1. Nelson Marconi Laura Carrillo Claudia Helena Cavalieri
Remuneration of Senior Managers in The Public Sector – An Analysis of the Latin American Countries
Latin American Center for Development Administration, CLAD
Nelson Marconi
Laura Carrillo
Claudia Helena Cavalieri

2. GOALS COMPARE AND ANALYZE THE WAGES
OBTAINED BY TOP OFFICIALS IN THE PUBLIC SECTOR IN LATIN AMERICA
DISCUSS THE RULES FOR THE SETTING OF
WAGES AND THE FEATURES OF THE
WAGE STRUCTURE
SUGGEST IMPROVEMENTS
FOR PERFECTING THAT STRUCTURE

3. COUNTRIES INCLUDED IN THE SURVEY
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
Mexico
Peru
Spain
United Kingdom
United States
Venezuela

4. METHODOLOGY OF THE ANALYSIS OF WAGE LEVELS
COMPARISON AMONG THE RELATIVE WAGES OF EACH COUNTRY’S LEADERS
TWO FORMS OF CALCULATION:
through the data supplied by the representatives of the governments of the countries themselves
through the data of the household surveys of the countries’ statistics institutes

5. INFORMATION REQUESTED FROM THE COUNTRIES
Names of the hierarchy levels
Levels of direct, incidental and indirect wages
Components of the wage structure
Rules for the calculation of those components
Indirect (non-monetary) benefits
Taxation rules
Retirement rules

6. FEATURES NOTED IN EACH COUNTRY’S WAGE STRUCTURE
Excessive number of wage divisions (to make sectorial adjustments possible)
Widespread adoption of benefits
Absence of wage hierarchy (8 countries, 25% of the situations open to analysis); no problems were exhibited by: BOL, BR, CR, EC, USA and VEN
Reduced or negative wage spread
Higher wages in the Judiciary (considering benefits, also in the Legislative Branch)
Absence of evaluation mechanisms associated with performance

7. IN RELATION TO DIRECT MONTHLY WAGE
WAGE SPREAD IN THE EXECUTIVE BRANCH (in %)
IN RELATION TO DIRECT MONTHLY WAGE
300
250
200
150
100 50
-50
ARG
BOL
BRA
CHI
COL
C RICA
ECU
SPAIN
USA UK
MEX
DOM R
VEN

8. PERCENTAGE SHARE OF INCIDENTAL AND INDIRECT WAGES
IN MINISTERS’ TOTAL WAGES 45 40 35 30 25 20 15 10 5
ARG
BOL
BRA
CHI
COL
C RICA
ECU
MEX
DOM R
VEN
incidental
indirect

9. PERCENTAGE SHARE OF INCIDENTAL AND INDIRECT WAGES
IN SENATORS’ TOTAL WAGES* 80 70 60 50 40 30 20 10
BOL
BRA
CHI
COL
C RICA
MEX
DOM R
* For Costa Rica, congressmen
incidental
indirect

10. MONTHLY WAGE – IN DOLLARS FOR THE FIRST HIERARCHY LEVEL BELOW MINISTER
22.500
20.000
17.500
15.000
12.500
10.000
7.500
5.000
2.500
ARG
BOL
BRA
CHI
COL
C RICA
ECU
SPAIN
USA UK
MEX
DOM R
VEN
monthly direct wage
total wage (includes incidental and indirect)

11. THEREFORE, IT IS IMPORTANT TO ANALYZE RELATIVE WAGES
WHAT COULD ACCOUNT FOR THE DIFFERENCES AMONG THE WAGES PAID IN THE COUNTRIES?
Distortions as a consequence of the conversion into dollars
Different levels of productivity, development and cost of living
Different degrees of distribution of income
Different wage policies adopted for leaders in each country
THEREFORE, IT IS IMPORTANT TO ANALYZE RELATIVE WAGES

12. MEDIAN OF THE RELATIVE WAGES OF GOVERNMENT LEADERS50 45 40 35 30 25 20 15 10 5
ARG
BOL
BRA
CHI
COL
C RICA
ECU
SPAIN
USA UK
MEX
PER
DOM R
VEN
direct monthly wage / median wage in the economy
total wage / per capita GDP

13. INFORMATION IN THE HOUSEHOLD SURVEYSES
Personal characteristics: years of education, median age, sex, hours worked
Amount of the wages reported by the people interviewed (may include personal perquisites; identification of posts and broader sample)
Comparison among data in the overall universe (all workers) and specific universe (only higher ranks)
THEY ALLOW CALCULATION OF THE WAGE DIFFERENTIAL AMONG WORKERS, SEPARATING THE IMPACTS OF PERSONAL CHARACTERISTICS

14. SUMMARY OF THE PERSONAL CHARACTERISTICS OF EMPLOYEES IN THE PUBLIC AND PRIVATE SECTORS
OVERALL UNIVERSE (ALL WORKERS)
Public servants have more years of education and are older; greater percentage of men in the private sector; number of hours worked is higher among private workers
SPECIFIC UNIVERSE (ONLY HIGHER RANKS)
Same number of years of education for both sectors; higher median age for public servants; women have a greater chance to hold managerial posts in the private sector; number of hours worked is higher for private managers

15. WAGE DIFFERENTIALS WITHOUT CONTROL FOR PERSONAL CHARACTERISTICS (IN %)

16. WAGE DIFFERENTIALS WITH CONTROL FOR PERSONAL CHARACTERISTICS (IN %) (CONTROLS FOR AGE, EDUCATION AND SEX)

17. ANALYSIS OF THE RESULTS
Classification of relative wages linked to the distribution of income (and not to economic development)
Countries in which relative wages are high and the public / private differential is negative (Bolivia, Mexico and Ecuador):
difference in the sample
concentration of income
lack of resources, political restrictions, additional benefits
the wage policy applied in the private sector is not a parameter

