GOVERNANCE Worldwide Bureaucracy Indicators Methodology, Insights, and Applications © 2021 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. This study is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 4.0 International License (CC BY 4.0) https://creativecommons.org/licenses/by/4.0/ Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution: Please cite the work as follows: World Bank. 2021.The Worldwide Bureaucracy Indicators: Methodology, Insights, and Applications. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 4.0. Translations: If you create a translation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content: The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Graphic Designer: Maria Lopez / lopez.ten@gmail.com Contents Foreword i Acknowledgements ii Abbreviations iii Executive Summary iv 1. What Are the Worldwide Bureaucracy Indicators? 1 2. How Were the Indicators Constructed? 3 Organization of the Dataset 3 Definitions 6 Public Sector 6 Employment 8 Wages 8 Data Sources 9 Methodology 9 Survey Selection and Initial Data Quality Checks 10 Construction of Indicators 10 Final Selection and Exclusion of Unexplained Outliers 13 3. Main Findings 14 Demographics of the Private and Public Sector Workforces 14 Relative Size of the Public Sector Workforce 15 Composition of the Public Sector Workforce 17 Gender Equity in the Public Sector 22 Public Sector Wage Competitiveness 26 Relative Wages and Compression Ratios 32 Gender Pay Gap 37 Public Sector Wage Bill 39 4. Potential Applications of the Dataset 42 Regional and Country Profiles 42 Fiscal Sustainability Analysis and Public Expenditure Reviews 43 Public Sector Productivity Diagnostics 43 Jobs and Economic Transformation 43 Equality in the Public Sector 44 Worker Adjustment Costs and Wage Rigidities 44 Myth of Bureaucratic Neutrality: Political Economy of the Public Sector 45 Conclusion 45 References 46 Tables Table 1: WWBI Indicators 4 Table 2: WWBI Coverage by Data Source 9 Table 3: WWBI Labor Definitions 11 Figures Figure 1: Public Sector Organizational Classifications 7 Figure 2: The Public Sector Is a Large Employer Globally 15 Figure 3: The Size of the Public Sector Varies Significantly by Region 16 Figure 4: Sizes of the Public Sector Workforce and Formal Employment Converge over Time 17 Figure 5: Public Administration Is the Largest Segment of the Paid Public Sector Workforce 18 Figure 6: The Size of the Public Sector Healthcare Workforce Increased in Some Countries 18 Figure 7: Most Education and Healthcare Workers Are Employed in the Public Sector 19 Figure 8: The Public Sector’s Size and Organization Correlate with Country Incomes 20 Figure 9: The Public Sector Workforce Is Older and Higher Levels of Education 21 Figure 10: The Public Sector Continues to Attract More Educated People 22 Figure 11: The Public Sector Employs More Women than the Private Sector 23 Figure 12: Public Sector Gender Equity Is Correlated with Country Income 24 Figure 13: Female Representation in the Public Sector Is Rising Globally 25 Figure 14: Female Representation in the Public Sector Is Concentrated in a Few Sectors 26 Figure 15: Public Sector Workers Receive a Wage Premium Compared to the Private Sector 27 Figure 16: Public Sector Wage Premiums Have Risen for Developing Countries 28 Figure 17: The Public Sector Wage Premium Varies by Worker Characteristics 29 Figure 18: The Premium Is Lower When Comparing Similar Workers 30 Figure 19: The Public Sector Wage Premium Has Risen for Tertiary Educated Formal Employees 30 Figure 20: Public Sector Wage Premium Varies by Sector of Employment 31 Figure 21: The Public Sector Provides More Benefits than the Private Sector 32 Figure 22: Public Sector Employees Experience a Flatter Pay Compression Ratio 33 Figure 23: Relative Wages in the Public Vary by Occupations and Seniority 34 Figure 24: Relative Wages of Key Service Delivery Staff Can Vary Significantly 35 Figure 25: Relative Wages of Key Service Delivery Staff in the Justice Sector 36 Figure 26: Cross-country Public Sector Pays Comparison Ratio: Hospital Doctor 37 Figure 27: The Gender Wage Gap Is Lower in the Public Sector and Varies by Region 38 Figure 28: Gender Wage Gaps Persist Even in Industries with Large Female Representation 38 Figure 29: The Public Sector Wage Bill Is a Significant Share of Public Expenditure 39 Figure 30: Variations in the Public Sector Wage Bill by Country Income 40 Figure 31: The Public Sector Wage Bill Is Uncorrelated with Fiscal Deficits and Surpluses 41 Foreword Effective governments are critical to attain the World Bank Group’s twin goals of ending extreme poverty and boosting shared prosperity. Therefore, the World Bank provides substantial financial and technical assistance to developing countries all over the globe to strengthen state capacity. A critical component of state capacity is human resources. The Worldwide Bureaucracy Indicators are a direct response to calls from the World Bank’s teams and client governments for more rigorous and granular data on public sector employment and compensation policies to support evidence-based reforms. This unique and comprehensive global dataset will enable an improved understanding of the quality, competitiveness, equity, representativeness, and efficiency of public sector employment and compensation regimes. As a cross-national dataset on public sector employment and wages, it will help governments make more informed decisions on interventions to improve the productivity of their human resources for better service delivery and improved welfare of citizens. Edward Olowo-Okere Director, Governance Global Practice World Bank WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS i Acknowledgements This report was produced by a team consisting of Faisal Ali Baig, Zahid Hasnain, Turkan Mukhtarova, and Daniel Rogger. Overall guidance for the report was provided by Vincenzo Di Maro, Arianna Legovini Tracey Lane, and Edward Olowo-Okere. This report and the Worldwide Bureaucracy Indicators (WWBI) are outputs of a collaboration between the Governance Global Practice and the Development Impact Evaluation department of the Development Economics Vice Presidency. The team is also thankful to several colleagues in the Poverty and Equity Global Practice and the Development Data Group for their collaboration in the production of the WWBI, including Carolina Diaz-Bonilla, Laura Liliana Moreno Herrera, Sandra Carolina Segovia Juarez, David Newhouse, Marko Olavi Rissanen, and Mizuki Yamanaka. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS ii Abbreviations COVID-19 coronavirus disease 2019 EEA European Economic Area EU-SLIC European Union Statistics on Income and Living Conditions GDP gross domestic product GFSM Government Finance Statistics Manual I2D2 International Income Distribution Database ICP International Comparison Program ICSE International Classification of Status in Employment ILO International Labour Organization ILOSTAT International Labour Organization Department of Statistic IMF International Monetary Fund LABLAC Labor Database for Latin America and the Caribbean LIS Luxembourg Income Study OECD Organisation for Economic Co-operation and Development QoG Quality of Government SOE state-owned enterprise WGI Worldwide Governance Indicators WWBI Worldwide Bureaucracy Indicators WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS iii Executive Summary Public sector employment and compensation practices have broad implications for public sector productivity, fiscal sustainability, and the competitiveness of the overall labor market. The public sector workforce is responsible for the provision of state services, the shaping and implementation of state policies, and the administration of regulations. Public sector employment and wages are two of the most important inputs into the government production function, and therefore, important determinants of state capacity and public sector productivity. Additionally, public sector employment and compensation practices have important implications on the overall fiscal position of the government through the public sector wage bill. Finally, given the primacy of the public sector as the single largest employer in most economies, the size and composition of its workforce and their wages can reshape the equilibrium within the overall labor market. There are several important questions about the public sector workforce that governments regularly need to address. What is the appropriate level of employment in the public sector as a whole and for essential workers like public administrators, teachers, and doctors? Is the public sector wage bill affordable? Does the public sector pay competitive wages compared to the private sector to attract talent while not crowding out private sector jobs? Does the public sector pay equal wages to workers in similar jobs and with similar skills? Does the public sector promote gender equality in employment? And are public sector pay and employment practices contributing to higher public sector productivity, better service delivery, and improved governance? Answering these questions requires high-quality, cross-country data on public sector employment and compensation, which the Worldwide Bureaucracy Indicators (WWBI) dataset provides. The WWBI includes 192 indicators that are estimated from microdata drawn from the labor force and household welfare surveys and augmented with administrative data for 202 economies. Indicators cover five categories: the demographics of the private and public sector workforces; public sector wage premiums; relative wages and pay compression ratios, gender pay gaps; and the public sector wage bill. The micro and administrative data utilized in the construction of the WWBI are drawn from data catalogs that house surveys conducted by national statistical organizations or multilateral organization data teams. In short, the WWBI is the most comprehensive and robust global dataset on the public sector workforce in the world. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS iv The WWBI reveal several, often surprising, stylized facts of the public sector workforce devoted to providing education about the public sector workforce. The public sector is often and healthcare increases with country incomes, signifying that the largest employer in most countries and is an especially as countries develop, they experience increases in demand dominant source of formal jobs in many low and middle- for the provision of social services. Additionally, the public income countries. Globally, it accounts for 16 percent of total sectors of high- and upper-middle-income countries are employment and over 30 percent and 37 percent of paid and relatively more representative for women than those in low- formal sector employment, respectively. Many of these public and lower-middle-income peers. While there is considerable sector workers provide critical services. For example, three- variance in the size of that premium across countries, varying fourths of the global education workforce and two-thirds of the from a penalty of 33 percent to a premium of 100 percent, the healthcare workforce are employed in the public sector. The variance is not correlated to the level of economic development average public sector employee is four years older, 37 percent enjoyed by countries. However, high-income countries overall more likely to be female, twice as likely to have a tertiary have experienced a relative decline in premia since 2000, degree, and more likely to be an urban inhabitant than their while they have been increasing in other countries. Globally private sector counterparts. the wage bill represents about 30 percent of government expenditures—with significant variation around this average The public sector is also a relatively well-paying employer and the wage bill taking up almost half of all government for certain types of workers. Public employees in most expenditures in many low- and middle-income countries. nations receive a wage premium compared to similar workers However, there is no discernable impact of a high-wage bill on in the private sector. Public sector workers have approximately fiscal balances implying that wage bill growth impacts fiscal 19 percent higher basic wages (excluding allowances and sustainability due to the wage bill’s affordability given country bonus payments) across the 111 countries for which the income and not their absolute size. World Bank has data, with 80 countries having a positive premium. These wage premiums have