Private sector salaries for Govt employees?

BONANZA FOR BABUS: CNN-IBN panel debates on 'internal brain drain' and why Govt loses out on talent.

          

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A 40 per cent pay hike was recommended by the Sixth Pay Commission for all of the 45 lakh Government employees and a 100 per cent hike in the salaries of defence personnel with effect from January 1, 2006. This will entail a wage bill of Rs 30,000 crore for the government.

But is it a well-deserved payout to cope with the severe price rise or is it an election gimmick?

Should government employees receive the same salary as private sector employees?

These were the questions addressed on CNN-IBN's special primetime show Face the Nation on Monday, which was hosted by Sagarika Ghose.

The panel comprised of Director and Chief Executive ICRIER Dr Rajiv Kumar, Former Cabinet Secretary T S R Subramaniam, and COO Naukri.com Hitesh Oberoi.

Where is the Money?

The discussions began with a key question: where is the money going to come from?

Rajiv pointed out that the Finance Minister in his Budget speech had announced that he had left head room for about Rs 20,000 crore to take into account the Pay Commission recommendations.

And because it is not necessary for all of it to come out in the same year, there seems to fiscal space to accommodate the huge payout.

“The payment of this can be handled in different ways. It can be staggered, it can be given out in bonds," he said.

But the Fifth Pay Commission was called a fiscal catastrophe. The World Bank had called it the single-largest adverse shock to India's strained public finance. Now, without downsizing the government, it seems tough for the government to afford this massive wage bill.

Subramaniam pointed out the wage bill was much higher than Rs 30,000 crore. "In an election year, it has to spread to the states within six months. The total bill is going to be Rs 1,50,000 crore. The Government of India's taxes are buoyant and Chidambaram can afford it for the Government of India. Very few state governments will be able to afford it."

He also pointed out that Group C and D, clerks and chaprasis account for 92 per cent of the total. “Today, they are paid better than the market. It is only upper echelons, which are paid much lower than the market,” he added.

Subramaniam suggested using technology and downsizing Group C and D jobs to get results. He added that for a government servant, salary is only one element of the total package. “What matters is the working conditions, politics, tenure, the ability to do things at the right time at the right place. So we should not confuse administrative reforms with the Pay Commission report."

Private Vs Public

The private sector attracts good, talented people by paying high salaries. So must India pay out very high salaries in order to get the kind of governance we deserve?

“If you look at what used to happen 10-12 years ago, when government servants used to be paid as much or as well as the private sector. But today, it's very different. Today, private sector salaries are 10 times government salaries, especially at the top. So in India, people in the government are sort of overstaffed, overpaid and under worked at the bottom and understaffed, overworked and underpaid at the top. This has to change if you want the government to do well."

Many say it could mean the salaries are artificially compressed and there should be much better differentiation between top-level salaries and lower-level salaries.

But Subramaniam replied that it isn’t that the intake at the top is of inferior quality. He, however, conceded that because of the plethora of opportunities today, people have many options than earlier.

Subramaniam also cited job security as an attractive feature of government jobs. As for the salaries, he said, it was hard to match market rates anywhere in the world.

Rajiv disagreed stating the example of Singapore, where the public and private sector salaries are at par. He reasoned that government jobs would not be able to attract the right kind of talent unless the difference between the highest and the lowest level government wages isn’t increased.

The Political Dilemma

But it is a difficult political decision for the government to touch the salaries of Class 4 and Class 3 employees.

Rajiv said increasing the difference doesn’t mean cutting down the salaries of Class 3 and Class 4 employees. Salaries at the top can be increased to achieve the same result, he suggested. He contended that increasing the wage difference was an important step in the direction of better governance.

If we have armies of people at the bottom serving redundant duties, shouldn’t they be given the golden handshake?

Rajiv answered in the affirmative saying that all government employees deserve to have their salaries increased, but it also true that half of them should be given the golden handshake, seeing as most of them work alternative jobs as well.

The Wage Differentiation Factor

So should the employees at the lower level be gotten rid of, or at least de-incentivised, while retaining the talented top level?

“That’s how the market is. The ratio of the salaries at the top to the bottom is only 1: 10 in the government, whereas it is 1:100 outside. If you want to attract people from the same talent pool you have to pay the market salaries,” Hitesh replied.

Subramaniam seconded Hitesh’s argument. He said if the CEO of a small-sized company can rake in as much as Rs 10 lakh a month, a top level government employee, whose everyday decision, possibly affects the country’s economy, certainly deserves to be paid a much higher wage.

Talent Retention

Does the government reward talent?

Rajiv, who has worked with the government for five years, answered saying that adequate rewards alone aren’t enough to retain talent. “Government’s working environment actually encourages mediocrity. The fact is you are made to be a file pusher. It’s not the money. The fact is that you are an ordinary bureaucrat and your hands are very tied,” he said.

Subramaniam cited politics as another reason as to why the right kind of talent does not get attracted towards public sector jobs anymore. “The kind of politics that we have here, people are not allowed to function,” Subramaniam argued.

Rajiv added that salary is the necessary but not the sufficient condition. “If you do not pay them enough, then you will not get the right talent but then you have to do much more for the talent to flower,” he explained.

The Real Recommendations

Pay commissions after pay commissions recommend hikes, slashing of government jobs, reducing pay scales, and doing away with vacant posts. Is the government just taking the hikes and ignoring the politically uncomfortable parts?

“Yes and that is why the talent is actually fleeing the government,” Hitesh replied, but at the same time added that if the government is the worst possible place top work, then how can you get people to work in the worst possible place by paying them the worst possible salary?

Subramaniam, however, contested Hitesh’s argument saying, “In general there are good working conditions, they have housing, good quality education and Rs 90000 a month is not chicken feed.”

But Hitesh pointed out that that may be true for people who joined the government job 20 years ago, but not who are fairly new in comparison.

The show concluded with everyone agreeing that even though money is important, it is not the only reason that makes people want to join government jobs. If government wants talent to come to it, then it has the job quality and also take the pay commission’s other recommendations, which is downsizing or right sizing, and productivity-related increments, into consideration.

Final results

Sixth pay commission: Should government employees receive the same salary as private sector employees ?

Yes: 67 per cent

No: 33 per cent