site.btaThink-Tank Urges Result-Based Remuneration for Civil Servants

How much longer can Bulgaria's state budget bear the pressure of rising wages in the civil service, and how sustainable is this from an economic perspective? The matter is discussed by Institute for Market Economics (IME) senior economist Petya Georgieva in an analysis published on the IME website on April 12.

Georgieva says that by a decree dated April 3, the government increased the base wages in the central and municipal government administrations "to reduce the considerable pay disparities between similar jobs". The approach chosen (very correctly) by the Council of Ministers was to analyze the disparities and consider several options to distribute BGN 268 million in additional remuneration among civil servants. All proposed options involved raising the wages of many civil servants, but the suggested rates of increase varied.

Eventually, the government decided that civil servants' wages should be augmented by a fixed amount of money representing between 12% and 18.2% of the new minimum for the respective administrative level. The highest level got the lowest percentage (12%), and the lowest level was given the highest percentage (18.2%). The amount of the increase for the levels from 28th (lowest) to 23rd was set at BGN 200 per month, and an extra increment of BGN 5 per month was approved for each level from the 22nd upward.

Increasing wages in the public administration raises at least three issues, the analysis says.

First, with inflation expected to be tamed in the coming years but fiscal stability risks likely to grow, any increase in public expenditures (particularly those for wages, which are very hard to bring back down) will add to the strain on Bulgaria's fiscal position. A larger expenditure base makes it necessary for every subsequent annual state budget to provide at least as much money for wages as the previous one, regardless of economic dynamics and public revenue compliance. Note that personnel costs accounted for more than 24% of total public expenditures in 2023.

Second, a pay rise may be a way to address income disparities and catch up with the growing cost of living, but it does not answer the question of how the public administration will do away with ineffective work in the government system and the services it provides to individuals and businesses, which leave much room for restructuring and improvement. Who can assess the potential for improvement and productivity growth, and how? This would mean assessing the potential for new legislation, technological upgrades and removal of unnecessary or harmful regulations, among other changes. It is this kind of reforms in the public administration system that can create an environment in which those who work well will be paid well, and those who do not work will be dismissed from their positions, the analyst argues.

Third, it is very hard to explain why civil servants' incomes get higher and higher, given the absence of measurable results from the policies in almost all sectors. So, the third and perhaps most important question is, when will Bulgaria acquire a proper system to assess the effects of the work of civil servants by taking account of the strategic objectives in the respective public domain and the contribution of every unit and individual to attaining the objectives? The usual approach nowadays is to assume that everyone, or almost everyone, works well and therefore should receive financial incentives. What is needed is a system to assess the end results through indicators showing the extent to which the efforts of a given administration, or a part of it, contributed to the achievement of a measurable and sensible policy goal over a certain period of time.

Is it normal that a government ministry in charge of a public service which produces 54% functionally illiterate ninth-graders receives a pay rise? Or a government ministry in charge of running and funding a system which leaves Bulgaria with the worst avoidable mortality score in the EU, is also given more money for wages? If the general assumption is that the poor results should not be blamed on the civil servants as they can change nothing, would it not be wise to close half of the ministries, since all that fuss about plans, strategies, regulations and control is no use? - the analyst says in conclusion.