also been rising over The coronavirus disease 2019 (COVID-19) pandemic the past decade in low- and middle-income countries. The and its impacts on fiscal space across countries at all size of this premium is not uniform and varies by personnel levels of economic development further underscore the characteristics and occupations. The premium is higher for importance of consolidating public expenditures without workers with primary or secondary education than those with impacting productivity and service delivery. Therefore, the tertiary education, and it is higher for workers in elementary WWBI comes at an opportune time and has several analytical and clerical occupations than those in technical or managerial and operational applications. It can be a source for global jobs. Public sector premia, in general, are likely to be higher benchmarking on pay and employment that policy makers when benefits are accounted for, as a much higher proportion and development practitioners can use as part of their regular of public sector workers enjoy formal contracts and have monitoring activities. Effective management of public sector access to health insurance and pensions. employment and compensation is a vital activity for fiscal sustainability and expenditure efficiency, and the WWBI can The WWBI provides unique insights on the equity and inform core World Bank analytical products, such as public representativeness of the public sector. Females are the expenditure reviews and wage bill assessments. Building majority of public sector workers in 55 nations. They enjoy representative bureaucracies should be an important policy almost a 30 percent wage premium over females employed objective of governments, and the WWBI represents an ideal in the private sector, but remain outnumbered by males in tool for benchmarking the varying successes of different managerial positions and within the top three income quintiles. countries. The data can be used to analyze public sector labor Even in industries where they predominate, such as education productivity, such as service delivery outcome indicators per and healthcare, they still experience a significant gender service delivery staff and links between the characteristics of wage penalty of 13 and 17 percent, respectively, compared to the workforce, human resource management, and the overall similarly educated and experienced male workers. quality of governance. Given its nuanced coverage of public and private sector employment along with decomposition by There is considerable cross-country heterogeneity in all occupations, industries, and levels of education, the WWBI the major indicators of employment, compensation, and can shed light on the public sector’s ability to affect labor the wage bill. The public sector is a much bigger source of allocations between the public and the private sectors and the formal employment in Sub-Saharan Africa, South Asia, and overall impact on jobs. the Middle East than in Latin America or Europe. The share WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS v 1. What Are the Worldwide Bureaucracy Indicators? Effective management of public sector employment and compensation is a vital activity of governments with broad implications for fiscal sustainability, public sector productivity, and the competitiveness of the overall labor market. Public sector employment and wages are arguably two of the most important elements of the government production function responsible for delivering infrastructure, regulations, and services to businesses and citizens. Government expenditures in the form of employee salaries and benefits represent a large proportion of total public expenditures with obvious fiscal sustainability and expenditure efficiency implications. Additionally, the public sector is a large employer, and changes in the size of the public sector workforce or government wages are likely to produce significant effects across the entire labor market and the overall economy. In many low- and middle-income countries, especially those experiencing fragility, public sector employment is the core ingredient of an official, or even implicit, political settlement. The public sector wage bill has immediate and often important implications for political stability, peace, and security. The objective of the Worldwide Bureaucracy Indicators (WWBI) is to provide comprehensive, cross-national data on public sector employment and compensation to help policy makers, development practitioners, and researchers answer several important questions. They include: • Are public sector pay and employment practices contributing to higher public sector productivity, better service delivery, and improved governance? • What is the appropriate level of employment in the public sector as a whole and for essential workers, such as public administrators, teachers, and doctors? • Is the public sector wage bill affordable? • Does the public sector pay competitive wages compared to the private sector? • Is public sector compensation distorting the supply of labor and leading to skills shortages in the private sector? • What is a typical distribution of public sector employment by skills, demographics, and occupations? • Does the public sector pay equal wages to workers in similar jobs and with similar skills? • Is the public sector a gender equal employer? WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 1 The WWBI indicators present a granular picture of public efficiency, transparency, and service delivery. These datasets, sector labor markets across the world based on objective, such as the Worldwide Governance Indicators (WGI) and the micro-level data. Its indicators are constructed from 909 Quality of Government (QoG), are based on expert-perception nationally representative household surveys undertaken measures of aspects of organizational and human resource by their respective national statistical authorities that have management that ordinally rank countries and territories substantial experience in designing and executing surveys, across composite indices constructed in turn from other often aided by World Bank or other multilateral organizations. sources or expert assessments. Given the specific nature of The dataset is further augmented with administrative data these datasets, they cannot provide information on the size, bringing the WWBI’s total coverage to 192 indicators across composition, competitiveness, or equity within the public 202 countries and territories between 2000 and 2018. The sector. These perception-based indicators are well suited to more than 110,000 individual observations included in the situations where data constraints inhibit empirical analysis, WWBI are estimated using a robust and empirically rigorous as is the case of intangible outputs or illicit activities. One methodology detailed in chapter 2 to provide objective example of the former is sentiments on bureaucratic quality as indicators on public employment and wages, improving on tracked by the QoG of the WGI’s Government Effectiveness and supplanting existing datasets. Index, where the intangible nature of public sector productivity does not lend itself easily to quantification of output. Similarly, The WWBI is the only dataset that can be used to the WGI’s Control on Corruption indicator exemplifies the address these questions for a large number of countries, latter where the furtive nature of the activity combined with given the limited scope and coverage of existing data a heterogenous distribution of law enforcement capacity sources. The ILOSTAT dataset of the International Labour to intercede across countries and over time impedes the Organization (ILO) is the closest to the WWBI in scope. While development of evidence-based metrics. While unique in their it includes many cross-national indicators on employment and own right, both these datasets represent natural compliments compensation across industries, occupations, and individual to the WWBI, which in conjunction can help examine the demographics, only a handful of these are related to the size relationship between employment and compensation and of employment in the public sector. The WWBI’s entire slew of institutional quality. indicators, on the other hand, explicitly target this segment of the labor market. Moreover, none of the indicators included in The WWBI is part of a larger effort at providing an empirical ILOSTAT directly compare public and private sector workers foundation to study the public sector. The Bureaucracy or present indicators of public sector wages, while the WWBI Lab—a collaboration between the Governance Global Practice pays particular attention to this nexus given the important and the Development Impact Evaluation department of the interactions between these two sectors. This makes the ILO Development Economics Vice Presidency—aims to promote dataset unusable for examining many of the questions on public evidence-based World Bank policy advice and government sector wages, including public-private wage comparisons and policy making on the public sector workforce through the cross-national public sector wage comparisons, that not only creation of new datasets, diagnostic instruments, and can impact public sector productivity and motivation, but also knowledge products. Since its inception in 2018, the WWBI extend to the effects on wage setting mechanisms in the private has sought to provide an analytical foundation to questions market. Another major source of data on the public sector is on the appropriate levels of employment and compensation from the Government at a Glance dataset of the Organisation for public sector workers. This report represents the latest for Economic Co-operation and Development’s (OECD). While iteration in a series of reports and empirical papers (Baig et al. the OECD does present some fine-grain measures of public 2021; Gilding et al. 2020; Hasnain et al. 2019). sector employment and compensation, similar to the WWBI, these exist only for its 36 member countries, all of which are This report is organized into four chapters. Chapter 2 provides also included in the WWBI. Further, the OECD’s dataset does details on the methodology used to construct the WWBI, not juxtapose the public and private sectors while investigating including a description of the data sources and estimations the patterns of employment and compensation. used for the different indicators. Chapter 3 presents the main findings that emerge from the dataset on some of these core The WWBI complements existing, perception-based questions. Chapter 4 concludes by presenting potential policy measures of public sector institutional quality. A second and research applications of the dataset. set of datasets on the public sector focus on public sector WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 2 2. How Were the Indicators Constructed? Chapter 2 presents a brief description of the methodology used in constructing the dataset, including its structure, working definitions for constructing indicators, main data sources, and statistical techniques employed within. The dataset is publicly available through the World Bank Data Catalog located here, where a detailed codebook and explanatory note that delves into further detail can also be found. Given that this is the third iteration of the dataset with each receiving methodological updates over time, in the service of transparency, the entire Stata code used in cleaning and estimation of not only this version but all former versions have been archived on GitHub here. Organization of the Dataset The WWBI is constructed with a deliberate effort to harmonize multiple data streams to offer comparable and consistent estimates across time and space. The WWBI encompasses five categories of variables (see table 1 for definitions): • The demographics of the public and private sector workforces (107 indicators); • Public sector wage premiums (39 indicators); • Relative wages within the public sector (35 indicators); • Gender pay gaps (9 indicators); and • The public sector wage bill (2 indicators). