Keeping the public wage bill in check

Amanda Jitsing

In the 2012 budget speech, the Minister of Finance raised concerns about the sustainability of the public sector wage bill. Spending on compensation of employees in the public sector has grown from R32 billion in 2001/02 to R98.6 billion in 2011/12, effectively tripling over a ten year period and greatly outpacing increases in inflation. The official explanation for this is higher staff levels in health and policing, as well as the introduction of an occupation specific dispensation (i.e. much higher salaries) for government employees in critical fields like health and education. We also know that the higher than expected wage settlement negotiated after a prolonged public sector strike in 2010 has had an impact. This wage settlement is expected to cost the fiscus an additional R5.6 billion in 2012/13.  

Over the medium term, the Budget Review calls for National Treasury to take all necessary steps to ensure that the state wage bill is brought back to under 40 per cent of operational expenditure. Furthermore, in the 2012 budget the Minister of Finance proposes to limit cost of living adjustments for civil servants to an average of 5 per cent over the next three years. By moderating growth in the wage bill, government intends to create further scope to fund an increase in public sector employment in core service areas. 

It is commendable that government has made significant efforts to improve real wages in critical service delivery areas such as health, education and policing.  However, while employment in these sectors account for the majority of the public service, spending on compensation of employees has grown across the whole of government over the past ten years.  One would hope that productivity has increased at a similar or even faster rate.

Unfortunately, very little research exists on public sector productivity – government does not produce widgets and it is difficult to construct uniform measures of public service outputs.  But through analysis of the Estimates of National Expenditure (ENE), it is possible to compare the structure of the civil service between government departments.  This provides some perspective of how government works.  In general, we would expect that more professional and higher paid staff in more efficient government departments should be able to do more with less. The ENE paints quite a different picture.

In certain national departments, the number of administrative staff is often equal to or exceeds the number of line functionaries.  Put differently, for every policy wonk or frontline service provider, there is more than one lesser skilled and desk-bound pen-pusher.  The Department of Trade and Industry and the Department of Sports and Recreation are amongst the worst culprits – employing two support staff for every line employee.  Similarly, the Department of Public Enterprises employs more administrators than it does technical staff.  As a result, the DPE, whose main function is to provide funding and oversight to state owned enterprises, spends 29% of its total budget on administration.           

 

DepartmentSupport to line staff ratio  
Department of Arts and Culture1:1
Department of Public Enterprises1,2:1
Department of Sports and Recreation2:1
Department of Trade and Industry2:1
Department of Tourism1,3:1

 

Source: Adapted from Estimates of National Expenditure (2012) and excludes staff of public entities

This little exercise is far from definitive, but the high number of administrators relative to front line staff within government is a disturbing pattern, not reflective of a more professional and efficient public service. Rather, it would seem that many national government departments are becoming more efficient at doing inefficient activities (such as organising travel and meetings). As the DPSA has not published any benchmarks for the public service, it is difficult to fully assess the implications of these ratios on efficiency. However, these numbers certainly point to the need for a more extensive study of the efficiency of the public service.

With the national government looking to increase employment in the public sector, some hard questions need to be answered before government embarks on any further recruitment drives. Where will such employment be created? How productive is our existing public service? And does the country in fact need more or less employees within the public service?