18. ANALYSIS OF THE RESULTSS
Brazil: reasonable relative wage and positive public / private differential
other studies state the same
Chile: reasonable relative wage and negative public / private differential
concentration of income
Argentina: low relative wage and positive public / private differential
difference among samples and personal benefits
precarious situation of the labor market

19. ANALYSIS OF THE RESULTS
Countries in which it wasn’t possible to calculate the wage differential:
Peru: high relative wages (only Legislative and Judiciary)
Colombia: reasonable relative wages, high participation of benefits
Dominican Republic and Costa Rica: medium relative wages, better distributed income
United Kingdom, United States and Spain: low relative wages, low concentration of income
Venezuela: low relative wages, higher concentration of income

20. Restrictions of a fiscal or political nature
IN GENERAL, THE DIFFERENCES BETWEEN THE WAGES PAID TO LEADERS IN THE PUBLIC AND PRIVATE SECTOR MAY BE EXPLAINED BY:
Restrictions of a fiscal or political nature
Existence of other benefits and personal preferences
Reduced negotiating power (unlikely)
Lack of correlation between the wage policy defined for top public officials and that which is established for private managers

21. FACTORS THAT CONTRIBUTE TO THE DETERMINATION OF THE MEDIAN WAGE OF PUBLIC SERVANTS
Availability of fiscal resources
Participation in a locality’s income of fiscal resources originating in other governments
Asymmetry of information
Conditions of the local labor market
Evolution of the cost of living
Negotiating power:
Political pressures of groups close to the decision-taking nucleus
Significance of the tasks performed
Number of voters and family members in the more numerous and better organized categories

22. POLICY RECOMMENDATIONS
Reduce the number of wage components (one fixed and another associated with the variable income, if the latter exists)
Incorporate benefits into wages; greater transparency
The existence of more flexible wage rules requires the definition of very clear rules and controls over their application
Increase in the wage range

23. POLICY RECOMMENDATIONS
The remuneration of public servants, from an individual point of view, must have a satisfactory correlation with:
Powers of the public servants
Responsibilities inherent in the post
Capabilities required
Performance of the public servants

24. POLICY RECOMMENDATIONS
To link the wage to the powers and capabilities, it is necessary to:
Reduce the number of wage components (including benefits) in order to make the wage structure comprehensible and transparent
Reorganize the wage hierarchy; gradually recompose the wages of leadership ranks
Reduce the resistance of society to raises

25. POLICY RECOMMENDATIONS
To link the wage to the powers and capabilities, it is necessary to:
Evaluate the need for an adjustment in wages, via:
prior study of the relative evaluation of posts, according to powers and required capabilities
comparison with the remuneration paid to equivalent posts in the private sector
elimination of the other monetary and non-monetary benefits

26. POLICY RECOMMENDATIONS
Implantation of policy involves negotiations and results that may differ from those expected; nevertheless, they may generate greater involvement by the public servants
It is essential to have a policy guideline that considers powers, responsibilities, capabilities, performance, remuneration in alternative markets and, cost of living, as well as monetary and non-monetary benefits, in the determination of wages

27. POLICY RECOMMENDATIONS
One component of remuneration must be associated with performance, to adequately reward those who perform best
Positive aspects (individual evaluation)
Possibility of assigning responsibility
Greater stimulation
Link between a part of expenditure and results
Negative aspects (individual evaluation)
Difficulty in establishing objective criteria
Wage oscillations inhibit fair evaluation
Social and cultural resistance to evaluation

28. POLICY RECOMMENDATIONS
Alternative: application of evaluations to groups or organizations
Evaluation is not personalized
Teamwork privileged
Reinforcement of the role of manages as team leaders
Solution of the dichotomy between the need to make rules uniform and to create flexibility to reward different performances: bonus

29. POLICY RECOMMENDATIONS
The organization must have clear, objective and measurable goals
It must begin with a pilot project, with simple indicators
Management contract
Percentage share of the bonus in the remuneration must be small
The payment of bonuses must be contingent
Evaluation of institutional performance linked to wage, and of individual linked to progression

30. POLICY RECOMMENDATIONS
Wage and bonus raises must obey realistic budgetary programming
Elimination of automatic adjustments (e.g., linked to years of service) must be gradual and substituted by other mechanisms linked to evaluation
Legal limits must be created for the exaggerated expansion of wages and expenditure on staff
Availability of information for the decision-making process
Consolidation of the legislation referring to the management of human resources

31. POLICY RECOMMENDATIONS
The practice of competitive wages is essential to guarantee attracting and retaining public servants
Nevertheless, to stimulate performance, other measures are also necessary

32. POLICY RECOMMENDATIONS
Positive stimuli to performance
Evaluation mechanisms linked to training and progression
Involvement of managers in the professional development of subordinates
Rewards linked to achievement
Discussion of the goals with the team
Negative stimuli to performance
Possibility of paying against results and dismissing staffers
Creation of actually applicable punitive mechanisms

33. POLICY RECOMMENDATIONS
THE ROLE OF THE MANAGERS IS ESSENTIAL IN REACHING THE DESIRED RESULTS; THEY MUST BE TRAINED TO PERFORM AS LEADERS
AN APPROPRIATE REMUNERATION POLICY FOR THIS GROUP IS A REQUIREMENT FOR THE SUCCESS OF PUBLIC ORGANIZATIONS

34. SUMMARY OF THE RESULTS OF THE WAGE DIFFERENTIALS