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 3 The demographics of public and private employment track relative wages of key occupations within the public sector, and key characteristics of the public sector workforce, including the cross-country comparisons of the compensation of public size (in absolute and relative numbers), age, and distribution sector workers by occupation. Indicators on the gender pay across sex, rural and urban locations, academic qualifications, gap compare the wages of females to their male colleagues wage quintiles, industry categories, and occupational groups. in the public and private sectors as well as decomposed pay Indicators on public sector wage premiums capture the overall gap by industry of employment. Finally, indicators on the competitiveness of public sector wages (compared to the relative size of the wage bill offer a glimpse into the structure private sector) as well as the decomposed public-private wage and affordability of the public sector within the larger economy. differential by sex, academic qualifications, industry category, Altogether, these indicators provide an important, albeit and occupation group. Indicators on pay compression ratios narrow, picture of the skills and incentives of bureaucrats. present the relative wages of the top and bottom earners in the They are further expounded on in the WWBI’s methodological public and private sectors, the ratios of wages for employees codebook located here. of occupational categories in the public and private sector, the T A B L E 1 - WWBI Indicators Indicator Description Demographics of the private and public sector workforces Public sector employment as a share Proportion of workers in the public sector using ICSE to define public and private of total, paid, or formal employment sectors and employment types (total, wage, and formal) Public sector employment distribution Proportion of workers in the public and private sectors based on key identifiers by demographic (mean and median age, male versus female, rural and urban divide, level of academic qualification, industry types, and occupational groups) Gender disaggregation of public and Distributions of female employment across public and private sectors private sector employment disaggregated by occupational groups, industries categories, and wage quintiles Industrial disaggregation of public and Distribution of public and private sector workers by industry along employment private sector employment types (total, wage, and formal) Social safety nets in the public and Share of public and private sector workers with various types of benefits (formal private sectors contracts, social security, health insurance, and union membership) Sample sizes, including by industry Total observations, number reporting employment, paid employment, public categories sector employment, and employment by industry Public sector wage premiums Public sector wage premiums Percentage differences in public and private sector wages (controlling for education, age, gender, and location) Public sector wage premiums P-values for public sector wage premium regressions for paid and formal wage (significance levels) employees Disaggregated public sector wage Percentage differences in public and private sector wages (controlling for premium by sex, education, industry, education, age, gender, and location) disaggregated by sex, levels of academic and occupation qualification, occupational groups, or industrial categories WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 4 Indicator Description Disaggregated public sector wage P-values for disaggregated public sector wage premium regressions premiums (significance levels) disaggregated by sex, levels of academic qualification, occupational groups, or industrial categories Gender pay gaps Gender pay gap Percentage differences in public and private sector wages for females compared to males Gender pay gap (significance levels) P-values for gender wage differential regressions Disaggregated gender pay gap by Percentage differences in public and private sector wages for females compared industry to males disaggregated by industry of employment Disaggregated gender pay gap P-values for gender wage differential regressions disaggregated by industry of (significance levels) employment Gender wage ratios Ratios of female to male wages in the public and private sector by mean and median workers Relative wages and compression ratios Pay compression ratios (90th/10th Ratios of wages of 90th percentile and 10th percentile wage earners in the public percentiles) for public and private and private sector sectors Relative wages in public and private Ratios of wages for managers, professionals, and technicians compared to clerks sectors by occupation in the public and private sectors Wage compression ratios in public Ratios of wages for indexed occupations to clerical occupations in the public sector, by occupation sector Cross-country wage ratio, by Ratio of wages of indexed occupations within reference country to the global occupation (mean and median) median or mean for the same category Public sector wage bill General government wage bill as a General government wage bill in proportion to country GDP (based on PPP; 2009 percentage of GDP U.S. dollars) General government wage bill General government wage bill in proportion to total general government as a percentage of government expenditures (based on PPP; 2009 U.S. dollars) expenditures Source: World Bank Note: GDP = gross domestic product; ICSE = International Classification of Status in Employment; PPP = purchasing power parity. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 5 Cumulatively, these indicators provide an empirical measure of Moreover, the definition of public sector employment also multiple dimensions of public sector capacity. They are directed corresponds to the one laid out by the ILO: toward both researchers—quantitative and comparative— interested in cross-national and temporal differences in the “The total public sector employment covers all organization of the public sector and policy practitioners employment of general government sector as defined in and development professionals aiming to benchmark trends System of National Accounts 1993 plus employment of between countries and over time. publicly owned enterprises and companies, resident and operating at central, state (or regional) and local levels of government. It covers all persons employed directly by Definitions those institutions, without regard for the particular type of employment contract.”1 Utilizing the more broadly defined public sector allows for a Public Sector clearer juxtaposition of the public and private sectors and For the WWBI to directly compare public and private a more comprehensive comparative analysis. Additionally, sector employment and compensation requires a globally given the self-reported nature of household survey data harmonized definition of the public sector. However, this need used in the construction of the indicators, using the broader is hindered by issues of comparability emerging from the definition ensures a more globally consistent definition that heterogenous definition of public employees across countries. includes all individuals employed within the core public To overcome this obstacle, the WWBI, as a guiding principle, administration, security sector, and public sector education utilizes the classification of the “public sector” compared and healthcare workforces, as well as individuals employed with the more narrowly defined “general government” by the in public institutions, including central banks and state-owned Government Finance Statistics Manual (GFSM) published by enterprises (SOEs). Significant effort is made to align all the International Monetary Fund (IMF). Definitions follow and surveys to this broader definition. The only exception is data on are represented in figure 1. countries within the European Economic Area (EEA) between 2004 and 2018. For these countries and years, the analysis is • The public sector consists of all institutional units controlled based on the smaller general government aggregate due to the directly, or indirectly, by the central and subnational unique nature of the data for this subset of countries using the governments as well as public corporations that are definition of the United Nations System of National Accounts. It engaged in a market-based activity. The public sector is refers to “public offices at all levels of government, [including] the general government as well as public or state-owned. nonmarket publicly owned hospitals, schools, and social security organizations,” but excludes “public or quasi-public • The general government consists of all institutional units in corporations, even when all the equity of such corporations the country that fulfill the functions of government as their is owned by government units” (European Commission 2014, primary activity, which includes central and subnational 12). Specifically, the classification of public sector employees in budget funded and nonmarket, nonprofit institutions. the EEA uses economic activity rather than sector (see box 1). 1. The definition appears in ILOSTAT’s glossary of statistical terms online at https://ilostat.ilo.org/resources/concepts-and-definitions/glossary/#P. For more information on the System of National Accounts, see United Nations et al. 1993; 2009. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 6 F I G U R E 1 - Public Sector Organizational Classifications Budgetary Central Extrabudgetary Governmenta Social Security Funds State Subsectorsc Govermentsa Local Subsectorsc General Government Governmentsa Social Security Fundsb Public Sector Central Bank Public Deposit-taking Corporations Public Deposit- Public Financial taking Corporations Corporations except Central Bank Other Public Public Corporation Financial Corporations Public Nonfinancial Corporations a. Includes social security funds. b. Alternatively, social security funds can be combined into a separate subsector, as shown in the box with dashed lines. c. Budgetary units, extrabudgetary units, and social security funds may also exist in state and local governments. Source: World Bank 2021. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 7 B O X 1 - Public Sector in the European Economic Area The identification of public and private sector employees is based on a specific question that explicitly asks for the sector of employment within each survey. This is the case for the microdata sourced from the I2D2, LAC Equity Lab, and LIS data repositories. The only exception to this is the data sourced from Eurostat’s European Union Statistics on Income and Living Conditions for countries within the European Economic Area. For these countries, an approximation of the public sector by combining NACE Rev. 2 industry classifications “O” which covers public administration, defense and compulsory social security, P which accounts for human health services and “Q” covering education services to represent the public sector (European Communities 2008). Therefore, unlike the definition of public sector employees used for all other surveys, this definition does not include public sector workers employed in public and quasi-public corporations. Therefore, constructing an identifier for public sector workers using industry classification more closely aligns with the definition of the general government as opposed to public sector. There are drawbacks associated with this approach as not all individuals employed in education and health services operate in the public sector which may overestimate the size of the public sector. Still, the aggregation of these three provides a fair approximation to the general government, especially for countries in the European Union given the large public sector healthcare and education sectors as is standard practice within the literature (see Christofides and Michael 2013; de Castro, Salto, and Steiner 2013; European Commission 2014; Giordano et al. 2015). Note: NACE is the acronym used to designate the various statistical classifications of economic activities developed since 1970 in the European Union. Employment Wages The classification of employed individual, paid employee, and Wage data in the WWBI denote the income associated with public paid employee is based on labor and employment status the occupation of employment used in the analysis (i.e., and type of sector. Definitions for total and formal employment income from which the individual dedicated the most time in are based on the ILO’s International Classification of Status the week preceding the survey) and excludes both bonuses, in Employment (ICSE),2 making the WWBI and ILOSTAT allowances, and other cash or in-kind payments from the databases cross-compatible despite fundamental differences same job as well as all additional sources of income (from in survey coverage, representation, sample size, and timing. other jobs) or investments and transfers. Due to the almost According to the ICSE, total employment is defined as: complete lack of information on taxes, the wage from primary job is not net of taxes. For all those with self-employment or their own businesses, wage data corresponds to net revenues “[A]ll those of working age who, during a short reference (net of all costs excluding taxes) or the amount of salary period, were engaged in any activity to produce goods or withdrawn from the business. provide services for pay or profit. They comprise employed persons ‘at work’, i.e., who worked in a job for at least one Wage information in the surveys is reported in each country’s hour; and employed persons ‘not at work’ due to temporary local currency unit, with a diverse array of periodicity. Great absence from a job, or to working-time arrangements care is taken to identify the exact frequency of income for each (such as shift work, flextime, and compensatory leave for individual within the surveys and convert all wages to weekly overtime).”3 wage after accounting for varying levels of hours worked to ensure credible comparisons across individuals and groups. Additionally, to control for the effect of possibly spurious outliers, the wage variables are winsorized by limiting extreme values in the survey data at the top 0.01 percent level.4 2. For more information on ICSE’s concepts and definitions, visit https://ilostat.ilo.org/resources/concepts-and-definitions/classification-status-at-work/. 