineates the main techniques used in Bank
operations to carry out the substantive approaches discussed above. (As a
reminder, this discussion includes initiatives that may or may not have
been directly in a Bank program. Some activities discussed were the result
of government action (some with IMF support) and thus may have precedod and
perhaps laid the foundation for the Bank's operational intervention.)
PreXeauisites to Reform: Data Collection. CoMnuterization. Civil Service
Census, Functional Review
Some Bank operational activities are prerequisites to further
reforms. These are usually related to the need to collect and access
necessary information to get control of the personnel system. They include
data collection and information management system improvements, civil
service censuses, functional reviews of whole governments or selected
ministries, diagnostic studies of overall employment problems, and other
specific aspects of employment and pay policy.
Civil Service Censuses
Civil service censuses are often viewed as a preliminary step to
generating information crucial to making necessary changes in public
employment and pay policy. Such surveys have been carried out in 6
countries where the Bank has been active in pay and employment reform.
They are intended as a head count of civil servants actually working in
government. They should be able, in principle, to distinguish those actual
employees from fictitious or fraudulent names (ghosts) on the staffing
lists of the civil service ministry or the individual technical ministries.
This can be achieved by comparing the results of the census with the
payroll. In 3 cases, this comparison was made and ghosts were eliminated.
Such follow-up comparisons are not always performed, however, calling the
usefulness of the census itself into question. Civil service censuses have
generally been carried out by government functionaries, often teamed with



- 14 -
local consultants. They are frequently undertaken under difficult
conditions and tend to use no standardized methodology. On average,
censuses take several months to complete, but the time required to carry
them out varies with the skill of the investigators, the size of the team,
and the size of the civil service. Civil service censuses are vulnerable
to fraud; investigators may be subject to pressures or payments from
interested parties, or they may fall victim to strong inclinations to
finesse already existing staffing lists rather than taking the trouble to
collect clean information. Still, in countries where virtually nothing is
known about actual numbers of public and/or civil servants, sometimes even
partial data gathered through a census may provide a starting point for
policy reform efforts.
Functional Reviews
Functional reviews of the public administration constitute another
prerequisite to pay and employment reform. Such reviews examine the
functional staffing requirements of government on a min4stry by ministry
basis, matching tasks with objectives and identifying the number and type
of staff necessary to carry out these essential activities as compared to
the established or authorized positions, and to those officials actually in
post. Thus, staff surpluses and shortfalls can be identified on a
technical basis, and, in theory, redundancies can be eliminated. Such a
review was executed in the Gambia with bi-lateral assistance in support of
both a Fund program and a Bank Structural Adjustment Credit and was the
basis for a large-scale staff reduction carried out in 1986 and 1987. In
Senegal, the Bureau of Organization and Methods (BOM)of the Office of the
President has attempted to carry out such a review, but few ministries have
cooperated in this process. A functional review has also been suggested by
the Bank to carry forward employment and pay reforms in Ghana, and is being
financed by the recently approved Structural Adjustment Institutional
Support Project. In addition, several national civil service commissions
have carried out similar exercises on their own.
As the basis for public pay and employment reform, functional
reviews provide technical guidance to policy makers as to where, if
necessary, changes can and should be made in the employment structure. To
the extent that they have such management decision uses, functional reviews
thus constitute a more sophisticated tool than civil service censuses
(which provide only raw numbers). They also supply a credible, technical
rationale for the difficult, political decision of employment reduction. A
few prominent consulting firms have developed functional review
methodologies that borrow heavily from work carried out in advanced
industrial countries. Concerns have been expressed that these reviews are
expensive and time-consuming (in the Gambia a three-person team took six
months to review a civil service of approximately 15,000). Given delicate
political circumstances, personnel reduction reforms may be more successful
if they are carried out swiftly, so some countries may be unable to wait
for the completion of a detailed functional review before taking action.
In addition, questions have been raised about the propriety and difficulty
of expatriate consulting firms carrying out such delicate reviews. In
Ghana, for example, government officials were reportedly uncomfortable with
this prospect. In Senegal, the resistance of various ministries to



- 15 -
submitting to this type of review underscores the sensitivity of the
exercise.
Data Collection and Computerization of Personnel Management Functions
For most countries surveyed, data about employment numbers and
structure, pay and non-wage compensation systems, and career promotion
patterns are often unavailable, inaccessible or unreliable. Frequently,
only rough estimates can be obtained for numbers of civil service
employees. Still less is known by central governments about employment
numbers in the public enterprise sector as a whole. (Even where the Bank
has tied SAL conditionality to employment reductions, as in Costa Rica,
data were reported to be very approximate for the civil service and not
available at all for the public enterprises.) In some countries, such as
Senegal, data on pay systems are incomplete due to the absence of adequate
information about the elaborate non-wage allowance system. Some data
problems stem from the reluctance of governments to surrender to the Bank
sensitive information about employment and pay. But in general,
governments themselves are unable to access information within their own
personnel management systems, many of which are still administered
manually. In some instances, the mechanized payroll records are not linked
to personnel recruitment records kept in the civil service ministry. This
is one reason why there are phantom employees receiving paychecks. Thus
several Bank operations, such as those in Mauritania, Ghana and the Central
African Republic, have financed the computerization of the personnel
management system and the reconciliation of personnel records with those of
the payroll. For several countries where ghost elimination has been
significant, mechanization and reconciliation of payroll appears to have
been crucial. Moreover, the usefulness of censuses in ghost elimination is
enhanced by subsequent payroll and personnel record automation.
Diagnostics and Studies
In an attempt to fill the data gaps discussed above, the Bank has
financed studies of various aspects of employment and pay issues. Through
its sector work, the Bank has also conducted diagnostic studies of various
issues in public administration, with attention to public pay and
employment questions, as part of project preparation for several T.A.
projects. Two such studies were carried out in Mauritania and Senegal.
The Mauritania diagnostic was reportedly useful in gathering essential
information about the personnel system as well as in facilitating Bank-
government communications in this area. In Senegal, initial ambiguity
about the purpose of the Bank's diagnostic work caused the government some
concern at first, but the information gathered helped lay a more solid
foundation for the preparation of a Development Management Technical
Assistance Project and helped broaden government views on key issues. The
degree to which such diagnostic tools may be useful in preparing and in
building country support for operational activities is worth further
exploration.
Institutional Arrangements
The institutional arrangements under which pay and employment
reform takes place influence its outcome. In a number of countries, reform



