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Public Service Pay Reform Tactics Sequencing and Politics In PUBLIC SERVICE PAY REFORM TACTICS SEQUENCING AND POLITICS IN DEVELOPING COUNTRIES: LESSONS FROM SUB-SAHARAN AFRICA (Draft Report) by Kithinji Kiragu, PricewaterhouseCoopers & Rwekaza Mukandala, University of Dar es Salaam January 2003 TABLE OF CONTENT Page 1 INTRODUCTION 1.1 Pay is a Key Public Service Issue 1 1.2 Diverse Interests and Policy Objectives Complicate Pay Decisions 3 1.2.1 Pay policy may be used to pursue egalitarian and equity goals 4 1.2.2 Labour unions and vested groups in the public service often ignore labour market 5 prices 1.2.3 Raising pay is difficult when budgetary allocations to operational and maintenance (O&M) costs are low 5 1.2.4 Significant improvement in service delivery entails expansion of the workforce 6 1.2.5 Pay operates in conjunction with other organisational and managerial systems 6 1.3 Politics is Inherent in Public Service Pay Decisions 7 1.4 Study Objectives and Hypothesis 8 1.5 Study Approach and Methodologies 9 1.6 Scope of the Study 10 1.7 Problems, Constraints and Implications 11 1.8 Structure and Content of the Study Report 11 2 COMPARATIVE PAY TRENDS, TECHNIQUES AND TACTICS: AN OVERVIEW 2.1 Introduction 12 2.2 Pay Trends 12 2,3 Wage bill levels 14 2.4 Pay Structures 16 2.5 Summary Observations 17 3 TECHNIQUES, TACTICS AND SEQUENCING 3.1 Introduction 19 3.2 Distinctive Approaches to Pay Decision-Making 19 3.2.1 National Incomes Policy 19 3.2.2 Salary review commission approach 22 3.2.3 Collective Bargaining Agreement 23 3.2.4 Index-linked salary adjustments 24 3.2.5 Wage bill and employment modelling 24 3.2.6 Cost of living adjustments 25 3.2.7 Crisis-driven pay adjustment 26 3.2.8 Job evaluation and salary re-grading 27 3.2.9 Market benchmarking of pay adjustments 28 3.2.10 Performance-based salary adjustments 28 3.3 Political, Rational and Default Models 28 3.3.1 A Default (Crisis-Response) model 29 3.3.2 Political Models 29 3.3.2.1 Centralised control model 30 3.3.2.2 Consensus-building model 30 3.3.2.3 Egalitarian model 30 3.3.3 Rational Models 31 3.3.3.1 Affordability Model 31 3.3.3.2 Skills Market Competitiveness model 31 3.3.3.3 Performance-based model 32 3.4 Dearth of strategic orientation and sequencing 32 4 PAY REFORM AND POLITICS 4.1 Introduction 33 4.2 Theoretical Perspective 35 4.3 Political and Related Variables in Pay Reform 37 4.3.1 Pay Reform as a Problematique in Resource Allocation 37 4.3.1.1 Administrative Actors 37 4.3.1.2 Representative Institutions 41 4.3.1.3 Market Institutions 41 4.3.1.4 Civil Society Institutions 42 4.3.1.5 The Donor Community 42 4.3.2 Political System and Stability Variables 45 4.3.2.1 Competitiveness of the Political System 45 4.3.2.2 Institutionalisation of Political Organization 46 4.3.2.3 Regime Legitimacy 47 4.3.2.4 Regime Ideology 47 4.3.2.5 The Social Basis of the Regime/State 49 4.3.3 Civil Society and Public Service Variables 49 4.3.3.1 Trade Unions 49 4.3.3.2 Public Service Variables 52 4.4 Economic Variables 52 4.5 Conclusion 5 TOWARDS A POLITICALLY RESPONSIVE STRATEGY TO PAY REFORM 5.1 Introduction 58 5.2 The shift from political to rational models 58 5.3 According priority to political assessment 61 5.4 Evolving a strategy around the varying political realities 63 6 BENIN 6.1 Introduction 64 6.2 The Pay System 66 6.3 Techniques and Tactics 66 6.4 The Political Context of Benin 70 6.4.1 Political Systems and Actors over the years 71 6.4.2 Past Public Service Reforms and their legacy (1960-1989) 73 6.4.3 Politics and political process of pay reform: 1990-2002 75 6.4.4 Politics of pay reform 1990-1997 77 6.4.5 Politics of pay reform: 1997 to the present 79 6.5 Political steps imperative for pay reform in Benin 80 7 BOTSWANA 7.1 Introduction 83 7.2 The Pay System: Structure and Trends 83 7.3 Techniques, Tactics and Sequencing 87 7.3.1 Pay Reform: Sequencing and Characteristics 90 7.4 The Political Context 91 7.4.1 Political Parties 92 7.4.2 The Dominance of the Executive Branch 95 7.4.3 Civil Society and Labour Movement 96 7.5 Conclusion 98 8 BURKINA FASO 8.1 Introduction 99 8.2 Pay Trends and Structure 100 8.3 Techniques, Tactics and Sequencing 102 8.4 Politics 104 8.4.1 Political systems and actors over the years 105 8.4.2 Past public service reforms and their legacy in Burkina Faso 107 8.4.3 Public Services Reforms of the First Generation 1960-1990 107 8.4.4 Public Service Reforms of the Second Generation 1990-Present 109 8.4.5 The politics and political process of pay reform 1990-2002 111 8.4.6 Susceptibility of Burkina Faso to political pressure in the public service pay 113 reform process: The political forces 8.5 Political steps imperative for pay reform in Burkina Faso 114 9 GHANA 9.1 Introduction 117 9.2 Pay Trends and Structure 118 9.2.1 Political and Socio-Economic History: The Politics of Disrupted