3. The 19th International Conference of Labour Statisticians in 2013 adopted revised standards concerning statistics of work, employment, and labor underutilization (ILO 2013). They included a narrowing of the definition of employment to work performed for pay or profit, which would exclude, for example, activities where the self-declared main intended use of the output is for own/family consumption. Hence, these revised standards no longer apply to employment or labor force participation rates. 4. Winsorization was used in the analysis of wage data in the WWBI to eliminate the impact of extreme values within the dataset on the coefficients to avoid possibly spurious outliers. This approach also ensures that no observations are removed but that outliers above 99.9 percent of the distribution are set to a specified percentile of the data; for example, a 99.9th percentile in the data. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 8 Data Sources All of the indicators included in the WWBI are derived from Of the 909 surveys used, 550 surveys included in the WWBI primary sources. Most of the indicators are estimates by the were sourced from the World Bank’s I2D2 database which WWBI team from household survey data. The remainder were stores nationally representative surveys—both household sourced from partner multilateral organizations and were welfare and labor force surveys—globally, harmonizing data based on public sector administrative data. Cumulatively, the using a common taxonomy applied to all countries and surveys. WWBI are drawn from the following six sources: To these, 343 labor force surveys from 29 European countries were coded from the EU-SLIC data catalog. Finally, 4 surveys • World Bank’s International Income Distribution Database from the LIS Cross-National Data Center’s catalog and 12 (I2D2), Revision 7 surveys from the World Bank’s LAC Equity Lab database were • World Bank’s Latin America and the Caribbean Equity Lab added with a total coverage of 909 surveys from 135 countries. (LAC Equity Lab) data catalog (table 2). As a complement to the above, wage compression • Eurostat’s European Union Statistics on Income and ratios in the public sector for 167 economies from the ICP Living Conditions (EU-SLIC) database and data on the public sector wage bill for 177 countries (and • LIS Cross-National Data Center, Luxembourg Income territories) from the IMF’s Government Compensation and Study (LIS) database Employment Dataset were added to the dataset bringing the • IMF Government Compensation and Employment dataset final geographical coverage of the WWBI to 202 economies. • International Comparison Program (ICP) 2017 Cycle, These are further expounded on in the WWBI’s methodological Data for Researchers database codebook located here. T A B L E 2 - WWBI Coverage by Data Source WWBI Data Sources Surveys Countries WB International Income Distribution Database 550 109 EU Statistics on Income and Living Conditions Dataset 343 29 WB Latin America and the Caribbean Equity Lab 12 12 LIS Database 4 4 IMF Government Compensation and Employment Dataset 6,280 observations 177 ICP Data for Researchers database 3,497 observations 167 Total 909 202 Source: Worldwide Bureaucracy Indicators. Note: EU = European Union; ICP = International Comparison Program; IMF = International Monetary Fund; LIS = Luxembourg Income Study; WB = World Bank. Methodology Most of the indicators included in the WWBI are derived from survey data, while the remainder were sourced from the IMF and the ICP, which are based on public sector administrative data. While public sector administrative data are potentially a more accurate and detailed measure of employment and wages in the public sector, they do not allow for comparisons with the private sector. Moreover, many countries lack administrative and information technology systems to be able to regularly and effectively produce accurate data on public sector employment and compensation. Finally, a heterogenous adherence to standardized GFSM WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 9 definitions of the public sector or general government creates the techniques used for dataset selection. This process is challenges for cross-national comparisons. described in greater detail in the WWBI’s methodological codebook located here. A final set of surveys was selected Household surveys have certain advantages—and some for analysis. First, surveys included were ensured to have shortcomings—over administrative data as a source of sound coverage across key variables used in constructing information on public sector and general government the indicators (no variables with more than 40 percent of employment and wages. One of the main advantages of observations missing). To minimize potential biases emerging household surveys is that they provide a rich, consistent, from estimating statistics in the presence of large swaths of and regularly updated set of variables for a variety of worker missing observations, filters were designed to identify surveys characteristics in the public and private sectors that enable with the sufficient number of observations for four sets of core robust, controlled comparisons between the two groups. The variables: employment; wages; demographics (age, gender, surveys on which the WWBI are derived are some of the most and rural and urban split); and education. Surveys with over professionally conducted surveys in the world, undertaken 40 percent of missing or incorrectly coded (as defined by the by national statistical authorities and frequently supported survey questionnaire) observations for employment-related or managed by World Bank or multilateral organization data indicators were excluded from the WWBI. This was done teams with substantial experience in designing and executing because of the critical role of employment-related variables such exercises. The harmonization process that brought the for every indicator. For the remaining three filters, only the surveys used in the WWBI together was managed by survey relevant set of indicators were discarded from the analysis. experts from across the World Bank. As an illustration, for surveys with more than 40 percent of observations missing for wage data, all indicators related to At the same time, heterogeneity within surveys due to public sector compensation are excluded from analysis. differences in questionnaire design between countries and over the years limits the ability to apply a uniform coding Second, the surveys were included only if they had a sufficient schema to a large set of indicators. Therefore, the WWBI team number of observations for public sector employees to be relies on a core set of variables that are common to most if able to construct statistically reliable statistics. Third, surveys not all surveys for the construction of indicators. Additionally, were chosen if they were representative at the national level surveys are based on self-reported quantities and thus are and included employees from the entire country. Finally, for vulnerable to systematic errors that may be related to the level multiple surveys for a given country for the same years, it and characteristics of employment and income. Every effort was ensured that the same survey source was used over was made to provide as coherent and unbiased a dataset the years (contingent on being available and meeting data as possible. However, because the database is based on quality standards). However, a differing dataset was utilized if worldwide welfare and labor force surveys, there may still be it offered greater precision. All four steps are briefly described inconsistencies in the indicators over time due to differences in the section that follows. in primary data sources that users may need to consider. Construction of Indicators Further, definitions of contracts or insurance may not be externally consistent except in the broadest terms. Survey Demographics of the Private and Public Sector questions vary from country to country in both the wording Workforces of the question, its intention, and its local understanding. Additionally, there is no indication that these terms are based The construction of all indicators included in the WWBI on internationally accepted concepts and are included for a rests on the precise identification of employed individuals, smaller sample of countries. paid employees, and public paid employees. These three definitions are essential for constructing indicators on the Survey Selection and Initial Data (absolute and relative) size of the public sector workforce and Quality Checks lay the foundation of all disaggregated indicators and the wage To ensure the quality of the estimates presented in the WWBI, analysis. These are based on the I2D2 dataset as defined all surveys proposed for inclusion underwent a screening below in table 3 and described in detail in the accompanying process. Included in this chapter is a brief description of explanatory note and detailed codebook. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 10 T A B L E 3 - WWBI Labor Definitions Variable Names Description Labor status Constructed for all persons administered the labor module of each survey above the internationally recognized standard of individuals aged 15 years and above as a lower age • Employed cutoff.a Additionally, all persons are considered active in the labor force if they presently have • Unemployed a job (formal or informal) or do not have a job. but are actively seeking work (unemployed). • Non-in-labor force Employment and unemployment definitions are taken from the surveys themselves. Employment status Constructed for individuals identified as employed under labor status. • Paid employee Paid employee includes those whose basic remuneration does not directly depend on the • Non-paid employee revenue of the unit they work for and instead are typically remunerated by wages and salaries, • Employer but may be paid for piecework or in-kind. • Self-employed • Other (not classifiable Non-paid employee includes contributing family workers who hold a self-employment job in by status) a market-oriented establishment operated by a related person living in the same household who cannot be regarded as a partner because of their degree of commitment to the operation of the establishment, in terms of working time or other factors, and is not at a level comparable to that of the head of the establishment. Employer is a business owner (whether alone or in partnership) with employees, excluding contributing family workers. Own-account or self-employment includes those whose remuneration directly depends on goods and service produced (where home consumption is considered to be part of the profits) and who have not engaged any permanent employees to work on a continuous basis. Other workers not classifiable by status include those for whom insufficient relevant information is available and/or who cannot be included in any other category. Sector of activity Constructed for individuals identified as employed under labor status. • Public sector Public sector includes central government, nongovernmental organizations, armed forces, • Private state-owned companies, and nonprofit organizations. Private sector is that part of the economy run for private profit and not controlled by the state. Source: World Bank 2021. a. Given the heterogeneous application of retirement ages across countries; no upper age cutoff was used. This was done to ensure that the subsequent analysis utilized the full roster of public sector employees. