Pay in the Public Sector

There was a hue and cry from the trade unions of the Civil Service when the 5-yearly report of the Pay Research Bureau (PRB) was published last year. It contained the recommended rates of increase for the different grades of Civil Servants and applicable changes in their conditions of service. Civil Servants felt that the range of increase granted at the lower levels of the public sector was too little compared with the rate of increase granted at the top levels of the Service.

The net result amounted, in their view, to an aggravation of the salary differential between those at the bottom and those at the top of the hierarchy. Tension mounted to a high pitch. In the circumstances, unions asked that the same Director of the PRB who had made such unacceptable recommendations should not be entrusted with the task of producing the Errors and Omissions Report meant to rectify the anomalies normally found in the original report of the PRB.

It is in this context that it was decided that Mr Dev Manraj, an Advisor to the Prime Minister’s Office and a former Financial Secretary, be appointed together with two independent assessors to look into the PRB report and make corrective alternative recommendations in the light of representations to be made by the unions. That was to become the Errors and Omissions Report (E&O). This has been done and the report, which was submitted on March 30^th, has been approved by the Cabinet last Monday and is to be implemented in toto with retrospective effect as from 1^st January 2013.

It is being stated that the new recommendations have proposed increases of around 20% for those at the lower levels of the Service (compared with 8% approximately in the original PRB report). It is not quite clear whether the gap said to have been aggravated by the previous report between those at the bottom and those at the top has been addressed to the satisfaction of the originally discontented unions. However, it appears that there is widespread endorsement by the unions of the new proposed increases in the basic pay of Civil Servants at the lower to middle levels. Thus, nurses, policemen at the lower and middle levels, teachers and handy workers in different ministries, amongst others, find the new basic salaries attractive and to their liking. Tensions have eased. It is estimated that the revision will cost a further Rs 1 billion to the government, i.e., the taxpayer, on top of the Rs 4.6 billion increase in the public sector wage bill the original PRB proposal was contemplating.

It is normal that the Ministry of Finance will have to foot the bill entailed by the scale of recommended increase in the basic pay of public servants. In fact, inasmuch as the new pay scales will become the basis for further normally upward revisions of salaries in the public service after three years the next time (instead of 5), the Ministry will have to think hard how to balance the budget reasonably well without escalating the already high burden of taxation on the public. Basic rates of pay in the public service are sticky upwards and, hence unlikely to pull back even if government finances were strained. One of the solutions to meet any gap, if it were to arise, would be to make use of a higher rate of tax for larger income earners in the future rather than to spread it out to all by means of, say, a generalised increase in indirect taxes such as the VAT. This will amount to doing away with the uniform rate of regressive taxation adopted since 2006 by introducing differential tax rates for different chargeable income tax brackets.

Given the increase in pay for those at the lower levels, the representatives of the private sector have already expressed their reservations on the “contagious” effect that could have on private sector pay rates for similar classes of workers. They are of the view that there are different sectors of activity in the private sector which will find it economically unsustainable to align their rates of pay with the rates presently recommended in the Errors and Omissions report of the PRB. They state that as things stand now, i.e. after implementing the E&O report, the basic salary of workers at the lower and middle levels in the public sector have gone beyond what is paid currently for identical overlapping levels in the private sector currently. Normally, the private sector pays a slightly higher amount to its workers than what obtains in the public sector for the same category. If that were to continue holding, the private sector would have to increase the pay of its workers to preserve the status quo ex ante. They have therefore expressed their apprehension that the follow-up of the raise granted by the E&O report in the public sector would have adverse implications for the competitiveness of key private sector activities, especially of those sectors of private enterprise that are fighting it out to survive.

Looked at in perspective, the private sector enterprises have a much larger gap in pay levels between those at the bottom of the employment ladder and those at the upper middle and top scales. To keep costs within manageable range, this huge headroom may need to be squeezed somewhat so that the disproportionately exaggerated difference in treatment of pay at different levels could get collapsed to an extent while still keeping the enterprise internationally competitive. Those at the top would need to share a larger part than heretofore of the companies’ profits with workers lower down and still end up with a much more handsome pay than what those at the top of the public sector, including the parastatals, will have as take-home pay. In other words, the E&O implementation of the PRB will lead to income redistribution in favour of those at the lower levels. In so doing, it will bring back the Gini coefficient (an index to measure income and wealth inequality over time) towards greater equality whereas it had been showing an ever-widening gap in favour of the higher income group so far.

We have to bear in mind that monetary reward is but part of the real rewards that workers should be entitled to so as to make them deliver the goods as they should in all stations where they are employed. A good working environment, instilling drive and motivation in them, providing them with a sense of fulfilment in the workplace and giving them an inspiring leadership in which those higher up contribute to adding to their skills – all these are factors which go to increase worker productivity. What Mauritius needs at this moment is to push its workforce up at the global level of productivity so that it does not get caught up in routine but develops rather a stronger urge to deliver something better and more performing with time, become innovative and meet on an equal footing those who are the best performers from any part of the world. One would wish that our Civil Service raised itself to this level, acting as a positive force to extend the country’s economic horizons. In which case, the generous pay raise it has just received would not have been in vain. We hope the Director of Audit will not, in the near future, contradict our hope.

* Published in print edition on 24 May 2013