- 16 -
begins with the formation of a high-level interministerial commission or
task force examining questions of pay and employment, often within the
context of larger organizational issues in the public administration.
(Zambia, Malawi, Bangladesh, Senegal, Sri Lanka, CAR, and Ghana, among
others, all had such commissions.) These commissions may issue reports and
organize or oversee civil service reform. They may be short-lived, as in
Bangladesh, or become more fully institutionalized, as in Senegal. They
may or may not offer remuneration to their members. The nature of these
commissions and their impact on reform varies. In Bangladesh a national
pay commission meets regularly to review salary policy and in 1983, a
public administration commission, (ENAM) reorganized the public service and
instituted a far-reaching decentralization program; another high-level
committee is now about to review the functions and effectiveness of the
management and professional levels of the public service. In Sri Lanka the
National Salary Commission, a standing body, substantially raised salaries
for higher level staff, prodded by a Special Presidential Administrative
Reforms Committee.
The actual implementation of employment and pay policy reform
takes place in a wide variety of settings within governments. More often
than not, personnel management and pay functions are divided between the
Ministry of the Civil Service and the Ministry of Finance. Personnel
management functions are also carried out in the personnel branches of
technical ministries as well as in local decentralized units of government.
Coordination and reconciliation of procedures as well as records is
required among these various agencies. In some cases, an additional entity
to carry out system-wide reforms is grafted onto one of these or is
attached to the president's or prime minister's office. (Examples of these
reform entities are found in Mali, Mauritania, Central African Republic,
Guinea, and Senegal, among others.) They are sometimes staffed with
expatriate consultants, as in the case of a Bank-UNDP, co-financed
administrative reform project in Mali. In Senegal, the institutional
proliferation of agencies making policy on employment and pay issues has
produced poorly coordinated decisions and contradictory staff rules. Past
efforts at reform have also been ineffective, partly because they have
consistently come from central agencies outside the technical ministries.11
Nonetheless, reform efforts located in more autonomous institutions with
greater access to higher levels of government generally have a better
chance of succeeding. In the Central African Republic, for example, the
National Commission for Administrative Reform was first placed under the
Ministry of the Civil Service which lacked the political influence and
independence to carry out the difficult choices involved in making
employment cuts. The Commission was subsequently moved to the Office of
the President to afford the reform progrem greater legitimacy and political
leverage.
_j/ John Nellis, An Assessment of the Senegalese Administrative System,
WA2DB Working Paper/Reports No. 7, September 11, 1986.



- 17 -
III. ANALYSIS OF PAY AND EMPLOYMENT IN BANK RESEARCH AND CESW
A. COUNTRY ECONOMIC AND SECTOR WORK
The increased attention being given to public pay and employment
issues is reflected in the expanding body of Bank Research and Country
Economic and Sector Work focusing on these issues. In the period under
review, Country Economic memoranda have increasingly treated pay and
employment issues at length. For most countries, attention to pay and
employment in the CEM preceded subsequent Bank operational work. In
Senegal, for example, the 1984 CEM identified overextension of the public
sector as one of four main problems affecting the country's development.
The report also underscored the need to control the growth of public
expenditures. Additional sector work, including analysis of pay and
employment issues, followed and led to the preparation of a freestanding
Development Management Technical Assistance Project to provide medium-term
support to strengthen institutions for personnel management.12 The 1985
Gambia CEM recommended employment reductions and the restraint of aggregate
wage expenditures. These recommendations were incorporated into
operational activities through the 1986 SAL.
In some countries, CEMs themselves have constituted the Bank's
principal operational work. In Thailand, for example, aside from a small
compensation study financed through the SAL, the 1986 CEM was the main
vehicle for Bank-country policy dialogue focusing on employment and pay
issues. In Bangladesh, recommendations made in the 1985 CEM with regard to
pay and employment also formed the basis for policy dialogue between the
Bank and Government, though these issues will recur in the work of an
Administrative Reforms Committee set up under the 13th Import Program
Credit. In Sri Lanka, some recommendations made in the 1986 CEM suggesting
revisions in the salary structure have been adopted by Government, and the
analysis and recommendations of the report on future civil service salary
and employment policy by the Presidential Reform Committee largely coincide
with those of the CEM. Indeed, in countries where national skill levels
are high and autonomy from Bank leverage is considerable, some Bank staff
contend that ongoing sector work is the most influential instrument of Bank
intervention. This is so, it is suggested, as long as it can be clearly
demonstrated that the Bank's professional contribution is unique and of
superior quality.
Even where CESW has not led directly to lending, its impact has
been felt. For example, the Indonesia Management DeveloRment ReRort's
recommendation that in-kind payments be integrated into the basic salary
structure of the Indonesian Civil Service was subsequently adopted by
Government.
B. BANK AND IMF RESEARCH
There has also been a growing research effort within the Bank
examining public employment and pay issues. (See attached bibliography for
D1/ Additional sector work included: John Nellis, An Assessment of the
Senegalese Administrative System, WA2DB Working Paper/Reports No. 7,
September 11, 1986.



- 18 -
a complete list of this research.) Most of the work focused on Africa and
was embodied in a research program undertaken in CPD. This project
produced country-specific papers reviewing pay and employment policy in
Sudan, Zambia, Senegal, Nigeria, and Liberia. In addition, several
overview papers analyzed those countries as well as additional public
sector wage and employment data for Ghana, Uganda, Kenya, Malawi and
Tanzania.13
The main sources of data for this research consisted of personnel
divisions of technical ministries, civil service commissions, finance and
civil service ministries, and, at times, private sector surveys carried out
by individual commercial enterprises. Data were thought to be best for
Zambia and worst for Uganda. In general, the research stresses the
diversity of employment and pay conditions in Africa. It does, however,
report a number of general trends: extreme wage erosion due to infrequent
sala'y adjustments and rapid price increases; increasing relative
importance of non-wage benefits; increasing wage compression;and rapid
expansion in government employment as a whole. The basic policy
recommendation emerging from this work is that employment expansion should
not be traded off against higher wages. Smaller, more productive civil
services should be the objective. With regard to the public enterprise
sector, Lindauer et al., argued for the separation of public enterprise and
civil service salary scales.
Several other studies recently carvied out in the Bank have
examined pay and employment issues. A.R. Xhan's "Liberia SAL: Wages and
Employment in the Public Sector" and "Employment and Wages in Liberia, Some
Preliminary Notes with Special Reference to the Public Sector" analyze
growth in public sector employment wages, their impact on the wage bill,
and wage compression. They present alternative instruments for the
attainment of target reductions in the wage bill, including reductions of
the rate of salary increase, postponements of increments and promotions,
and overall reductions in employment. Other studies on this issue include
Sunita Kikeri, "Compensation Systems for Public Enterprise Managers in
Africa" (1987) and Peter Heller and Alan Tait, "Government Emplayment and
Pay: Some International Comparisons," which was carried out by the IMF's
Fiscal Affairs Division. The former looks at comparison schemes and
performance criteria in public enterprises in Africa; the latter examines
comparative data for public sector employment and suggests ways to measure
and evaluate them. In addition, a recent paper by Ruth Klinov, "Public-
Sector Wages and Employment in Bolivia" relates public employment issues to
overall economic trends in Bolivia. And, John R. Harris, Edward Andoh,
Kojo Evlo, and Martha Starr have analyzed several African pay and
employment experiences in their recent paper, "Experiments in Wage Bill
Containment in Africa," sponsored by the Bank's Special Office on Africa.
In addition, Inayatullah, "Public Employment and Pay" provides a general
review of public sector employment issues in developing cuuntries, from the
viewpoint of civil service senior management.
2/ The overview papers include David Lindauer, "Parastatal Pay Policy in
Africa," 1986; Lindauer, Public Sector Wages and Employment in Africa:
Facts and Concepts," 1981, and Lindauer, Meesook and Suebsaeng,
"Government Wage Policy in Africa: Summary of Findings and Policy
Issues," 1986.