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 11 Public Sector Wage Premiums The decision to use a simple regression specification was due to the relative trade-off between a more well-specified Estimating public sector wage competitiveness compared equation and the inability to provide a large set of observations to the private sector is methodologically complicated. The because of an inability to apply such a precise specification standard approach in the academic literature is to measure across multiple countries. Similarly, there is no variable in differences in total compensation between the public and the raw data that may reasonably allow for a more precise private sectors for statistically similar workers in similar jobs. instrument for wage differentials while controlling for selection Given the demographic differences of workers between the or endogeneity. Further, incomes within the data are also two sectors, this approach ideally requires controlling for limited to self-reported wages and do not include bonuses, observable worker characteristics, such as age, education, allowances, and in-kind payments, which can be significant work experience, and gender that impact human capital and in the public sector. Certain surveys do include information therefore earnings; accounting for unobserved characteristics on work benefits, such as health insurance and social such as ability, risk aversion, and public service motivation; security, but these are not monetized and therefore cannot be and controlling for occupations given that the similar workers combined with the wage data to provide an estimate of total can have very different responsibilities in different occupations. compensation. A simple raw comparison of average wages in the private and public sectors is misleading as public sector workers are older For all decomposed wage premiums, including those and more educated than their private sector counterparts, disaggregated by sex, educational qualification, industrial have different career objectives and motivations, and work on categories, or occupational groups, equation 1 was used occupations that may not be well represented (if not entirely instead with an interacted dummy variable that indicated the absent) in the private sector. To estimate the public sector sector and decomposed characteristics of the worker. wage premium, Mincerian earnings regressions were utilized, specified with a dummy variable indicating the sector of the Relative Wages and Compression Ratios individual.5 The basic specification follows: Indicators on relative wages and pay compression ratios in the logwi=α+β . Publici+Xi . γ+∈i (1) public sector are included in the WWBI. The relative wages of managers, professionals, and technicians (compared to clerks) Where β is the adjusted public-private wage differential; logwi in the public (and private) sectors provide a useful measure of is log weekly wages in local currency of employee i winsorized wage progressions within both sectors. Additionally, indicators to exclude the top 0.01 percent of the wage distribution; on the ratio of wages earned by the 90th and 10th percentile Publici is equal to 1 if the worker is employed in the public of the income distribution affords a window into the inequality sector and 0 otherwise; and Xi is a vector of standard controls between the top and bottom earners within the public and consisting of age, age squared, level of education, location private sectors for each country. (urban or rural), and gender. To these, three sets of indicators on within- and cross-country Reported premiums are transformed based on equation (2) wage ratios are added using data from the 2017 cycle of the below as the untransformed β̂ only provides an approximation ICP’s Data for Researchers dataset. The ICP is a worldwide of the actual premium and the discrepancy becomes larger statistical initiative to collect and compile comparable price when the β̂ > ± 20%. Within the WWBI, 10,358 observations and national accounts expenditure data and estimate for wage premiums are reported across 21 indicators and all purchasing power parties for the world’s economies. The countries and years. This simple transformation allows for a program is implemented as a global partnership of national more precise estimation of premiums.6 and regional agencies and managed by the ICP Global Office at the World Bank, under the auspices of the United Nations %∆y= 100*(eβ1∆x–1) (2) Statistical Commission. More information is available on the 5. The two main empirical approaches in the literature are the Mincerian wage regression with a dummy variable indicating whether the worker is employed in the public sector or private sector; and the Oaxaca-Blinder decomposition which does not assume that the returns to education, gender, age, and other observable worker characteristics are the same in the public and private sector. The latter method decomposes the wage differential into a part that can be explained as resulting from worker endowments, and an unexplained part presumably due to economic rents that the public sector enjoys. The two approaches in general give similar results (Gittleman and Pierce 2011); a dummy variable method is simpler to present and used here. To allow the public sector earnings differential to vary between individuals, Mincer-style wage gaps are estimated by gender, age, occupation, skill level, and other characteristics. 6. The algebraic expression of the transformation of these premiums are documented in appendix A3 of the WWBI explanatory note and codebook. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 12 program’s website here. These indicators allow for a more imputation for the difference between the current period focused inquiry into wage compression ratios both within and pensions and the contributions paid for these benefits), between the public sectors of respective countries. Based on the rest prefers cash. the International Standard Classification of Occupations, they represent a natural complement to the pay compression ratios • Recording of benefits and bonuses (sometimes between the 90th and 10th percentile of wage earners in the recorded as expenditure in goods and services), unit of public and private sectors within each country and allow for a measurements (number of employees versus full-time comparison of notable occupation within the public sector of equivalents), and the definition of employment (permanent each country and across nations. versus temporary employees) might essentially lead to different wage bill calculations. Gender Pay Gap • Issues of comparability could also arise by the different To estimate the gender wage gap, Mincerian earnings ways in which governments provide public services. For regressions are similar to the previous equations, except example, in France, most healthcare professionals are specified with a dummy variable indicating the gender of the government employees. While in the Netherlands, they individual. The basic specification follows: are contractors whose compensation is classified under goods and service expenditure instead of compensation logwi=α+β . Femalei+Xi . γ+∈i (3) of employee. Where β is the adjusted public-private wage differential; logw_i Final Selection and Exclusion of is log weekly wages in local currency of employee i winsorized to exclude the top 0.01 percent of the wage distribution; Unexplained Outliers While the pre-screening ensures that the surveys selected Femalei is a dummy equal to 1 if the worker is female; and Xi meet a certain threshold of quality for inclusion, a second set is a vector of standard controls consisting of age, age squared, of checks are employed on the resulting estimates to identify level of education, and location (urban or rural). outliers. While outliers may be a result of natural heterogeneity between countries, these could also result from incorrect Reported premiums are again transformed based on equation measurements or sampling errors that skew the sample 2. For decomposed gender wage premiums by industry of distribution away from the population mean. Removing these employment, equation 3 was used with an interacted dummy are essential to reducing error variance, and since these are variable indicating the gender and industry of the employee. expected to be distributed non-randomly, they can decrease normality. This was done using a three-step process described Public Sector Wage Bill as follows: Indicators on the relative size of the public sector wage bill • Observations located more than three standard deviations are sources from the IMF’s Government Compensation and away from a country’s mean were marked and removed Employment 2016 dataset. The wage bill is defined as the total for countries with four or more surveys between 2000 compensation (in cash or in-kind) payable to a government and 2018. employee in exchange for work. Wage bill includes wages and salaries, allowances, and social security contributions • The above does not work for countries with fewer made on behalf of employees to social insurance schemes observations since the standard deviation expands (IMF 2014). The IMF provides a detailed explanation of the mechanically to account for the variation. Therefore, construction of the indicators and the suggested caveats for observations that represent significant structural breaks using the cross-country analysis data (IMF 2016). It notes from an overall trend of the indicator were identified that the measurement of the wage bill might differ depending and removed. on the coverage, definitions, and different ways of public service provision: • Additionally, for countries with fewer than four observations, outliers were identified based on being structural different • The base of the wage bill may vary considerably across from the Region and income category of the country as countries. While high-income countries prefer expressing defined by the World Bank. wage expenditure on an accrual basis (including an WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 13 3. Main Findings This chapter highlights several cross-national and temporal stylized facts on public sector employment and compensation emerging from the WWBI. All cross-sectional figures use the latest available indicator for each country. Figures presenting time-series estimates include data for the indexed years. Thus, there may be large differences within these two sets of figures.7 Additionally, in the construction of figures that incorporate other data sources (e.g., national incomes), these data are sourced for the same year as the year of observation included from the WWBI. The full dataset, including an online data visualization dashboard, can be found here. The dataset, a detailed explanatory note, and codebook are publicly available in the World Bank Data Catalog here. The entire Stata code used in cleaning and estimation for the dataset have been archived on GitHub here. Demographics of the Private and Public Sector Workforces Is the public sector over-, under-, or adequately staffed? A key dimension of diagnostic assessments of the public sector involve identifying whether the levels and distribution of the public sector workforce is in line with the asks on the public sector such that there is neither over- nor under-staffing and that the right type and number of staff are employed in the right positions. Important metrics in assessing aggregate staffing levels are public sector employment as a share of total; paid (i.e., those working for wage labor, which excludes self-employed workers); and formal sector paid employment (those possessing a formal job contract or receiving benefits including pensions). Total employed individuals are defined as those workers, aged 15 and older, who in the respective household surveys responded as having a job in the prior week. Paid employees only include those among them whose basic remuneration is not directly dependent on the revenue of the unit they work for and are instead paid in wages and salaries, piecework, or in-kind, and therefore, exclude self-employed workers. Further, formal wage employees include only those among paid employees who also possess either a formal employment contract or receive some form of social security benefits, such as health insurance, pensions, or union membership. 