After the Bell: SA’s public service may not be ‘bloated’, but the wage bill is
SA is getting the worst of both worlds: an out-of-control wage bill and a government without the ground forces necessary to deliver services more effectively.
Way back in 1986, US President Ronald Reagan — not my favourite president TBH — memorably said, “The nine most terrifying words in the English language are: ‘I’m from the government, and I’m here to help.’” I don’t agree with this statement, but I do know where he was coming from. Reagan said this during the era of an ever-expanding government, which was putting pressure on public finances while not substantially improving the lives of Americans.
What country does that remind you of?
In the wake of the mini budget last week, we are at last getting some more detailed stats about SA’s public sector wage bill. There is one important distinction right from the start: the public service is not necessarily bloated, although there is an argument to be made supporting this point. What is indisputably distended is its wage bill.
Here are the highlights of the statistics:
- The number of public servants earning above R1-million per year has grown from just over 10,000 in 2013/14 to more than 55,000 in 2023/24.
- SA spends more on its public servants, as a proportion of total government expenditure, than Australia, Canada, the US, Denmark, Sweden and Norway.
- Almost half the public servants in SA will earn an annual salary of between R350,001 and R600,000 in 2023/24.
But interestingly, although SA pays more than most OECD countries, it still has fewer public servants in relation to that budget than, say, Denmark. With those stats, it’s easy to work out what has been going on here: senior people in government departments have been promoting each other willy-nilly.
The result is that SA is getting the worst of both worlds: an out-of-control wage bill and a government without the ground forces necessary to deliver services more effectively. The brass has been absorbing the biggest slice of the increases.
The slice we are talking about here is not insignificant: total remuneration costs are set to rise from R646.4-billion in 2023/24 to R720.3-billion in 2026/27.
How does all this happen? Partly it’s because government is government. The incentive systems are misplaced because performance measurement is loopy, where it exists, and more often, it just doesn’t exist. Did you know, by the way, that government departments are required by law to develop and institute performance management systems?
The other really crazy thing about the public service is that in most countries, people go into the public service out of a desire to serve the public. There is a morally laudable aspect to the job. This is why there is usually a premium paid to people who choose to work in the private sector. You may very well be helping humanity and you probably are in some way, but your immediate responsibility is to the business and its shareholders.
But this doesn’t apply in SA. At the beginning of last year, a host of well-known developmental economists, led by Ricardo Hausmann, published a paper on the South African economy over the past decade through the United Nations University World Institute for Development Economics Research.
What it found was that government salaries in all but the lowest and highest categories have gradually been outpacing private sector salaries, to the extent that now state employees in the 50th percentile get paid 110% more than their private sector counterparts. I am not making this up.
On average, the premium paid to public sector employees, the research found, is about 25% compared with their counterparts in the private sector, controlled for job type. And there is something even more weird: the premium paid to public servants compared with non-union private sector employees is even higher, around 40%. (I presume that is because if you are comparing public servants to non-union private sector employees, you are comparing people largely in professional jobs. But it’s still pretty incredible.)
So, is the public service “bloated”? Some of my colleagues believe that it’s unquestionably not bloated; the areas of greatest need are education and healthcare, and there are real shortages of teachers and nurses. The numbers above do provide some support for this notion.
But, it is also true that the number of public servants has been increasing really fast. The cost of the public service has exploded, but its total headcount number has also increased sharply, by 30% between 2007 and 2019. And in this number, there are some very strange things: the absolute number of nurses plummeted, but the number of social workers grew substantially. There are now almost as many social workers employed by the government as nurses.
The picture you get from all these numbers is simple: the whole process is completely lacking in any rational planning or preconception. It’s just a mess and is compounded by government buckling at the slightest threat from public sector trade unions in all years other than the two Covid years, arguably the time they should have lent a hand.
The economists and other notables who recently signed the letter demanding SA take on more debt claimed they were doing so to prevent widespread hunger. But it turns out that by far the majority of SA’s new debt will be going not to poor people struggling to put food on the table, but to some of the most pampered employees in the country, the favoured 2%: public servants. DM