- 19 -
In general, research within the Bank on public pay and employment
has synthesized a large volume of data--for the most part on Africa-
-analyzing problems and suggesting solutions. This research has brought
available data to bear on a topic which previously had been subject to much
conjecture and few facts. As such they represent an important advance in
formulating an informed, coherent analytic framework for Bank policy in
this area. Most of the studies stop short, however, of providing an
operational guide for dealing with pay and employment issues. For the most
part, the studies stress the economic rather than the institutional
dimensions of the problems. A survey of this research suggests several
possible avenues for future work:
*   Expansion of the data base through more in-depth studies of pay
and employment problems in specific countries.
*   Comprehensive studies of government service incentive systems,
including analysis of salary structures, career paths, non-wage
allowance and pension systems, and relevant tax provisions in
selected countries.
*   Review of severance scheme experiences; follow-up of selected
experiments.
O   Study of political and social consequences of pay and employment
reform.
v   Review of case studies of employment and pay experience through
individual sectors, and public enterprises.
IV. ISSUES IN PUBLIC EMPLOYMENT AND PAY REFORM
Even at this early stage, a number of issues have emerged from
the Bank's experience with public employment and pay reform. This section
raises some of the major concerns uncovered by this review. These focua
both on the content of changes in employment and pay policies and on
procedural questions about the Bank's role and strategy in promoting
reforms.
The Context of Reform: The Importance of Politics
There is little doubt that economic crisis is often a powerful
catalyst for public employment and pay reforms. It is also obvious that
political factors figure significantly in conditioning such reforms, but
such factors have been given less detailed attention in Bank operations.
Recent Bank experiences, however, indicate the need to examine both
political and economic variables in assessing the prospects for pay and
employment reform in any individual country. In Ghana, for example, the
impetus to undertake major reforms ir, civil service employment patterns was
largely motivated by the desperate state of the economy, but the incumbent
regime's political stability also appears to have been crucial to
Government's willingness to act decisively without fear of being
overthrown. Guinea, partly in response to its own economic crisis, has
moved quickly with pay and employment reforms. But Bank staff also
reported that reform was facilitated by a general climate of revolutionary



- 20 -
purpose resulting from th_ end of many years of one-man rule.  This climate
has created both the courage to tackle vested interests and a willingness
to sacrifice on the part of groups such as civil servants, who may be
affected by sweeping employment reductions. In Niger, the ability of a
stable, authoritarian military regime to give full commitment to employment
reform is reinforced by the absence of organized political opposition.
Politics can also pose serious obstacles to meaningful employment
reform. In Peru, Jamaica, and Guyana, deteriorating economies motivated
changes in civil service employment and pay strv tures, but political
constraints derailed reform efforts. In Peru, the populist Garcia regime,
whose support came from the working and lower middle class, chose not to
implement a salary reform skewing wages in favor of higher level of
professional staff, many of whom ware associated with the previous regime.
In Jamaica, early commitment to pay refor-m for the civil service elite was
present at the highest level in the person of Prime Minister Seaga. With
economic decline labor unions became more vociferous and Seaga was
increasingly threatened by the opposition with electoral defeat. These
political pressures made a reform redistributing civil service salaries
upward difficult for the Seaga government. While there was one initial
attempt to reform the salary structure (in 1984), later efforts were
stalled. Clearly, in electoral policies with well developed, articulate,
and powerful interest groups, leaders' calculation of support requirements
will affect their willingness to undertake bold and sensitive steps toward
pay and employment reform.
Bank staff have, for the most part, tended to be sensitive to the
political complexities of these reform efforts. The need for a subtle
approach to pay and employment issues in more highly developed, politically
sophisticated countries was forcefully acknowledged in discussions of
experiences in Thailand, Jamaica, Sri Lanka, and Peru. Nonetheless,
although individual Bank staff exhibit awareness that interest groups such
as labor unions, urban workers, students, and factions of the bureaucracy
may have tremendous impact on operational outcomes, there is little
systematic analysis of these factors in Bank sector work or lending
operations. Indeed, although there is often a recognition that some
measures being proposed by the Bank and undertaken by Government may pose
significant political risk or that a particular policy may lose political
support, there is relatively little attention given, for example, to
possible means by which reform programs can be designed to help reduce
those risks or replenish that support.
RedeRloyment
Earlier sections of this review suggested that the issue of
redeployment of retrernched employees has not received significant attention
in Bank operations. Indeed, short of the assumption of an economic upturn
resulting in increases in private sector employment opportunities, the
conseauences of Bank prescriptions for employment reduction are left
largely unaddressed in most interventions. Labor-intensive public works
programs, retraining programs for employment in other sectors, and small
agriculture and business credit schemes have all been discussed, but such
proposals have, for the most part, been initiated by the borrowers
themselves, often in the absence of adequate technical and financial



- 21 -
resources for implementation, and sometimes in a largely symbolic manner.
The Bank has generally refrained from active involvement in these schemes.
More broadly, Bank sector work has not, by and large, carefully analyzed
the connections between public employment reductions and the capacity of
eit;.er agriculture or the urban labor market to absorb fired government
workers. Nor has it assessed the capacity of specific sectors to take on
surplus civil servants, or the mechanisms whereby such a redeployment could
take place. Such analysis would appear to be particularly important in
those countries where the private sector is weak. Ii the Bank is to
continue and deepen its involvement in this area, more comprehensive
analysis of employment and pay questions will need to consider the
redeployment issue. This will require not only more systematic attention
to the issue in se^tur work, but also, at least in the case of retraining
schemes, better coordination among individual sector programs within the
Bank's overall country program strategies.
Timing of Reform
The timing requirements of pay and employment reforms appear to
vary with individual circumstances. No optimal pace or sequencing of
policy changes could be inferred from Bank operations. In general, salary
adjustments seem to be made all at once, while employment cuts and
redundancy payments may be phased over a long period of time. Gradually
phased retrenchment may serve to cushion the blow and thereby dissipate
opposition. On the other hand, an incrementalist strategy of retrenchment
may allow contesting coalitions time to strengthen. Yet-to-be-dismissed
employees may become demoralized and less productive. Also, the manner in
which severance packages are disbursed may determine the fiscal manuevering
room of a government in subsequent months. Deferral of redundancy
payments, for instance, may lighten government's financial burden and open
up the possibility of non-payment should the payments later prove
unaffordable. Sequencing affects the effectiveness of Bank operations as
well.  Phasing reforms over time allows for somtwhat greater capacity for
monitoring and control if policy changes are tied to phased conditionality.
On the other hand, the deferral of reforms also raises the possibility that
the political will to carry them out will dissolve and earlier actions on
the part of the government will not be followed through by the rest of the
reform program.
The question of whether pay and employment reforms should be made
in a comprehensive package affecting central government simultaneously with
public enterprises remains to be answered. Clearly, conditions in one
affect the other, so attacking the problems jointly would seem to be
sensible, if not essential. In some cases, considerably more information
is available for employment and pay issues in central governments than in
public enterprises. The uneven quality of data often impels the Bank and
governments to treat the two areas independently.
Information Gags
As noted, the quality of the information base for much of the
Bank's operational work on pay and employment is poor. Bank staff working
in this area are confident that the quality and quantity of pay and
employment data can be increased. The accumulation of information needs to