7. For transparency, figures in the report mention when the underlying data identified are sourced from multiple years. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 14 Relative Size of the Public Sector Workforce The public sector is a major source of employment in most countries. The public sector is often the single largest employer in most nations. Using the latest available information for the countries included in the WWBI, the public sector accounts for, on average, 16 percent of total employment and over 30 percent and 37 percent of the paid and formal sector employment, respectively (see figure 2). The first metric measures the overall labor market footprint of the public sector. The latter two are better measures of the public sector’s size in the salaried and formal subset of the labor markets which are more comparable to public sector employment. For instance, the difference between the relative size of the public sector as a share of total, as opposed to paid employment, is primarily due to the inclusion of non-paid or own-account employees, employers, and self-employed individuals in the former, all of which are almost entirely absent from the public sector workforce. Similarly, the fact that the size of the public sector as a share of formal employment is roughly 8 percentage points larger than its share of paid employment is due to the lower penetration of formal contracting for paid jobs or the absence of social safety nets in many developing countries. However, the above comes with the obvious caveat that since figure 2 is based on the latest observations per country present in the WWBI combined with an uneven coverage over years, these statistics are based on multiple years of data. F I G U R E 2 - The Public Sector Is a Large Employer Globally Formal employment 37% Paid employment 30% Total employment 16% Public sector employment (as a share of...) Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). The size and importance of the public sector varies ratios are roughly identical in Middle East and North Africa and extensively by country income and Region. While less Europe and Central Asia. This difference in the relative size is than 9 percent of the total labor force of the average nation due to higher penetration of formal contracting, near-universal in the Sub-Saharan Africa Region is employed in the public access to social safety nets, or a lower level of undeclared sector, the public sectors of the nations in the Middle East work within the private sectors of countries within these and North Africa Region employ, on average, a quarter of Regions. This further underscores the important role that the the entire labor force (figure 3). Similarly, not only does the public sector plays as a source of good stable jobs in many size of the public sector formal employment vary by Region, developing countries. While there may not be universal targets but so does its relative importance. While the public sectors for adequate employment among countries, the indictors of countries in East Asia and Pacific, South Asia, and Sub- included in the WWBI allow countries to benchmark against Saharan Africa employ a much larger percentage of their peer countries using these globally harmonized metrics. formal workforce compared to their paid workforce, these WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 15 F I G U R E 3 - The Size of the Public Sector Varies Significantly by Region 60% Public sector employment (as a share of ...) 50% 40% 30% 20% 10% 0% East Asia Sub-Saharan Middle East South Asia Europe Latin America & Pacific Africa & North Africa & Central Asia & Carribean Formal employment Paid employment Total employment Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). There has been a trend toward convergence in the Figure 2 sources the latest observations by country from relative size of the public sector footprint in the total and various years. This convergence in the public sector’s share formal labor markets betweeytn 2000 and 2018. While the of the total and formal labor force is in part due to greater relative size of the public sector within total employment has demands on government services as countries develop and in increased, public employment as a share of formal employment part due to increased penetration of formal contracting and the has steadily declined over the 18-year period (figure 4). presence of social safety nets within the private sector over Moreover, while regional differences persist, there has been the period. This argument is further strengthened by the fact greater similarity in the share in recent years. In 2000, public that the relative importance of the public sector within formal sector employment accounted for over 54 percent of formal employment fell faster and further in many middle-income employment in the Sub-Saharan Africa Region and almost countries than in high- or lower-income countries, both of 31 percent in the Latin America and the Caribbean Region, which experienced relatively slower rates of growth of labor respectively. In 2018, public sector formal employment in these force productivity and per capita incomes (Cho et al. 2012). two Regions stood at 22 percent in Sub-Saharan Africa and Further, while WWBI’s access to underlying labor force survey 23 percent in Latin America and the Caribbean, respectively. data differs by year, this trend is consistent even for Regions The departure from the headline estimate presented in figure with stable long-term coverage, such as Sub-Saharan Africa 2 is due to the uneven coverage of the WWBI across years. and Latin America and the Caribbean. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 16 F I G U R E 4 - Sizes of the Public Sector Workforce and Formal Employment Converge over Time Public sector employment (as a share of ...) 40% 30% 20% 10% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Formal employment Paid employment Total employment Source: Worldwide Bureaucracy Indicators, 2000-2018. Composition of the Public Sector compulsory social security) is the single largest component of public sector workforce in most countries (figure 5). Using Workforce the latest available observation for all countries, on average, Globally, public administration is the single largest 35 percent of the public sector workforce is employed in public segment of the public sector paid workforce. Countries administration, followed by the education and healthcare have unique legal and occupational classifications of public sectors which employ, on average, 30 percent and 19 percent sector employees that make cross-national comparisons of the public sector workforce, respectively. Together these difficult. In many countries, all employees are classified as three industries account for over 80 percent of all public sector civil servants, meaning they enjoy distinct legal protections. employees. “Other” accounts for public sector employment In other countries, only management and policy staff are civil in all remaining walks of economic activity, ranging from servants, and other staff, particularly service delivery staff, construction and infrastructure, the provision of public utilities, have fewer privileges and are governed by the labor code or workers engaged in SOEs that are not classified under similar to formal private sector employees. WWBI’s reliance public administration, education, or healthcare provision. on survey data uses internationally accepted standard industry While there may not exist a universal formula for the ideal and occupational classifications and therefore allows for cross- makeup of the public sector workforce, countries are now able national comparisons and finds that public administration to benchmark against peer countries or historically to see how (which includes individuals responsible for the general their respective public sector workforce has been evolving administration of the government; the provision of defense, over the past two decades. justice, police, and foreign affairs; and the management of WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 17 F I G U R E 5 - Public Administration Is the Largest Segment of the Paid Public Sector Workforce Employment, by industry (share of public sector paid employment) East Asia & Pacific 30% 10% 43% 18% Europe & Central Asia 31% 30% 30% 9% Latin America & Carribean 32% 13% 41% 14% Middle East & North Africa 28% 11% 45% 16% South Asia 26% 9% 40% 25% Sub-Saharan Africa 26% 9% 27% 38% 0% 20% 40% 60% 80% 100% Education Healthcare Public Administration Other Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). Over time, a gradual increase is seen in the relative share of the public sector workforce employed in the healthcare sector within certain countries. Beginning in 2004 (where data coverage across countries is more representative of the global average), on average 18.5 percent of the public sector paid workforce was employed in the healthcare sector. However, there were large differences between countries. Within high-income countries, almost 29 percent of the public sector paid workforce were healthcare sector employees compared to less than 9 percent in low-income countries (figure 6). By 2018, over a third of the public sector paid workforce in high-income countries was employed in the provision of healthcare. Similarly, the share of healthcare workers in the upper- middle-income countries increased by almost 60 percent to 22.6 percent in 2018. However, during this same period, low and lower middle-income countries did not experience any noticeable increase. F I G U R E 6 - The Size of the Public Sector Healthcare Workforce Increased in Some Countries 40% (as a share of public paid employment) Healthcare sector employment 30% 20% 10% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Low Income Lower-Middle Income Upper-Middle Income High Income Source: Worldwide Bureaucracy Indicators, 2000-2018. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 18 The education and healthcare segments provide critical and contribution cannot be overstated. The WWBI can shed services, and much of the provision takes place in the light on the immense role that the public sector education public sector. Over three-fourth and two-thirds of the and healthcare workforce specifically plays within these two education and healthcare paid workforce are, on average, sectors. The WWBI finds substantial variation by Region. employed in the public sector, respectively (figure 7). The While over 91 percent of the education and 73 percent of the education and healthcare staff have been central to the relative healthcare workforce in the Europe and Central Asia Region is success of countries in meeting the targets set out in the employed in the public sector, countries in Latin America and Sustainable Development Goals for universal health coverage the Caribbean employ just under 66 percent and 52 percent, and literacy. Recently, however, both sectors have seen respectively. While organizations, such as the OECD and the significant attention as essential workers in the aftermath of World Health Organization, have developed standards for the the COVID-19 pandemic. Frontline education and healthcare appropriate ratio of education and healthcare workers to serve providers, academics and researchers, epidemiologists, a local population, the WWBI offers a window into estimating public health experts, and engineers have been an essential both cross-nationally as well as within-country due to its bulwark against the public health crisis and their importance longitudinal coverage. F I G U R E 7 - Most Education and Healthcare Workers Are Employed in the Public Sector 80% Public sector employment, by industry (share of paid employment) 60% 40% 20% 0% East Asia Europe Latin America Middle East South Asia Sub-Saharan & Pacific & Central Asia & Carribean & North Africa Africa Education Healthcare Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 19 Cross-nationally, the relative size of the public sector segments of the public sector workforce. There is, however, within total employment and the share of the public sector