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Civil Service Reform and the World Bank

B Nunberg and J Nellis (1995)
43 pages (2.55 MB)

This paper surveys the World Bank's (WB's) efforts to assist with civil service reforms, building on a previous paper written in 1989 (Barbara Nunberg, 'Public Sector Pay and Employment Reform: A Review of World Bank Experience', WDP-68). Nunberg and Nellis find that WB programmes have generally failed to reduce civil service wage bills, even where they have managed to reduce the number of civil servants. Consequently more forceful reforms may be required, including involuntary redundancies, especially since the political fallout from reforms was generally less than feared. They also note that more attention must be paid to longer-term strategy.

While stressing that there is still less than adequate empirical evidence, the trend seems to suggest that the impact of reforms on the aggregate wage bill during the period surveyed was negligible. Also:

  • Government efforts have either concentrated on reducing average wages while allowing numbers of employees to rise, or conversely savings from redundancies were spent on increasing the wages of remaining personnel
  • Of 14 countries with available data on WB or IMF sponsored reform, only four witnessed a decline in the real term wage bill. This lack of improvement highlights the importance of reducing overall level of employment.
  • The Bank has focused on four main issues: excessive public sector wage bills; surplus personnel; erosion of public service salaries; and wage compression leading to difficulties in retaining senior or highly skilled staff.
  • The WB's programmes have been dominated by short-term efforts to correct distortions in pay and employment practices. The Bank is now beginning to focus on longer-term issues.
  • Despite adverse criticism that studies of the problem are a tool to delay or avoid actual action, these studies provide vital recommendations and also help assure public servants that reforms are fair, equitable and carefully thought out

Easier policies such as voluntary redundancy, reduction of ghost workers and enforcement of the retirement age are not enough to achieve real reductions in civil service wage bills, but must be combined with wage limitation and dismissal of inefficient or superfluous staff. Furthermore:

  • In the least developed countries with poor records the first need is to determine the make up of the civil service (numbers, skills, age-range, pay-levels, etc.) so as to establish a manpower database and so plan retrenchment strategies
  • The development of this database must then be followed by a functional review and then personnel must be matched to requirements, with excess staff dismissed
  • Wage 'top-ups' are needed to induce the most valuable employees to stay, but this must be achieved without causing adverse effects among staff not receiving the top-ups, and must encourage long- rather than short-term retention
  • More study of the political economy of pay and employment reform is required
  • More attention should be paid to devising coherent strategy for reform
  • Regimes can, and should, make deeper cuts.

Source: Nunberg, B. and Nellis, J. 1995, 'Civil Service Reform and the World Bank', World Bank Policy Paper, WDP-161, May 1995.

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