- 22 -
be tied, however, to actionable objectives. Indeed, other international
agencies, including the Department for Technical Cooperation and
Development of the United Nations, have for years financed data collection.
But in the absence of sufficient high-level political commitment to change,
these exercises have produced little reform.
Poor or inaccessible information has sometimes forced Bank staff
to make judgments that are more instinctual than empirical. In Jamaica,
the Bank promoted a salary scale for executive-level civil servants that
was to be 85% of public enterprise salaries. In the absence of reliable
information as to the level of salaries required to attract and retain
high-level civil servants or of the level of salary that could be
comfortably financed by the government, the Bank decision was based on
intuitive judgment. In Costa Rica, Bank staff reported that data on public
sector employment were not available when recommendations were made by the
Bank through policy dialogue to reduce employment. Although the Fund
attached conditions related to t'ha wage bill to its 1985 standby agreement,
reliable numbers for employment were still not available. These data only
became available at the time of the release of the second tranche of the
SAL in 1986, which was conditioned on determining the number of public
service employees.
Very little information is available in the Bank about the
experience of other donors or countries with pay and employment reforms,
particularly the successful ones. Little is known, as well, about the
academic institutions or consulting firms that may have proven track
records in this area.
Types of Bank Interventions: Suitability for Reform
The views of Bank staff differ with regard to the appropriate
operational instruments or combinations of instruments for work on public
employment and pay. Some staff are frustrated by the constraints placed on
achieving lasting reform by the use of essentially short-term SALs.
Several point to cases in which governments met conditionality on paper but
had not internalized commritment to the reform objectives and were therefore
inclined to abandon them when leverage was relaxed.14 But this objection
could be mitigated if the SAL were one phase of a longer series of SAL
operations, so that leverage could be sustained over a more extended
period. SALs were also judged to be more effective if coupled with
companion Technical Assistance Loans that offered institutional support for
SAL conditionality. Still, most Bank staff agree that those reforms that
have taken place, however incomplete, would not have occurred without the
conditionality of a SAL. SALs are viewed as imperfect but necessary
instruments.
/ This is a generalized issue in Structural Adjustment Lending.  See
Geoffrey Lamb, "Institutional Reform in Structural Adjustment Lending,"
1984.



- 23 -
The less threatening, "softer-sell" approach that a freestanding
technical assistance project is thought to provide was favored by some Bank
staff as a vehicle for pay and employment reform (as well as other forms of
institutional restructuring). In cases where the institutional
infrastructure for reform, such as trained personnel managers and a
functioning personnel management system, needs to be established, technical
assistance projects were deemed particularly useful. That these could
proceed independently of SAL conditionality was sometimes considered to be
an advantage. The Jamaica Public Administration Project, for example,
assumed a strategy intentionally distancing personnel management and salary
reforms from the overall employment cuts and wage bill reductions that were
a part of the Fund's program. Salary increases for higher level staff were
linked to Jamaica's SAL III, however, and it is still unclear if the slow
implementation of these reforms uias due to or in spite of SAL
conditionality. In general, SALs and freestanding T.A. projects are not
considered to be mutually exclusive. Instead, they are seen as
complementary instruments with somewhat different objectives.
In a few cases, the best instrument for bringing about desired
changes in employment and pay policy was ongoing Country Economic and
Sector Work and sustained policy dialogue. This is particularly applicable
to relatively more advanced countries. In Sri Lanka, for example, the
Bank's involvement in pay and employment was through sector work and
continuing policy discussions with high level government officials
interested in bringing about salary structure reforms. These officials
were reported to have made use of what they considered to be high quality
professional advice on the part of the Bank to reinforce their own argument
for reform to other members of the national bureaucracy. The result was a
1986 salary adjustment and a possible technical assistance operation to
support the policy work of an interministerial commission. Ongoing sector
work and policy dialogue was also the primary approach used in Thailand and
Bangladesh, although in the latter case this is now being reinforced by
conditionality on a public administration reform study under Imports
Program Credit 13.
Internal Bank Coordination
Coordination and communication of Bank activities on public pay
and employment has sometimes been weak. Interventions on these issues have
often been made through individual sectors witheut coordination with
overall country program initiatives, except in the case of public
expenditure reviews which do seem to faciittate intersectoral contact.
Moreover, Bank operations staff are often unaware of what others in their
region are doing in this area. Even among Public Sector Management
Divisions, information has heretofore been spread mostly by word of mouth.
Coordination and commmunications between the Bank and the Fund on pay and
employment varies significantly from one country to another. In some
cases, Fund-Bank programs are closely linked; in others, there is virtually
no interaction on the issue.
Bank Staff Capacity
With the exception of those operations that have been managed by
the regional Public Sector Management Divisions, the Bank's involvement in



