Federal Employees Cost Twice as Much as Private Enterprise Workers, per World Bank Study

RIO DE JANEIRO, BRAZIL – A federal civil servant in Brazil costs almost twice as much to his employer, the federal government, as a private business worker in a similar economic activity.

This is one of the findings of a detailed study prepared by the World Bank that analyzed personnel management and payroll in the Brazilian public sector. The survey will be released on Wednesday, October 16th, in Brasília.

The researchers unraveled the data from 22 government and state bases in which the income of each worker can be analyzed, the readjustments granted over the last decade, and performance bonuses, among other factors.

Every year, all 11.5 million Brazilian civil servants cost R$725 billion (US$181 billion). This is the equivalent of 20 times the amount spent on the Family Allowance program and represents ten percent of Brazil’s gross domestic product.

According to the study, in general, public servants at the three levels (municipal, state and federal) earn 19 percent more than their private counterparts. This is no different from the rest of the world. The world average is 21 percent.

However, the discrepancy occurs when employees are analyzed separately. The federal government has 96 percent higher wage costs than private enterprise. The states have 36 percent higher costs, while municipal workers do not earn more than the average for private workers.

“In addition to the salary premium, Brazilian civil servants have tenure, so that the risk of dismissal is very low once they are hired,” the report emphasizes. In general, however, the majority of federal civil servants (56 percent) have monthly salaries less than R$10,000, according to the survey.

The survey is in line with the discourse of Minister Paulo Guedes’ economic team, which advocates a downsizing of the state payroll, including the reallocation of civil servants and the decrease in their number.

In recent weeks, rumors have circulated in Brasília that Chamber of Deputies President Rodrigo Maia is discussing, with President Jair Bolsonaro, the end of tenure for civil servants, something that is rejected by most labor organizations. Both denied that there was such a debate.

On the other hand, the World Bank survey contrasts with the surveys carried out by worker representatives, which advocate the replacement of the workforce with retired workers, something that is not in the Government’s planning.

Prepared at the request of the federal government, the document serves as a means of demonstrating the significance of making a profound administrative reform in public power, according to the study’s coordinator, Daniel Ortega.

In addition, Ortega said that by the end of the Bolsonaro government in 2022, some 26 percent of active government employees will retire. By 2030, this rate will reach 40 percent. “This is a good time to carry out reforms,” said Ortega.

Today, the federal public payroll includes 300 different careers. “Reducing the number of careers by making them more lateral and with more general attributes would provide greater flexibility to public administration”. The bank’s proposal is to make some of them more flexible by moving employees from one body to another without the need for new tenders.

The researchers quoted an alternative example: the creation of a mid-level technical career path, which would replace different technical careers for education, health, and safety. According to the evaluation, these civil servants perform administrative tasks and end up performing similar activities.

A further suggestion is to establish clearer and stricter career progression criteria. Data show that in only a decade servants reach the top in some career paths. This is the case, mainly, of careers in law, in which a civil servant first earns more than R$20,000 per month and quickly reaches the civil service ceiling – R$39,000.

Some examples: It takes doctors 28 years to reach the highest level of their career path. A professor of higher education and an official from the Ministry of Defense take 25 years, while judges, attorneys, and prosecutors take only ten years.

Further data that shows there is distortion in the percentage of employees of certain bodies who have already reached the top level. Ninety-eight percent of Defense officials are on that last tier. Among those in the judicial area, there are 78.2 percent. The lowest rates are among higher education teachers (2.9 percent), employees of regulatory agencies (3.3 percent) and doctors working in universities (four percent).

States

When confronted with the state data, the findings were not very different. The researchers also found that there is a gap between the formal public and private sectors, an increase in the payroll as a result of the increase in the average wage of workers, high wage dispersion caused by bonuses and wage readjustments given quickly under pressure from labor unions.

They also found that reducing employee replacement rates has a limit and does not solve the fiscal issue. When comparing the period between 2003 and 2017, the number of state employees grew by only 0.5 percent, but the average salary increased by 78.1 percent.

In this scenario, the country recorded seven states that declared themselves in a calamitous financial state, and another 12 that exceeded the spending limit for personnel outlined by the fiscal responsibility law (LRF)–60 percent of current net revenue. The result is that in recent years, 20 of the federation’s 27 units have at some point delayed payments to their active and outsourced employees.

In order to try to change this scenario, the states will have to cut, on average, two percent per year in their spending on active and inactive civil servants in order to reach the LRF limit by 2022. Those states facing the greatest challenge are Minas Gerais, which would be forced to cut 5.4 percent, Mato Grosso do Sul, 4.8 percent, and Rio Grande do Norte, 3.6 percent.

Source: El País