Politics of Pay Reform Lessons of Experience from Africa Kithinji Kiragu Denyse Morin Rwekaza Mukandala May 2003

Overview 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 Problem  Why 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: oPoor implementing capacity of relevant agencies? oInstitutional environment within the concrete circumstances of each country? oWhat is the influence of politics?

Study 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

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

First Stage Map 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 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 Facts VARIABLESCOUNTRIES UNDER STUDY BENINBOTSWA NA BURKI NA FASO GHAN A TANZANI A UGAN DA ZAMBI A Estimated population (in millions), about Average Rate of Population Growth (per cent per year), Average Real GDP (in million USD), ,0595,0602,2976,5445,4175,7883,733 Average GDP per capita, (in USD) 3723, Average Rate of Real Economic Growth (Percent per year), Average Budget surplus/Deficit (in million USD) (52)183(82)(326)17(132)(No) Average consumer Price change (percent change over previous year),

Overview  Pay Regimes  Politics and Pay  Politics matters  Institutions matter

Significant Definitions: Pay & 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 Trends

Salary Compression Ratios

Summary 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 & Techniques ModelsTactics and Techniques 1. CorporateNational incomes policy, review commissions, moderated collective bargaining 2. Salary indexationPolitically 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/MLWEmphasis 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 Categories MODEL 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 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

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

Actors

Political Systems

Politics and Pay Reform VariablesUncompetitive Pluralism Competitive Pluralism Uncompetitive Monopolistic Political Competition Tamed PoliticsHighly Competitive Non competitive Institutionali zation HighLow Legitimacy HighMediumLow Stability HighFairUnpredictable Pay Models Technically Rational Politically reactive

Conclusion  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 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