- 24 -
public pay and employment issues has been carried out mostly by country
economic staff, often in the context of a much broader effort to elaborate
and agree on an economic reform program. In a few cases projects staff
have been involved in operational work touching upon these issues. On a
sectoral basis projects staff have been involved in reform efforts. The
degree to which these staff have the appropriate professional background
and expertise to bear full responsibility for pay and employment issues
needs to be assessed within the Bank as a whole.
Suipervision
The absence of on-the-ground supervision of pay and employment
reform operations has been cited as a major constraint on their
effectiveness. Such activities require very close review, support and
continuing dialogue. Without such intensive supervision, they can easily
get lost. Such attention might be supplied through a resident mission if
staff time were made available and if such work were accorded a high enough
priority. An alternative solution would be to allocate sufficient
supervision time so that Washington operational staff with specific
expertise in this field could thoroughly address these issues.
V. CONCLUSIONS
Bank involvement in public sector pay and employment reform is new
and is proceeding on a trial and error basis. Definitive lessons about the
appropriateness or effectiveness of approaches currently being utilized
cannot be drawn from such a brief history. Still, it makes sense to take
account of this experience as it accumulates in an effort to discern
emerging trends and to raise issues for future activities. This has been
the purpose of the present review, which should be seen as an initial step
in an ongoing assessment process. The paper's findings suggest the
following considerations for staff working in this area:
*   Political factors are crucial in determining the success of pay
and employment reforms in many countries. Systematic analysis of
the politics of the reform process, largely absent from Bank
sector work up until now, needs to be incorporated into CESW and
in direct preparation of Bank projects.
*   Governments must feel full "ownership" of reforms, or they will
not succeed. In pursuing this end, a style must be struck which
allows for the appropriate mix of Bank leverage and country
autonomy. Although this notion has become something of a cliche
in institutional development circles, it is worth reasserting with
regard to reforms as sensitive and politically difficult as those
involving public pay and employment issues.
*   Bank pay and employment operations have tended to take a short-
term perspective, frequently ignoring the medium-range
consequences of policy prescriptions for pay reform and especially
employment retrenchment programs. Issues of redeployment,
retraining, and pension and severance obligations for dismissed
workers have not been seriously considered. The most well-
intended immediate policy measures may collapse



- 25 -
down the road if such longer range implications are not addressed.
Responsible action in this area will require a more comprehensive
approach that considers all stages of the reform process, and
makes more specific provision for implementation over the medium
term.
*   Bank employment and pay operations often have multiple, sometimes
conflicting objectives, usually related to fiscal soundness,
bureaucratic efficiency, or developmental goals. To the degree
possible, such objectives should be made explicit and trade-offs
among them clarified from the outset. In cases where the IMF has
been active on these issues, it will be important to discuss and
coordinate Bank-Fund policy initiatives to ensure that mutual
objectives are fully understood and appropriately balanced.
e   Bank operations are being carried out in the absence of adequate
information about key pay and employment issues. Basic data on
employment numbers and comparative salary scales for central
government and parastatal sectors need to be collected and
analyzed for reasoned policy formulation. Through an expanded
program of research and country and economic sector work, more
also needs to be learned about the detailed intricacies of salary
and career incentive structures, non-wage allowance systems,
supplementary benefit schemes such as social security programs,
and labor market absorptive capacity, to name a few important
topics for further analysis.
*   Although this review has examined only system-wide, central
government reforms in pay and employment, there is clearly a large
body of experience with such reforms at the sectoral and state
enterprise level. A comprehensive review of these experiences
will be essential to complete this preliminary picture of the
Bank's progress to date in this area.
*   No single lending instrument could be identified in this review as
the most suitable for bringing about desired changes in pay and
employment systems. In fact, the variegated character of country
cases and types of pay and employment problems calls for
flexibility in operational approach and style. Although SALs have
proven an effective mechanism for stimulating reform, one-shot
conditionality diminishes the chances for success. The Bank,
therefore, needs to consider serial conditionality supported by an
institutional infrastructure provided either through specific SAL
components, companion technical assistance projects, or medium-
term sectoral support projects with institutional development
components.
*   A consistent country strategy toward pay and employment issues
must be developed at all levels of Bank intervention. These
include central state and local government, state enterprises, and
individual sectors. Public expenditure reviews provide a minimal
framework for cooperation among these levels, but a more
systematic methodology for coordination is needed to provide the
necessary program coherence.



- 26 -
*   Strategies for the supervision of Bank employment and pay
operations need to be re-evaluated. Such activities clearly
require intensive and sometimes extensive attention, often on the
ground. In developing supervision programs, the appropriate role
of Bank staff and the proper allocation of staff time to these
activities need to be assessed.
*   The complex and multidisciplinary nature of the tasks involved in
pay and employment operations may require specialized training for
Bank staff and/or recruitment of personnel with appropriate
expertise. For some activities, good consultants need to be
identified to supplement Bank staff capacity. In addition, the
Bank should encourage countries' own efforts to perform policy
analysis on these issues.
*   Finally, although the Bank seems to have taken a lead in the area
of public sector pay and employment reform, some work has been
done on these issues by developing countries themselves, other
multi-lateral and bi-lateral aid agencies, academic institutions
or individuals, and independent consultants and consultancy firms.
In addition, there is much to be learned from the experience of
advanced industrialized countries that have undergone pay and
employment reforms induced by contracting economies. This outside
experience needs to be reviewed critically to expand and refine
the range of operational approaches currently used by the Bank.



- 27 -
TABLE 1. BANK OPERATIONS WITH EMPLOYMENT/PAY COMPONENTS
(Aporoved as of February 1987)
(in Chronological Order)
Ln/Cr
Ln/Cr          Ln/Cr           Approval       Amount
Country       Type            Number         Date            (USSm)
Guyana        SAL             Ln 1948        81/02            14.0
CAR           TAL I           Cr 1150        81/05             4.0
Turkey        SAL II          Ln 1987        81/05           300.0
Thailand      SAL I           Ln 2097        82/03           150.0
Turkey        SAL III         Ln 2158        82/05           304.5
Peru          TAL             Ln 2204        82/09            10.2
Mali          TAL             Cr 1307        82/12            10.4
Thailand      SAL II          Ln 2256        83/03           175.5
Bannladesh    PA              Cr 1349        83/04            12.0
Jamaica       SAL II          Ln 2315        83/06            60.2
Turkey        SAL IV          Ln 2321        83/06           300.8
Uganda        TAL II          Cr 1434        83/12            14.2
Jamaica       PA              Ln 2423        84/05             4.5
Turkey        SAL V           Ln 2441        84/06           376.0
Jamaica       SAL III         Ln 2478        84/11            55.0
Guinea        TAL             Cr 1559        85/03             9.5
Mauritania    PE TAL          Cr 1567        85/03            16.4
CAR           TAL II          Cr 1581        85/04             8.0
Costa Rica    SAL             Ln 2518        85/04            80.0
Costa Rica    TAL             Ln 2519        85/04             3.5
Togo          SAL II          Cr 1599        85/05            27.8
Togo          TAL III         Cr 1600        85/05             6.2
Malawi        SAL III         Cr 1644        85/12            30.0
Bangladesh    IPC 13          Cr 1655        86/02           200.0
Guinea        SAL             Cr 1659        86/02            25.0
Niger         SAL             Cr 1660        86/02            20.0
Senegal       SAL II          Cr 1656        86/02            20.0
Bolivia       RIC             Cr 1703        86/05            55.0
Gambia        SAL             Cr 1730        86/08             5.0
CAR           SAL             Cr 1732        86/09            14.0
TOTAL NUMBER OF PROJECTS: 30