Reform, 1957 - 1981 9.2.2 The Period of Sustained Reform (1982 – 1992) 9.3 Techniques, Tactics and Sequencing 119 9.4 Politics 121 9.4.1 The Politics of Disrupted Reform, 1957 - 1981 121 9.4.2 The Period of Sustained Reform (1982 – 1992) 125 9.4.3 Reform under Democratization (1993 – 2000) 129 9.4.4 Liberalized Politics and Declining Economy 130 9.5 Reform Prospects in the Post-Rawlings’ Era: 2001 Onwards 133 10 TANZANIA 10.1 Introduction 138 10.2 Pay Trends and Structure 139 10.2.1 Pay Reform in Tanzania 140 10.3 Tanzania’s Political History 151 10.3.1 One-Party Hegemony 151 10.3.2 Egalitarianism 152 10.3.3 Civic Peace, Unity and Stability 154 10.4 The Politics of Pay Reform 155 10.5 Concluding Observations 161 11 UGANDA 11.1 Introduction 162 11.2 Pay Trends and Structure 164 11.3 Techniques, Tactics and Sequencing 166 11.3.1 Pay reform and the public service reform 176 11.3.2 Pay as an incentive System 176 11.4 Politics 179 11.4.1 Trade Unionism 181 11.4.2 Political Priority in Resource Allocation 184 11.4.3 The Role of Donors 185 11.4.4 Remuneration Comparison between Civil Servants and Politicians 185 11.4.5 The Pension Scheme 186 11.5 Summary Observations 187 12 ZAMBIA 12.1 Introduction 189 12.2 Pay Trends and Structure 190 12.3 Techniques, Tactics and Sequencing 191 12.4 The Political History of Zambia 191 12.4.1 The Party Politics 191 12.4.2 Organized Labor and the State 195 12.4.3 The MMD: Unstable Coalition 198 12.4.4 The Politics of Pay Reform 199 12.4.5 Elections and Public Service Pay Increases 200 12.4.6 Trade Unions and Pay Reform 203 12.5 Summary Observations 205 TABLES AND FIGURES TABLES Page Table 1.1: Select Indicators of Economic Potential and Performance of the Study 11 Countries Table 2.1: Comparison (in dollar parity terms) of Top and Bottom Salary levels for the 13 study countries, 1992 – 2001 Table 3.1: Distinctive Approaches, Techniques and Tactics, and Prevalence in the Study 20 Countries Table 3.2: Main categories of public service pay decision-making models 29 Table 4.1: Strength and Orientation of the Main Actors 39 Table 4.2(a): Pay Reform, Ideology and Political Organization 43 Table Political System and Stability Variables 44 4.2(b): Table 4.3: Civil Society Variables: Strength of Civil Society Generally, Trade Unions, 50 Media and Opposition Parties Specifically Table 4.4: Public Service Variables 53 Table 4.5: Economic Variables, 1990-2000 Averages 56 Table 6.1: Benin - A Schedule of Public/Civil Service Pay Decisions, 1980 to Present 67 Table 6.2: Real Wage Per Civil Servant: Index 1990 = 100 70 Table 7.1: Difference between Minimum Wage and Highest Wage in Public Service 86 Table 7.2: Botswana - A Schedule of Major Public/Civil Service Pay Decisions, 1990 to 88 Present Table 7.3: BDP Parliamentary Seats 1965-1999 92 Table 8.1: Salary Structure by Qualifications and Experience 101 Table 8.2: Burkina Faso - A Schedule of Public/Civil Service Pay Decisions, 1989 to 102 Present Table 9.1: Ghana - A Schedule of Public/Civil Service Pay Decisions, 1991 to Present 120 Table 9.2: Changes in Nominal Daily Minimum Wage, 1970s-2001 in cedis 123 Table 9.3: Reasons for 54 Pay Increase Decisions for the Civil Service and other Public 132 Services Table 10.1: Tanzania - A Schedule of Public/Civil Service Pay Decisions, 1989 to Present 143 Table 10.2: The 1995 and 2000 Parliamentary Elections 155 Table 10.3: The 1995 and 2000 Presidential Elections 155 Table 11.1: Tax Revenue Collection, 1988/89 – 1995/96 162 Table 11.2: Uganda - A Schedule of Public/Civil Service Pay Decisions, 1989 to Present 168 Table 12.1: Zambia - A Schedule of Public/Civil Service Pay Decisions, 1990 to Present 192 FIGURES Page Figure 2.1: Comparative trends in median salaries levels (in dollar parity terms) for the 14 study countries: 1990-2001 in dollar parity Figure 2.2: Comparative Nominal Wage Bill to GDP ratio (%): 1992-2000 16 Figure 2.3: Nominal Salary decompression ratio: 1992-2001 17 Figure 4.1: The Main Actors in the Politics of Resource Mobilization and Allocation 38 Figure 6.1: Benin salary levels in 2000 and 2001 69 Figure 7.1: Trends in Top, Median and Bottom Salary Levels in Botswana at Constant 84 Prices, 1990 to Present Figure 8.1: Burkina Faso – Trends in Top, Median and Bottom Salary Levels at Constant 100 Prices, 1992 - Present Figure 9.1: Trends in Top, Median and Bottom Salary Levels in Ghana at Constant 118 Prices, 1990 to Present - 1995=100 Figure 10.1: Tanzania salary levels at constant prices: 1995=100 139 Figure 11.1: Uganda salary levels at constant prices 1995=100 166 Figure 12.1: Zambia salary levels at constant prices: 1995=100 190 CHAPTER 1 INTRODUCTION 1.1 Pay is a Key Public Service Issue The argument that adequate pay1 is crucial to sustaining motivation, performance and integrity of public servants has been widely accepted and documented.
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