Improving the wages of government employees is no easy task, but a recent study shows it's possible, reports Niveen Wahish
It is no secret that public sector and government jobs offer dismal pay, not enough to sustain an individual, let alone a family. Yet many eagerly go after this kind of jobs for the sake of security; not only can they not be fired, but also they are guaranteed social and health insurance. Moreover, a government working day is often short, allowing employees to take another job in the afternoon. These well-known facts were confirmed by a study entitled Reforming the Pay System for Government Employees in Egypt conducted by Doha Abdelhamid and Laila El-Baradei for the Egyptian Centre for Economic Studies.
Paying some 5.7 million government employees is no easy task. According to the study, there are more than 40 different laws and regulations and no less than 55 decrees regulating the government employees' pay system. Moreover, the study describes these wages as "low" and "set way below market rates". This has consequences. According to the study it affects the level of motivation and productivity of employees and the ability of the government to attract required skills.
A survey of 100 government employees showed that most found the government salary "neither sufficient nor satisfactory". Survey findings showed that a large number of employees make up for the gap between their basic needs and rising prices through means other than their government job.
The study showed that deterioration has occurred in real pay over the years. It showed that the ratio of minimum wage to per capital gross national product (GNP) fell from 60 per cent in 1984 to 13 per cent in 2007. And when compared to other countries, it is among the lowest.
Low pay, according to the study, has resulted in a "general heightened level of dissatisfaction, especially of public employees and workers." The report laments that although the National Council for Wages (NCW), established by Law 12/2003 to ensure that salaries are aligned with the cost of living, is functioning, nothing has been achieved so far.
Abdelhamid and El-Baradei say the minimum salary in the government and public sector has been at LE35 per month since 1984. After adding a series of bonuses and incentives it reaches LE289 per month. But the study suggests that the minimum wage level must be raised to around LE251 per month. They argue that in most countries the minimum wage level represents about 25 per cent of the average per capita GDP. In Egypt, per capita GDP is LE1,004 per month. Therefore, the minimum wage level ought to be near LE251 per month. At that level it would also be higher than the poverty line of LE119 per month below which the basic requirements of individuals cannot be fulfilled.
From that starting point, report authors suggest that "the annual salary is to be automatically adjusted by adding an increment reflecting changes in cost of living and GDP growth per capita rates". That, they say, will reflect "per capita productivity in order for salaries not to be eroded and employees to hold a stake in productivity levels."
So far Egypt has not been systematic in wage increases. In fact, the study shows that "salary adjustments do not meet, and are actually de- linked from real increases in cost of living expenses". Neither do they link performance to pay. Pressure is another factor that affects government decisions when it comes to wage increases leading to "ad hoc temporary solutions" to emerging problems. The study gives the example of the exceptional 30 per cent increase decided by President Hosni Mubarak in May 2008, rather than the usual 10-20 per cent increase, in an attempt to "appease workers and public sector employees and contribute in some way to controlling the rising rates of demonstrations and strikes over the past year". Another example is the "special cadres" status for public school teachers.
But increasing government employees' pay would necessitate extra funding. Resources, researchers suggest, could be obtained from better management of government assets, rationalising government spending, enforcing property tax laws so as to increase revenue collection from those who can afford to pay, and enhancing the collection of taxes.
No less important is "right sizing" government employees and making sure that neither is there redundant labour nor an internal capacity haemorrhage due to an absence of leadership. Tactics put forward to deal with these issues include offering early retirement, freezing new hiring except where there is need, offering unemployment insurance and upgrading skills and training. Outsourcing services such as catering, cleaning and transportation would also help, as well as making sure that the private sector provides social and medical insurance so that government jobs "lose some of their allure".
As far as the wages themselves are concerned, the study calls for making "the system of allowances more transparent, and reducing wage discrepancies". To do that it highlighted the need for a database, consolidating allowances into salaries, setting ceilings for government pay and ratios between highest and lowest salary, and for revisiting the parallel system of donor-funded salaries of employees in technical offices of various ministries. The study also called for "a better link between pay and performance" by developing real performance measures for both organisations and personnel and ensuring fair implementation. It further recommended that incentives be tied to citizen satisfaction and to reward both team and individual performance.
Most important of all, the study concludes, is that pay reform should be part of a broader civil service reform in which social dialogue and popular engagement are key. To oversee and coordinate civil service reform, the researchers called for the establishment of a high-level civil service reform steering committee. They stressed the need for "continued support, sponsorship and commitment to reform at the highest political levels, and active participation of the various stakeholders". Moreover, they highlighted that reform must be phased and must be accompanied by awareness campaigns to support reform efforts.
Another element essential for the success of reform is the "full engagement of pooled funding and technical support for swift implementation of cross-cutting, sweeping reforms over the largest sector of the nation to sustain development."