- 28 -
TABLE 2. BANK OPERATIONS WITH EMPLOYMENT/PAY COMPONENTS
(Under Pregaration as of February 1987)
Country                  Operation
Bolivia                    TAL
Ghana                      SAL
Ghana                      TAL
Guinea Bissau               SAL
Haiti                       SAL
Haiti                      TAL
Mali                        PE TAL
Mauritania                  TAL
Mauritania                  SAL
Senegal                    SAL III
Senegal                    TAL
Sierra Leone               SAL
Sudan                      TAL
Sri Lanka                  UNDP
Uganda                      Economic Recovery Credit
TOTAL NUMBER OF PROPOSED PROJECTS: 15



- 29
TABLE 3. COUNTRIES UITH BANK OPERATIONS IN
PUBLIC SECTOR PAY AND EMPLOYMENT
Region                       Current                       Proposet
Africa                       CAR                           CAR
Gambia                        Ghana
Guinea                        Guinea Bissau
Mali                          Mali
Mauritania                    Mauritania
Niger                         Senegal
Senegal                       Sierra Leone
Togo
Malawi                        Sudan
Uganda
Asia                         Thailand                      Sri Lanka
Bangladesh
[AC                          Bolivia                       Bolivia
Costa Rica                    Haiti
Guyana
JAmaica
Peru
EMENA                       Turkey



- 30 -
TABLE 4. COUNTRY ECONOMIC AND SECTOR WORK ON
PAY AND EMPLOYMENT
Region                            CESW
Africa                            CAR
Gambia
Ghana
Mauritania
Senegal
BLS Countries
Sudan
Uganda
Zambia
Asia                              Bangladesh
Sri Lanka
Indonesia
Thailand
LAC                               Costa Rica
Guyana
EMENA                             Jordan
Tunisia



- 31 -
TABLE 5. MAJOR DIAGNOSED PPOBLEMS FOR COUNTRIES
WITH BANW EMPLWYENT/PAY INTERVTIONS
Excessive          Surplus
Wage               Civil
Bill               Servants             Erosion              Compression
Bangladesh         Bangladesh           Bangladesh           Bangladesh
Bolivia            Bolivia              Bolivia              Guinea
CAR                CAR                  Jamaica              Guyana
Costa Rica         Costa Rica           Mali                 Jamaica
Gambia             Gambia               Peru                 Peru
Ghana              Ghana                Thailand             Thailand
Guyana             Guinea
Haiti              Guyana
Jamaica            Haiti
Malawi             Jamaica
Mauritania         Mali
Niger              Mauritania
Senegal            Niger
Sierra Leone       Senegal
Togo               Sierra Leone
Uganda             Sri Lanka
Togo
Turkey
Uganda



- 32 -
TABLE 6. BANK OPERATIONS WITH EMPLOYMENT/PAY COMPONENTS
BY LENDING INSTRUNENT
(As of Februarv 1987)
REGION          SALS            TALS            OTHER          TOTAL
West Africa
Approved       6               6               0              12
Proposed       5               4               0              9
East Africa
Approved       1               1               0               2
Proposed       0               1               1              2
South Asia
Approved       0               1               1               2
Proposed       0               1               0              1
IAC
Approved       4               3               1               8
Proposed       1               2               0              3
EAP
Approved       2               0               0               2
Proposed       0               0               0              0
EMENA
Approved       4               0               0              4
Proposed       0               0               0              0
Total
Approved      17              11               2              30
Proposed       A               A               1             la
23             19               3              45



TABLE 7. BANK OPERATIONS BROKEN DOWN BY PAY AND EMPLOYIUNT COMPONENTS
(hAnroved Or utder Preoar topn as of FebMUar7 1987)
Data                 Reform Wage &                                                        Create/ Change/
Collection/MIS/      Salary Structure                              Redeployment           Strengthen             SOE Employment &
CS Census              MechanitatLon        (Decompression,                               Training/               Personnel Mgmt         Pay (Separate or
Surveyliead Count/    of Pers. Magt         Grading, Freezing      FreezelOut             ComenzationI            Iastitutions.          Align vith CS, Cut
Studies Diagnostics   Functional Reviev       Fctio.               Cutting Wage Bill)    Employment            !Severance               Commissions, Etc..    Numbers, Etc.)
Bangladesh IPC         CAR SAL                Bangladesh PA        Bangladesh IPC         Bolivia                Bolivia RIC*           Bangladsh PA            Gambia SAL
Bangladesh PA          CAR TAL I              CAR SAL              Bangladesh PA          CAR SAL                CAR SAL                 CAR SAL                Guinea SAL
CAR SA                 Gamble SAL             CAP TAL II           Bolivia                Costa Rica SAL         CAR TAL II              CAR TAL I              Guinea TAL
Cost& Rica TAL         Ghana TAL*             Ghana SAL*           CAR SAL                Gambia SAL             Costa Rica SAL          Gambia SAL             Jamica PA
Guinea TAL             Guinea SAL             Ghana TAL*           Costa Rica TAL         Ghan  SAM.             Gambia SAL             Ghana SAL*              Jamica SAL III#
Haiti SAL*             Jamaica SAL II         Mali TAL             Gambia SAL             Ghana TAL*             Ghana SAL*              Chana TAL              Mali PEP
Jamaica PA            Uganda ERC*             Mauritania SAL       Ghan  SAL*             Guinea SAL             Ghana TAL*             Cuinea SAL              Niger SL.
Jamaica SAL III#      Uganda TAL II           Mauritania TAL'    Ghana TAL*               Guyana SAL             Guinea SAL              Jamaica PA             Sudan*
Maurcitanl  PE                                Senegal SAL          Gulnea SAL             Haiti SAM.             Guyana SAL              Jamica SAL III*        Turkey 5AL II
Mauritanla TAL*                               Senegal TALM         Haiti SAL*             Haltl TAL*              Haitl TAL*             Mali TAL               Turkey SAL III
Niger SAL                                     Sudan*               Haiti TAL*             MaurLtania SAL         Mauritania TALZ        Mauritania TAL*                                W
Peru TAL                                                           Jamaica PA             Niger SAL              Senegal SAL II         Peru TAL
Senegal SAL III                                                    Jmalca SAL 111        Senegal SAL IT                                Senegal TAL*
Sri Lanka UNDP*                                                    Maurltania SAL         Slerra Leone SAL*                             togo TAL III
Thailand SAL I                                                     MauritanL  TMAL*       Turkey SAL II                                 Turkey SAL V
Thailand SAL II                                                    Niger SAL              Turkey SAL III                                 Ugand  TMAL 1I
Togo TAL III                                                       Peru TAL               Uganda ERC*
Senegal SAL
Sierra Leone TAL*
Thailand SAL I
Thailand SAL II
Togo TAL III
Uganda ERC'
Total     17                  8                      11                   23                      17                     12                     16                     10
%of
Total
(45 Ln
All)      38S                18X                     24X                  51S                     38X                    271                    352                    221
' denotes loans under preparation
5 denotes cross-condltionality vith Jamaica PA as only pay & smployment component