no discernible relationship between country income levels and devoted to the provision of social services rise with the public sector employment as a share of salaried employment, level of economic income. Globally, the public sector’s share which suggests that the public sector grows along with the of total employment ranges from less than 2 percent to over 44 formal private sector. percent (figure 8a). Countries in Europe and Central Asia have some of the largest public sectors, while in countries in Sub- While this hypothesis may be at work globally, individual Saharan Africa, the public sector has the smallest relative labor country circumstances warrant closer scrutiny as other market footprint. This positive relationship between the size factors may be at work. For example, the size of the of the overall public sector and economic prosperity (referred public sector is also historically sticky as it may be a result within public economics as Wagner’s Law) in its simplest form of determined economic policy as opposed to a sustained argues that as countries develop, their government needs to increase in the demand for greater public services that perform greater functions, particularly social services. This is accompany economic development. For example, four upper- further evidenced by the positive relationship between country middle-income countries (Botswana, Jordan, the Russian income and the share of the public sector workforce that is Federation, and South Africa) have some of the smallest shares dedicated to the provision of education and healthcare (figure of public sector workforce engaged in education or healthcare 8b). Over 80 percent of all public sector workers in Denmark, provision. Additionally, the displacement effect hypothesis Finland, and Switzerland are employed within the education argues that increases in government spending over time may and healthcare sectors, compared to The Gambia, where these be due to periods of crisis when public spending (including the segments employ about 4 percent of public sector workers. As public sector wage bill) expands in a countercyclical manner countries develop, the relative share of public administration but does not adjust downward after the crisis (Peacock and employees in the public sector workforce gets smaller as the Wiseman 1961; 1979). healthcare and education workforce becomes relatively larger F I G U R E 8 - The Public Sector’s Size and Organization Correlate with Country Incomes a. Public sector employment (share of total) b. Education and health workers (share of total) 40% 80% Share of total employment Share of total employment 30% 60% 20% 40% 10% 20% 0% 10% 2 3 4 5 2 3 4 5 Log GDP per capita (Constant 2010 USD) Log GDP per capita (Constant 2010 USD) East Asia & Pacific Europe & Central Asia Middle East & North Africa South Asia Latin America & Carribean North America Sub-Saharan Africa Source: Worldwide Bureaucracy Indicators, World Development Indicators, latest observations per country (multiple years). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 20 Public sector Public sector workers are older and more The public sector has a higher proportion of workers with educated than private sector wage workers. In both panels tertiary levels of education. Forty-seven percent of public of figure 9, the dotted line denotes symmetry between the sector workers have a tertiary degree compared to 21 percent two axes. Countries largely cluster below the 45-degree line in the private sector (figure 9b). These systematic differences in both figures, signifying that the public sector workers are, between public and private sector workers have implications on average, over four years older than their private sector for any comparative analysis between the two labor markets, counterparts (figure 9a). The age, grade, and seniority especially public-private wage differentials. Additionally, the profile of public sector workers can point to skills gaps. For proportion of public sector workers with tertiary education example, prolonged periods of hiring freezes or disruptions to varies by country income levels. In low-income countries, 19 recruitment because of conflict can result in missing cadres, as percent of the public sector workforce has either primary or was the case in Cameroon and Sierra Leone. Another problem no formal education qualifications, with the proportion rising is a large proportion of older workers, as in the Democratic to as high as 40 percent in some cases. High proportion of Republic of Congo, where the inability to finance pensions has low-skilled workers points to the public sector serving a social meant that many retirees stay on the payroll. An aging public welfare function and points to potential fiscal savings without sector workforce is also a problem in high-income countries. compromising public sector productivity by outsourcing of In Romania, for example, 30 percent of public employees are some elementary functions. A corollary to this high proportion approaching retirement in the next 10 years, which can have of low-skilled workers is a high proportion of clerical or support implications for both staff motivation and productivity, and jobs where a functional review of Serbia’s executive branch fiscal sustainability given the growth in pensions expenditures found a third of all positions were internal administrative (World Bank 2019). support, such as information technology, human resources, legal, estates, communications, procurement, knowledge management, and finance (World Bank 2016). F I G U R E 9 - The Public Sector Workforce Is Older and Higher Levels of Education a. Mean age of paid workers b. Share of paid workers with tertiary education 50 80% 45 60% Private sector Private sector 40 40% 35 20% 30 0% 30 35 40 45 50 0% 20% 40% 60% 80% Public sector Public sector East Asia & Pacific Europe & Central Asia Middle East & North Africa South Asia Latin America & Carribean North America Sub-Saharan Africa Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 21 Globally, more educated people continue to prefer the attainment, yet much of it is silent on whether the returns of public sector over the private sector. While the share of additional schooling (especially for tertiary education) differ employees with a tertiary degree has increased around between the public and the private sector (Patrinos 2016). 20 percentage points in both sectors, the public sector has However, nascent research on the topic finds a higher return to continued to employ more workers with higher educational additional years of schooling in the private sector—compared attainment. In 2018, almost 60 percent of the public sector to the public sector—given the higher returns for productivity workforce had a tertiary degree, almost twice as much as in the private sector (Psacharopoulos and Patrinos 2018). This the private sector. This gap in the educational qualifications finding helps further cement the higher predictive capabilities between public and private sector workers has remained of intrinsic factors, such as job security, public service roughly steady since 2000 (figure 10). There is a growing motivation, or reputation, for explaining the choice between literature on the private and social return of educational the public and private sectors (Frey 1997). F I G U R E 1 0 - The Public Sector Continues to Attract More Educated People 60% Employees with Tertiary degrees, by sector (share of paid employment) 40% 20% 0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Private sector Public sector Source: Worldwide Bureaucracy Indicators, 2000–2018. Gender Equity in the Public Sector The public sector is a more important source of employment for women than the private sector. The public sector’s large labor market footprint means that it can be a strategic leader in changing norms and behaviors and promote greater equality in employment in the overall labor market. In many developing countries, the public sector in general and the education and healthcare sectors in particular have a long history of being two of the few options for employment available to females (Yassin and Langot 2017). Globally, females represent 46 percent of the public sector workforce compared to 33 percent in the private sector (figure 11). While men outnumber women in the private sector in all 130 countries for which data are available, women outnumber men in the public sector in 55 countries. Additionally, countries generally cluster by regional groups, with 36 countries in Europe and Central Asia employing more women than men in the public sector. In contrast, only 27 percent and 29 percent of the paid public sector workforce in South Asia and the Middle East and North Africa are female, respectively. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 22 F I G U R E 1 1 - The Public Sector Employs More Women than the Private Sector 80% Share of public paid workers 60% 40% 20% 0% 0% 20% 40% 60% 80% Share of private paid workers East Asia & Pacific Europe & Central Asia Middle East & North Africa South Asia Latin America & Carribean North America Sub-Saharan Africa Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). Female representation in the public sector is strongly country income. While multiple factors influence female correlated with country incomes (figure 12). A large body participation rates in the labor force, other studies confirm the of literature finds a U-shaped relationship between female positive relationship between fostering more representative employment in the private sector and economic development bureaucracies (including through female participation) and (Goldin 1986, 1995; Jayachandran 2020). However, the improved social and economic outcomes across a wide companion literature on the female participation rates in the spectrum, including reductions in gender-based violence public sector remains lacking. The WWBI provides forays into (Johnston and Houston 2016) and improvements in student this literature by showing a positive and significant relationship performance (Zhang 2019) and public sector productivity between female participation in the public workforce and (Park 2013; Andrews et al. 2005). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 23 F I G U R E 1 2 - Public Sector Gender Equity Is Correlated with Country Income 100% Female (share of public paid employees) 80% 60% 40% 20% 0% 2.5 3 3.5 4 4.5 5 Log GDP per capita (Constant 2010 USD) East Asia & Pacific Europe & Central Asia Middle East & North Africa South Asia Latin America & Carribean North America Sub-Saharan Africa Source: Worldwide Bureaucracy Indicators, World Development Indicators, latest observations per country (multiple years). Over the past two decades, women are increasingly known factors contributing to higher female employment in the choosing the public sector, while men are transitioning public sector are a lower gender pay gap and higher wages for into the private sector. Globally, the public sector hires women in the public sector (Gindling et al. 2020); better work disproportionately more women than men (figure 13). Between and life balance for public sector workers (Nielsen, Simonsen, 2000 and 2018, women’s public sector employment as a and Verner 2004); greater job security (Munnell and Fraenkel share of paid work has increased around 6 percentage points, 2013); intrinsic preferences for public sector occupations while men’s employment has decreased by 7 percentage (Lanfranchi and Narcy 2015); occupational segregation (ILO points. From a theoretical perspective, the gender bias in 2016); and less discriminatory hiring policies by gender public employment results from a combination of demand- (Gindling et al. 2020). and supply-side factors and gender norms. Some of the well- WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 24 F I G U R E 1 3 - Female Representation in the Public Sector Is Rising Globally 40% Public sector employment, by gender 35% (share of paid employment) 30% 25% 20% 15% 10% 2002 2004 2006 2008 2010 2012 2014 2016 2018 Female Male Source: Worldwide Bureaucracy Indicators, 2002–2018. While most public sectors have higher participation occupations, finding that while 84 percent of the 28.5 million by women, their representation is confined to a few nurses and midwives are women, they are still outnumbered industries and occupations. While the public sector is a by men in physician and specialist positions (Boniol et al. large employer of women, there is considerable horizontal and 