Politics of Pay Reform Politics of Pay Reform Lessons of Experience Lessons of Experience

from Africafrom Africa

Kithinji KiraguDenyse Morin

Rwekaza MukandalaMay 2003

OverviewOverview

• Pay is a Key Public Service IssuePay is a Key Public Service Issue

Comparatively poor pay has remained a feature of most public services

Major feature of concern for public services in most countries

The ProblemThe ProblemWhy have efforts made to bring about

pay reform not resulted in more success?

Why have pay levels remained low?Why has implementation been difficult?Has this happened because of:

o Poor implementing capacity of relevant agencies?

o Institutional environment within the concrete circumstances of each country?

o What is the influence of politics?

Study ObjectivesStudy Objectives

Explore and describe the context and limits to which models have guided pay reform strategies and policies

Collect and organize data and information on public service pay reform experiences

Explain the political contexts and rationales underlying pay reform policies and strategies adopted

HypothesesHypotheses

Technical solutions to public service pay reform without due attention to a country’s political context are not sustainable

A successful strategy for public service pay issues is underpinned by choice of correct tactics and sequencing of the appropriate measures

Approach/MethodologyApproach/Methodology

Two-stage process to see if there is a match between the technical choices, political developments, and pay reform implementation:

First StageFirst StageMap out in detail the solutions

(choices), the tactics and the sequences Identify & analyze any major political

considerations and developments Illustrate and trace implementation of

public service pay reforms including identifying implementation stages

Attempt to see if there is a correlation between the three variables mentioned above within the country

Second StageSecond Stage

Comparatively match the experiences of the countries under study on the basis of the three variables mentioned above

Establish if there is any correlation across countries along these variables

Country FactsCountry FactsVARIABLES COUNTRIES UNDER STUDY

  BENIN BOTSWANA

BURKINA FASO

GHANA

TANZANIA

UGANDA

ZAMBIA

Estimated population (in millions), about 2000

6.0 1.6 10.0 17.0 30.0 19.0 9.0

Average Rate of Population Growth (per cent per year), 1990-2000

2.9 2.5 2.7 2.9 3.2 36 3.0

Average Real GDP (in million USD), 1990-2000

2,059 5,060 2,297 6,544 5,417 5,788 3,733

Average GDP per capita, 1990-2000 (in USD)

372 3,461 228 382 183 297 419

Average Rate of Real Economic Growth (Percent per year), 1990-2000.

5.0 5.0 3.0 4.0 3.0 7.0 1.0

Average Budget surplus/Deficit (in million USD)

(52) 183 (82) (326) 17 (132) (No)

Average consumer Price change (percent change over previous year), 1990-2000.

9.0 11.0 4.0 27.0 19.0 16.0 90.0

OverviewOverview

Pay Regimes

Politics and Pay

Politics matters

Institutions matter

Significant Definitions:Significant Definitions:Pay & SalaryPay & Salary

Pay=salary+monetary benefits+ in-kind benefits [including retirement]

Nevertheless, salary remains the core element of pay

When salary is replaced by benefits and allowances there are explicit or implicit technical and/or political considerations

Salary trend is a good pointer to the decisions underlying pay changes

Median Real Salary Median Real Salary TrendsTrends

0

2000

4000

6000

8000

10000

12000

14000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001year

Am

ount

(U

S $

p.a

)

Benin Botsw ana Bukina Faso Ghana Tanzania Uganda Zambia

Salary Compression RatiosSalary Compression Ratios

Figure 2.3: Nominal Salary decompression ratio: 1992-2001

Source: Annex Table 2.3

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Year

Rat

io

Benin Botswana Bukina Faso GhanaTanzania Uganda Zambia

Summary of Trends in 1990sSummary of Trends in 1990s

Botswana: consistently high and decompression

Ghana & Zambia: overall deterioration, increased use of benefits

Bénin & Burkina Faso: declining salary levels and compression

Tanzania & Uganda: rising levels and decompression to a point

Models, Tactics & TechniquesModels, Tactics & Techniques

Models Tactics and Techniques1. Corporate National incomes policy, review

commissions, moderated collective bargaining

2. Salary indexation Politically preemptive, controlled collective bargaining

3. Wage bill & employment modeling

Invoking affordability constraints, controlling numbers

4. Pressure-driven /patronage

Ad hoc awards to politically strong or favored groups

5. Cost of living/MLW Emphasis on egalitarian objectives

6. Job evaluation /salary regrading

Job specification, workload assessment, emphasis on equity

7. Market benchmarking

Comparator studies, decompression

8. Performance-related

Performance management systems and productivity measurement

Three Pay Model CategoriesThree Pay Model CategoriesMODEL CATEGORY

MODELS

Technically rational (TR)

