Government Wage Bill Management and Civil Service Reform in the Eastern Caribbean Currency Union
IMF Working Papers, May 17, 2019
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- Government Wage Bill Management and Civil Service Reform in the Eastern Caribbean Currency Union
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Bibliographic details
- Authors: A. E. Wayne Mitchell, Ronald James, Ann Marie Wickham
- Published: May 17, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498304214.001
Overview
- Study assesses the size of the government wage bill and employment in the member countries of the Eastern Caribbean Currency Union and their implications for fiscal sustainability and the adequacy of public service delivery.
- Analysis period: 2005 to 2015.
Key findings
- The wage bill (as a percentage of GDP, government revenues and expenditures) is higher than in other small states over the period 2005 to 2015, notwithstanding recent efforts by governments to make it more manageable.
- Composition and distribution of employment is sub-optimal and is reflected in skills mismatches contributing to inefficiencies in public service delivery.
- Using a dynamic fixed-effects panel, the study finds:
- Wage bill growth reflects the expansion of government activities to speed up economic and social development.
- Wage bill spending is procyclical in good times but is rigid during downturns.
Implications for fiscal sustainability and public service delivery
- A relatively high wage bill relative to GDP, revenues, and expenditures poses challenges for fiscal sustainability.
- Skills mismatches and sub-optimal employment distribution undermine the adequacy and efficiency of public service delivery.
- Procyclicality in good times and rigidity during downturns suggest limited automatic stabilizer function for wage spending and potential fiscal stress when revenues fall.
Empirical approach
- Employs a dynamic fixed-effects panel to analyze drivers of wage bill growth and cyclical behavior of wage spending.
Policy recommendations and reform needs
- The study identifies the main institutional and legal reforms needed to improve wage bill management and public service efficiency.
- Reform emphasis (as characterized in the study):
- Strengthening institutional frameworks for wage bill management.
- Legal reforms to enhance flexibility and control of wage spending.
- Measures to address skills mismatches and realign composition and distribution of public employment to improve service delivery.
- Specific reform details are identified in the full study.
Source: Government Wage Bill Management and Civil Service Reform in the Eastern Caribbean Currency Union (IMF Working Paper).
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- Working Paper