- 34 -
REFERENCES
A.   BANK DOCUMENTS - PROJECT & SECTOR WORK
BANGLADESH
Economic and Social Development Prospects, Report No. 5409,
April 2, 1985.
Economic Trends and_pevelopment Administration, Report No. 4822,
February 27, 1984.
Public Administration Strategy Paper, March 1987.
BOLIVIA
Public Financial Management Oteration, White Cover, SAR,
January 12, 1987.
Reconstruction ImDort Credit Project, Report No. P-4253,
April 25, 1986.
BOTSWANA. LESOTHO. SWAZILAND
Study of Public Administration Management: Issues and Training
Needs, Report No. 5948, April 21, 1986.
Technical Assistance Project, Report No. P-3054, May 6, 1981.
Second Technical Assistance Project, Report No. P-4004,
March 28, 1985.
Country Economic Memorandum, Report No. 5332, December 22,
1984.
Structural Adjustment Credit, Report No. 4377, August 11,
1986.
COSTA RICA
Main Economic Problems and ProsRects, Report No. 5759, Green
Cover, May 1985.
Current Economic Position and ProsRects, Report No. 3193,
November 3, 1980.
Technical Assistance Loan, Report No. 3985, March 5, 1985.
Structural Adjustment Loan, Report No. 3984, March 5, 1985.
THE GAMBIA
The Gambia. DeveloRment Issues and Prospects, Report No. 5693,
September 6, 1985.
Structural Adiustment Credit, Report No. 4362, August 4, 1986.



- 35 -
GHN
Ghana: Towards Structural Adiustment, Report No. 5854 - GH,
October 7, 1985.
GUINEA
Technical Assistance Credit, Report No. 3952, February 29, 1985.
Structural Adiustment Credit, Report No. 4162, January 21, 1986.
Guyana: Recent Developments and Short-Term ProsRects, Report No.
3951-GUA, May 31, 1982.
Structural Adiustment Loan, Report No. P-2935, January 12, 1981.
Second Technical Assistance Project, Report No. P-2936, January
12, i981.
Ptagram Performance Audit Report for Guyana Structural Adjustment
Loan and Credit. LN. No. 1948/CR. No. 1098 and Second Technical-
Assistance Project, LN. No. 1949, Report No. SECM86-358, March
31, 1986.
Guyana: Country Economic Memorandum, Report No. 6501, December
1986.
HAIT-I
ProRosed Structural Adjustment Operation, Initiating Memorandum,
September 15, 1986.
INDONESIA
Indonesia: Management DeveloRment, Report No. 4965-IND, May 20,
1985.
JAKAIC
Second Structural Adjustment Loan, Report No. P-3559, May 5,
1983.
Public Admnistration Reform Project, Report No. P-3796, May 3,
1984.
Third Structural Adjustment Loan, Report No. P-3889, October 23,
1984.
JORDAN
Efficiency and Eguity of Government Revenues and Social
Exnenditures, Report No. 5697-JO, June 1986.
MALI
Economic Management and Training Project, Report No. P-3356,
November 15, 1982.
MAURITANIA
Public Enterprise Technical Assistance and Rehabilitation
Project, Report No. P-3979, March 7, 1985.



- 36 -
Institutional Development: Constraints and Recommendations,
WA2DB, Working Papers/Reports No. 6, July 14, 1986.
Develonment Management Project, Project Brief, March 3, 1986.
NIGER
Structural Adjustment Credit, Report No. P-4185, January 23,
1986.
PERU
Public Sector Management Project, Report No. P-3383, September 1,
1982.
SENEGAL
Sene&gIl  Country Economic Memorandum, Report No. 5243,
November 5, 1984.
Structural Adjustment Credit, Report No. P-4213, January 10, 1986.
Development Management Credit, Project Brief, April 25, 1986.
An Assessment of the Senegalese Administrative System, WA2DB,
Working Papers/Reports No. 7, September 11, 1986.
SRI LANKA
Ui1, Report No. 6176, May 19d6.
SUDAN
Sudan: Prospects for Rehabilitation of the Sudanese Economy,
Report No. 5496, October 7, 1985.
Economic Management Reform Project, Yellow Cover, Report No.
P-4434, January 9, 1987.
THAILAND
Structural Adiustment Loan, Report No. P-3201, February 8, 1982.
Second Structural Adiustment Loan, Report No. P-3481, March 10,
1983.
Program Performance Audit Regort for Thailand-First and Second
Structural Adiustment Loans, Report No. 6085, February 28, 1986.
Thailand: Growth with Stability: A Challenge for the Sixth Plan
Perform. A Country Economic ReRort, No. 6036-TH, June 5, 1986.
Thailand: An Institutional DeveloRment Strategy, N.D.
TOGO
Third Technical Assistance Project, Report No. P-4063,
Mav 1, 1985.
Second Structural Adiustment Program, Report No. P-4064,
May 1, 1985.



- 37 -
TUNISIA
Country Economic MemQrandum: Midterm Review of the Sixth
Development Plan (1982-86), Report No. 5328-TUN, October 1985.
ITURKE
Second Structural Adiustment Credit, Report No. P-3034,
April 20, 1981.
Third Structural Adiustment Credit, Report No. P-3273,
May 7, 1982.
Fourth Structural Adjustment Credit, Report No. 3543,
May 26, 1983.
Fifth Structural Adiustment Credit, Report No. P-3783,
May 24, 1984.
ZAKBIA
Wage Policy and the Structure of Wages and EmRloyment,
Report No. 5727, May 7, 1986.
B.  BANK RESEARCH
Bloch, Peter C.
Wage Policy. Wage Structure and Employment in the Public Sector
o Seneg_al, CPD Discussion Page, No. 1985-41, May 1985.
Public Sector Emoloyment in Thailand: Civil Service and State
EnterDrise, Background Paper for World Bank Economic Report on
Thailand, February 1986.
Harris, John R., Edward Andoh, Kojo Elvo, and Martha Starr.
Exoeriments in Wage-Bill Contanment in Africa, Special Office on
Africa, World Bank, April 1987.
Inayatullah
Public Employment and Pay, PPDPS, June 1986.
Khan, Aziz R.
Recurrent Government Expenditure in Nigeria, CPD Discussion
Paper, No. 1986-14, February 1986.
Wages and Employment in Nigeria, CPD Discussion Paper No.
1986-15, February 1986.
EmRloyment and Wages in Liberia. Some Preliminary Notes with
Reference to the Public Sector, CPD, November 1983.
Kikeri, Sunita
Managerial Compensation Systems for Public Enterprises in
Sub-Saharan Africa, Forthcoming, 1987.



