Modeling Civil Service Pay & Employment Strategy in East Asia Using the Civil Service Financial Model: A Rapid but Comprehensive Approach to Civil Service Reform

Why does East Asia need civil service pay and employment reform?

Most East Asian governments have managed their wage bills well over the last three decades

Public sector employment levels have also been relatively well-managed in the region

The crisis highlighted the need for better civil services Need for performance orientation Remedy politicization and clientelism Need to professionalize bureaucracy Promote civil service accountability Merit-based recruitment and promotion

The crisis has prompted a new look at improved civil service management Tight budgets place greater emphasis on ensuring pay and employment practices result in efficient service delivery Increased political voice, demands for accountability, and emphasis on reducing corruption

How do we assess East Asian civil service management? The pace of modernization varies – most countries could do better

Given the tight, post-crisis fiscal constraints, progress on civil service management may require pay and employment fundamentals to be adjusted. How can governments navigate a sensible but timely course of reform?

The Civil Service Financial Model can provide an essential policy tool for governments wishing to plot a realistic civil service reform strategy Macro- analysis to determine appropriate size and costs of the civil service Micro functional review to determine staffing and incentive levels in the civil service

The Civil Service Financial Model 123 Plugs in desired attributes of future civil service Reconciles with current empirical reality and sets targets Models reform program of costs and timing for reaching goals

Employment – no change Salaries – increase to 90% of private sector levels over 10 years Personnel spending as a proportion of GDP increased from 2.25% to 2.75% Anyland: Reform Scenario A

Employment – hiring freeze 3% attrition over 10 years Salaries – increase to 90% of private sector levels over 10 years Personnel spending as a proportion of GDP decreased from 2.25% to 1.5% Anyland: Reform Scenario B

SituationProblemReform options Low wage bill (1.7% GDP) Very low average wages (2.5 time less than national minimum wage) No accurate information on remuneration, placement, skills of employees Pressure from a certain IFI to contain wage bill Higher salaries necessary to attract more skilled civil servants This IFI’s solution: cut employment immediately World Bank solution: provide targets for salary adjustment, decompression, wage bill envelope and rightsizing options through modeling exercise offering options for different salary increase / rightsizing options

SituationProblemReform options New country with no parameters UN organization acting as interim government Setting civil service pay and employment rules is an arbitrary exercise Budget planning and pay and employment assumptions must be made Determine wage bill envelope Determine salary scale Determine staffing numbers Simulate pay and employment scenarios

Government ends up with: A tool to facilitate policy formulation A vehicle for dialogue among key stakeholders Ongoing capacity for pay and employment monitoring