Serbia - Right-Sizing the Government Wage Bill

Serbia's public sector wage bill constitutes a significant share of total government expenditure. At present, it is significantly higher than in most neighboring European Union (EU) member countries. This is largely due to higher average levels of compensation, rather than higher levels of staffing. While wage spending has fallen recently this is not the occasion to be sanguine about the Government's wage and employment policies. There are two reasons. First, continuing control over the wage bill is a key part of the Government's overall deficit reduction strategy. Given the Government's reluctance to raise taxes and the difficulty it confronts in reducing other major categories of expenditures (particularly pensions), restraining the wage bill is critical to fiscal sustainability. In connection with its standby arrangement with the International Monetary Fund (IMF), the government is committed to enacting fiscal responsibility legislation which would cap wage bill spending at eight percent of gross domestic product (GDP) over the medium term. To date, the Government has been relying on blunt instruments to achieve this target; most importantly a freeze on nominal wages and a partial freeze on the creation of new positions, both introduced in 2009. As the current recession eases, pressures to increase wages are mounting. The wage freeze is becoming politically unsustainable. More nuanced methods of restraining the wage bill are required. Second, over the longer term, the present policy of continuous wage and position freezes would undermine the quality of public administration. Persistent wage freezes would make it difficult to attract and retain competent staff. Persistent position freezes would lock in existing patterns of over- and under staffing. On the other hand, a reversion to the former system of ad hoc adjustments in staffing and wages could set the stage for unsustainable wage bill growth in the future. Structural reforms are therefore required.

Bibliographic Details

Main Author:	World Bank
Language:	English
Published:	World Bank 2010-10-12
Subjects:	ACCOUNTABILITY, ACCOUNTING, ADVERSE SELECTION, ATTRITION, AVERAGE WAGE, AVERAGE WAGES, BUDGET EXECUTION, BUDGET PROCESS, CIVIL SERVANT, CIVIL SERVANTS, CLERKS, COLLECTIVE BARGAINING, COMPETITIVE PRESSURES, CRIME, DISMISSAL, EARNING, ECONOMIC CONDITIONS, EMPLOYEE, EMPLOYER CONTRIBUTIONS, EMPLOYMENT POLICIES, EMPLOYMENT SERVICES, EQUAL PAY, EQUALIZATION, FEDERAL GOVERNMENT, FINANCIAL INCENTIVES, FISCAL RESPONSIBILITY, GOVERNMENT EMPLOYEES, GOVERNMENT OFFICIALS, GOVERNMENT SPENDING, GROSS WAGES, HEALTH INSURANCE, HOUSING, HUMAN RESOURCE, HUMAN RESOURCES, INCOME, INCOME TAXES, INFLATION, INFORMAL SECTOR, INSURANCE, JOB SECURITY, JOBS, JUDICIARY, LABOR FORCE, LABOR LAW, LABOR MARKET, LABOR RELATIONS, LAWS, LAWYERS, LOCAL BUDGETS, LOCAL FINANCE, LOCAL GOVERNMENT, LOCAL GOVERNMENT EMPLOYEES, LOCAL GOVERNMENTS, LOCAL LEVEL, MINIMUM WAGE, MINISTER, MINISTRIES OF FINANCE, MUNICIPAL COUNCILS, MUNICIPAL GOVERNMENTS, MUNICIPALITIES, MUNICIPALITY, NOMINAL WAGES, OCCUPATION, OCCUPATIONS, OUTPUTS, PAYROLL TAX, POLICE, POLITICIANS, POVERTY REDUCTION, PRIMARY LEVEL, PRIMARY SCHOOL, PRIVATE EMPLOYMENT, PRIVATE FIRMS, PRIVATE SECTOR, PRIVATE SECTOR WAGES, PRIVATE SECTORS, PRIVATIZATION, PRODUCTIVITY, PROVISIONS, PUBLIC, PUBLIC ADMINISTRATION, PUBLIC EDUCATION, PUBLIC EMPLOYEES, PUBLIC EMPLOYMENT, PUBLIC ENTERPRISES, PUBLIC EXPENDITURE, PUBLIC EXPENDITURE REVIEW, PUBLIC SECTOR, PUBLIC SECTOR COMPENSATION, PUBLIC SECTOR DOWNSIZING, PUBLIC SECTOR EMPLOYMENT, PUBLIC SECTOR HUMAN RESOURCE, PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT, PUBLIC SECTOR INSTITUTIONS, PUBLIC SECTOR STAFF, PUBLIC SECTOR UNIONS, PUBLIC SECTOR WAGE, PUBLIC SECTOR WAGE BILL, PUBLIC SECTOR WAGES, PUBLIC SECTOR WORKER, PUBLIC SECTOR WORKERS, PUBLIC SERVICE, PUBLIC SERVICE EMPLOYEES, PUBLIC SERVICES, PUBLIC SPENDING, REAL WAGE, REAL WAGES, RETIREMENT, SAVINGS, SELF EMPLOYMENT, SERVANTS, SERVICE SECTOR, SEVERANCE PAYMENT, SEVERANCE PAYMENTS, STRUCTURAL REFORMS, TAX, TEMPORARY WORKERS, TOTAL EMPLOYMENT, TOTAL WAGE, TRADE UNIONS, TRANSPARENCY, TREASURY, UNEMPLOYED, URBAN AREAS, VOTERS, WAGE ADJUSTMENT, WAGE BILL, WAGE DATA, WAGE DETERMINATION, WAGE INCREASES, WAGE LEVELS, WAGE NEGOTIATION, WAGE PREMIUM, WAGE STRUCTURE, WORK FORCE, WORKERS,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000334955_20101104023105 https://hdl.handle.net/10986/2923
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