•Performance-related•Market benchmarking•Job evaluation and regrading•Wage bill & employment modeling

Politically rational (PRA)

•Cost of living/MLW•Salary indexation•Corporate/consensus

Politically reactive (PRE)

•Pressure-driven/patronage

Model Trends since 1960sModel Trends since 1960s

TR •Ghana

•Botswana•Uganda

•Botswana•Tanzania

PRA

•Burkina Faso•Benin•Zambia•Botswana•Ghana•Uganda•Tanzania

•Botswana

•Zambia•Tanzania

•Botswana

•Tanzania

•Burkina Faso•Benin

•Uganda

•Burkina Faso

PRE

•Ghana•Burkina Faso•Benin

•Uganda

•Zambia

•Burkina Faso•Benin•Uganda

•Tanzania•Zambia•Ghana

•Zambia•Benin•Ghana

PERIOD 1960-75 1975-85 1985-90 1990-95 1995-2000

Politics MattersPolitics Matters

What constitutes the essence of politics is the constraints under which political actors operate and the strategic maneuvering that they occasion and that occurs within them

 Politics is a complex game of strategic calculations. Politicians often face the so-called “politicians’ dilemma” in deciding among a set of policy preferences:

Politician’s DilemmaPolitician’s Dilemma

CONFLICT:• To survive in office• To govern effectively &

efficiently• To build a loyal political

organization

TRADE-OFF:• Technical considerations

for effective performance• Partisan loyalty

Institutions MatterInstitutions Matter

Variations among politician’s preferences largely depend on the nature of the political system, and the nation’s institutions.

ActorsActorsTHE POLITICAL SYSTEM

ADMINISTRATIVE INSTITUTIONS Chief Executive Ministers Public Sector

Bureaucracies and Technocracies

THE DONOR COMMUNITY Donor Agencies Consultants

MARKET INSTITUTIONS Private Sector The Business

Community

POLITICS OF RESOURCE MOBILIZATION AND ALLOCATION (The Budgetary Process)

CIVIL SOCIETY INSTITUTIONS

The ruling political party

Political Parties in opposition

Trade Unions Media Others

REPRESENTATIVE INSTITUTIONS Parliament Local Government Councils/Assemblies

Political SystemsPolitical Systems VARIABLE BENIN BOTSWANA BURKINA

FASO GHANA TANZANIA UGANDA ZAMBIA

Political System Monopolistic Uncompetitive

Pluralism Competitive

Pluralism

X

X

X

X

X

X

X Political Stability Unstable Unpredictable Fairly Stable Stable

X

X

X

X

X

X

X

Regime Legitimacy Low Medium High

X

X

X

X

X

X

X

Institutionalization (a) Low (b) Medium (c) High

X

X

X

X

X

X

X

Social Basis of the State/Regime Factional basis `National’ basis

X

X

X

X

X

X

X

Politics and Pay ReformPolitics and Pay ReformVariables Uncompetitive

PluralismCompetitive Pluralism

Uncompetitive Monopolistic

Political Competition

Tamed Politics Highly Competitive

Non competitive

Institutionalization

High Low Low

Legitimacy High Medium Low

Stability High Fair Unpredictable

Pay Models Technically Rational

Politically reactive

Politically reactive

ConclusionConclusion Politics Matters. The nature of the political

system, regime legitimacy and stability, and the dynamics of the political process are all critical variables in pay reform

Institutionalization of political life and organizations matter. Acceptance and respect for rules of the political game by major political actors and the general citizenry is very important, especially for competitive political systems

Ultimately and ideally, technical models can fully and sustainably prevail in a competitive political system that is highly institutionalized, stable, and enjoying high levels of legitimacy.

The Way ForwardThe Way Forward

Political and Institutional Environment

Policy and Strategy

Stress-free •Scope for technically-rational models•Watch out for stress

Stressed systems

•Long-term perspective•Politically-driven strategy•Consensus building•Strengthening institutions