- 38 -
Klinov, Ruth
Public Sector Wages and Emplovment in Bolivia, DRDIM, World
Bank, April 1987.
Lindauer, David L.
Labor Market Behavior in the Republic ot Korea: An Analysis of
Wages and Their Impact on t;Ae Economy, World Bank SWP No. 641,
1981.
Public Sector Wages and Employment in Africa: Facts and Concepts,
World Bank, Studies in Employment and Rural Development No. 68,
July 1987.
Parastatal Pay Policy in Africa, CPD Discussion Paper No. 1986-
31, May 1986.
Lindauer, David L. Oey Meesook and Parita Suebsaeng
Government Wage Policy in Africa: Summary of Findings and Policy
Issues, CPD Discussion Paper No. 1986-24, April 1986.
Lindauer, David L. and Oey Meesook
Public Sector Pay and Employment Policy in the Sudan, CPD
Discussion Paper No. 1984-33, May 1984.
Macedo, Roberto
The Brazilian Labor Market: An Overview, World Bank, DRD No. 151,
January 1986.
PPD
A Review of Bank Interventions in Sunnort of Administrative
Reform, PPD, PSMU, June 1984.
Institutional Reform in SALs, PPD, PSMU, October 1984.
A Review of Bank Lending for Reform of State-Owned Enterprises,
PPD, PSNU, August 1984.
Richardson, Ray and Kim, B. W.
The Structure of Labor Markets in LDCs: Overview for South Korea.
1953-1984, Report No. DRD162, March 1986.
C.   GENERAL REFERENCES
Abdin, Ragia, Paul Benell, Olufemi Fajana, Martin Godfrey,
Bachir Hamdorich
A World of Differentials: African Pay Structures in a
Transnational Context, Hodder & Stoughton Std., U.K. 1983.
Benell, Paul S.
"Earnings Differentials between Public and Private Sectors in
Africa: Cases of Ghana, Kenya and Nigeria" Labor & Society Vol.
6, No. 3, July-September 1981.



- 39 -
COGESULT, Inc.
Prozramme d'Adjustement Structurel GrouDe d'Etude Sur les
Ressources Humaines et la Fonction Publique. Gouvernement de
la Republiaue du Niger, April 1986.
Gretton, John and Harrison, Anthony
How Much are Public Servants Worth?, Basil Blackwell, Oxford,
1982.
Hartman, Robert W. and Weber, Arnold R. (eds.)
The Rewards of Public Service: Compensating Top Federal
Officials, Brookings Institution, Washington, D. C., 1980.
Heller, Peter S. and Tait, Alan A.
Government Emplovment and Pay: Some International ComRarisons,
IMF, OP No. 24, Washington, D.C. 1983.
ICPE
'Public Criteria and the Implementation of Performance Evaluation
Systems" in Public Enterprise, Vol. 2, No. 3, 1982.
'Wage and Remuneration Policy in Public Enterprises", Public
Enterprise, Vol. 2, No. 3, 1982.
IDET-CEGOS
La Maitrise des DeDenses de Personnel de l'Etat: Analyse et
ProRositign, June 1982.
Iwuji, E. C.
"Wage Structure in Developing Countires: A Comparative Study of
Six English-speaking African Countries", Labor & Society, Vol. 5,
No. 2, April 1980.
King, Kenneth
"Manpower, Technology, and Employment in Africa: Internal and
External Policy Agendas," in,
Lardeau, Leenhhardt, Thibault & Martin
Employment and Salaries in the Civil Service in Mali, SEDES,
January 1985.
Robinson, Derek & Ken Mayheur (eds.)
Pay Policies for the Future, Oxford University Press, 1983.
Rose, Richard, editor
Public Employment in Western Nations, Cambridge University Press,
Cambridge, 1985.
Veriter, Francois
Le Personnel et les Structures de l'Administration Publigue
Senegalaise, June 1986.



PPR Working Paper Series
Title                             Author                   Date             Contact
WPS90   A Frameworksfpe Analysis of Mineral
Tax Policy in Sub-Saharan Africa          Robert F. Conrad         September 1988    A. Bhalla
Zmarak M. Shalizi                          60359
WPS91   Israel's Stabilization Program            Nissan Liviatan          September 1988    N. Liviatan
61763
WPS92   A Model of Cocoa Replanting and New
Planting in Bahia, Brazil:  1966-1985    Pravin K. Trivedi         September 1988    D. Gustafson
33714
WPS93   The Effects of Education, Health and
Social Security on Fertility in
Developing Countries                      Susan H. Cochrane        September 1988    S. Ainsworth
31091
WPS94   The World Bank's Population Lending
and Sector Review                         George B. Simmons        September 1988    S. Ainsworth
Rushikesh Maru                              31091
WPS95   International Trade and Imperfect
Competition: Theory and Application
to the Automobile Trade                   Junichi Goto             September 1988    J. Epps
33710
WPS96   The Private Sector and Family Planning
In Developing Countries                   Maureen A. Lewis         September 1988    S. Ainsworth
Genevieve Kenney                            31091
WPS97   Export-Promoting Subsidies and What
to Do About Them                          Richard H. Snape         September 1988    J. Sweeney
31021
WPS98   Diversificatyon in Rural Asia             Agriculture and Rural   October 1988        S. Barghouti
Development Staff                          38408
WPS99   Trade Policies and the Debt Crisis        Sam Laird                September 1988    S. Torrijos
Julio Nogues                               33709
WPS100  Public Infrastructure and Private
Sector Profitability and Productivity
in Mexico                                 Anwar Shah               September 1988    A. Shalla
60359
WPS11 Measuring the Impact of Minimum Wage
Policies on the Economy                   Luis A. Riveros          October 1988       R. Luz
Ricardo Paredes                            61762



PPR Working Paper Series
Title                             Author                    Date             Contact
WPS102 Effects of ihe Multifibre Arrangement
(MFA) on Developing Countries:
A Survey                                   Junichi Goto             October 1988       J. Epps
33710
WPS103 Macro Shocks and Industrial Portfolio
Responses: An Econometric Model
for LDCs                                   James Tybout
Taeho Bark
WPS104 Financial Crises in Developing
Countries                                  Manuel Hinds
WPS105  Securing International Market Access       Richard H. Snape         October 1988        J. Sweeney
31021
WPS106  Energy Issues in the Developing World    Mohan Munasinghe
Robert J. Saunders
WPS107  A Review of World Bank Lending for
Electric Power                             Mohan Munasinghe
Joseph Gilling
Melody Mason
PS108 Some Considerations in Collecting Data
on Househoid Energy Consumption            L. Leitmann
PS109 Improving Power System Efficiency in
the Developing Countries Through
Performance Contracting                    Philip Yates
PS110 Impact of Lower Oil Prices on
Renewable Energy Technologies              E. Terrado
M. Mendis
K. Fitzgerald
WPSII1  Recent World Bank Activities in Energy   Industry and Energy
Department
WPS112 A Visual Overview of the World Oii
Markets                                    Kay McKeough
Jose Escay
Sompheap Sem
WPS113 Public Sector Pay and Employment
Reform                                     Barbara Nunberg          October 1988       J. Cheeseman
61703