2019). Although the reasons for this inequality in public sector vertical occupational segregation with women concentrated in employment are understudied, drawing on academic studies certain industries and positions; over 64 and 70 percent of the on the private sector, these likely include the differential caring public sector education and healthcare workforce are female, responsibilities that limit women’s career progression; social respectively. Comparatively, less than 38 percent of the public norms and attitudes about what type of work women are more administration workforce is female (figure 14a). Additionally, suited to; and biases in task assignments so that women women occupy around 38 percent of managerial positions are less likely to receive more visible and career-enhancing in the public sector while representing almost 70 percent of responsibilities (Crampton and Mishra 1999; Forret and clerical positions (figure 14b). A recent report confirms that Dougherty 2004). women health workers are concentrated into lower-status WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 25 F I G U R E 1 4 - Female Representation in the Public Sector Is Concentrated in a Few Sectors a. Female representation, by industry b. Female representation, by occupation Females (share of public paid employees) Females (share of public paid employees) 70% 60% 64% 60% 61% 57% 52% 47% 40% 40% 38% 34% 20% 20% 0% 0% Education Health Public Administration Elementary Occupation Clerks Technicians Professionals Managers Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). Public Sector Wage Competitiveness Public sector wages are an important determinant of of these options is explored in this section, while the latter two personnel quality and motivation, and therefore, a key are discussed in detail in the proceeding section. determinant of state capacity. However, answering this question requires an assessment of who makes up the Given the size of the public sector, public sector appropriate comparator group for public sector workers. compensation should be designed in cognizance of its The first option is to directly compare the wages of public influence on the broader labor market. While public sector and private sector workers given that the most likely outside wage-setting mechanisms do not mechanically respond to option to employment in the public sector is the private market forces, they should be carefully designed to consider sector. Therefore, estimating public-private wage differentials the distributional aspects of wages. Policy makers need to offers the most natural comparison explored in a very ensure that public sector wages remain competitive enough to large academic and policy literature. The second involves attract and retain high-quality public sector workers. However, comparing the wages of public sector workers in one country oversized public sector compensation policies can create with those in other countries. Given that these are the closest disequilibria through queuing and crowding effects in the counterparts to one country’s public sector workforce, this is private sector labor market. Under an optimal compensation an important method for estimating whether public servants in policy, public sector wages will be competitive without being one country are over- or under-paid. These comparisons are distortionary, and there will not be any shortage of skills in particularly useful in the case of industries or occupations with either sector. The same principle implies that the wage transferable skills, such as healthcare workers who migrate premium should be annually monitored to ensure that no gap internationally or workers in clerical or managerial positions emerges between the public and private sectors due to wage who rotate within the public sector. A third option is to compare rigidities in the public sector that can cause a departure from individuals performing different tasks or employed in different a theoretical optimum. occupations within the same country’s public sector. The first WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 26 Public employees in most nations receive a wage premium have approximately 19 percent higher basic wages (excluding compared to their counterparts in the private sector. allowances and bonus payments) across the 111 countries Given the demographic differences of workers between the for which the World Bank has data, with 80 countries having two sectors as presented in section 2.1, the WWBI approach a positive premium. There is considerable heterogeneity provides an empirically robust and globally uniform measure in the size of that premium across countries, varying from of public-private wage differentials. Figure 15 shows the a penalty of 33 percent to a premium of 100 percent. The premium when the public sector is compared to all private size of the premium is negatively correlated with country sector salaried employees, irrespective of the type of job incomes, a finding corroborating academic studies that report and controlling only for worker characteristics (including sex, higher premiums for developing countries (Finan, Olken, and age, levels of education, and location). Public sector workers Pande 2017). F I G U R E 1 5 - Public Sector Workers Receive a Wage Premium Compared to the Private Sector 100% 80% Public sector wage premium 60% 40% 20% 0% -20% -40% 2.5 3 3.5 4 4.5 5 Log GDP per capita (Constant 2010 USD) East Asia & Pacific Europe & Central Asia Middle East & North Africa South Asia Latin America & Carribean North America Sub-Saharan Africa Source: Worldwide Bureaucracy Indicators, World Development Indicators, latest observations per country (multiple years). Public sector wage premiums in low- and middle-income countries have been rising over the past decade. The public sector wage premiums have risen in developing countries over time while having fallen in developed countries. Between 2008 and 2018, the average public sector wage premium for low-income countries rose by over 140 percent. Lower-middle and upper- middle-income countries experienced comparatively more muted expansion in the public sector wage premium, recording 37 percent and 24 percent, respectively (figure 16). Moreover, the average wage premium within high-income countries experiences a protracted commutative decline measuring at just under 45 percent for the decade. While a large body of literature finds evidence of declining public sector wage premiums within developed country labor markets (Bender and Elliott 2002; Gibson 2009; Melly 2005), a similar literature on labor markets in developing countries finds that the increased vulnerability to instability and volatility result in higher and persistent wage premiums in the public sector in many developing countries (Barton, Bold, and Sandefur 2017; Miaari 2020). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 27 F I G U R E 1 6 - Public Sector Wage Premiums Have Risen for Developing Countries 50% 40% Public sector wage premium 30% 20% 10% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Low Income Lower-Middle Income Upper-Middle Income High Income Source: Worldwide Bureaucracy Indicators, 2008–2018. The public sector wage premium is not uniform and varies penalty for workers in 38 countries. Similarly, females enjoy a by personnel characteristics. The magnitude of the public wage premium in the public sector that is twice as large as that sector wage premium depends on an employee’s educational for males (figure 17b). It is important to consider these wage qualifications (figure 17a). A growing body of research finds premiums in relation to the private sector. Specifically, analysis that higher wages in public jobs can partially be explained has more to do with the opportunity costs for employment in by job composition and worker characteristics (Baig et al. the private sector than the state of compensation in the public 2021; Gindling et al. 2020). The public sector wage premium sector. The main reason that tertiary educated individuals is estimated to have a concave relationship with employee earn a low or no premium compared to private sector workers education. Individuals with secondary levels of educational is due to the ability to earn greater wages in the private sector qualifications enjoy a higher premium than individuals with no Similarly, the large wage premium for females in the public or low levels of education, but individuals with tertiary education sector has greater implications for the large gender pay gaps experience a much smaller wage premium and in fact, a wage that exist in the private sector. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 28 F I G U R E 1 7 - The Public Sector Wage Premium Varies by Worker Characteristics a. Educational qualification (compared to private workers) b. Gender (compared to private workers) 15% 30% 29% Public sector wage premium Public sector wage premium 12% 10% 20% 9% 8% 14% 5% 10% 2% 0% 0% No education Primary education Secondary Education Tertiary Education Female Male Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). The public sector premium is lower when public workers professional, and clerical occupations, and not so much are compared to private workers doing similar jobs. in sales or agricultural workers). One approximate way for This analysis implicitly assumes that workers with the same controlling for industry and occupation is to compare the public personal characteristics should be paid the same wage sector wage premium only to formal private sector workers. irrespective of the industry or occupation of employment. As The public sector premium reduces to 7.3 percent globally, seen in figure 5, public employment is concentrated in a few with 62 of the 84 countries in the sample having a statistically industries or sectors of the economy (public administration, significant public sector earnings premium at the 5 percent education, and healthcare). Similarly, wages vary substantially level. As figure 18 shows, the public sector wage premiums by type of occupation, and public employment is concentrated vary substantially across regions but are lower in all regions within a few occupational groups (including managerial, when restricting analysis to formal wage employees. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 29 F I G U R E 1 8 - The Premium Is Lower When Comparing Similar Workers 36% 35% 30% 32% Public sector wage premium 20% 15% 10% 14% 11% 6% 1% 0% 4% 4% 0% Sub-Saharan Latin America South Asia Middle East Europe East Asia Africa & Carribean & North Africa & Central Asia & Pacific -10% -16% -20% All private employees Formal wage employees Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). However, the wage premium for formal workers has been points higher than a formal wage worker (differences exist increasing steadily for employees with a tertiary degree. depending on the occupation of employment). Significant Since the early 2000s, the public sector workforce with a wage premiums in the public sector and high accompanied tertiary degree has been earning significantly more compared fiscal costs of public sector workers have implications for public to formal wage workers in the private sector (figure 19). In fact, sector performance and productivity. Whether these relatively the wage premium has continued to increase. In 2017, those high wages incentivize better public sector performance or not with a tertiary degree received salaries that were 10 percentage is still a question that needs to be addressed in future research. F I G U R E 1 9 - The Public Sector Wage Premium Has Risen for Tertiary Educated Formal Employees 15% Public sector wage premium (formal wage employees) 10% 5% 0% -5% -10% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Worldwide Bureaucracy Indicators, 2000–2018. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 30 A more detailed analysis of the public sector wage premium by industry and occupation reveals its heterogeneity across types of work. Figure 20 shows that the public sector wage premium is higher for individuals employed in elementary or clerical occupations: 9 percent and 6 percent, respectively. However, individuals employed as technicians, professionals, or managers earn a wage penalty compared to private sector workers in similar occupations even after controlling for personnel characteristics. While it is not possible to compare public administration since the industry does not exist in the private sector, it is possible to compare the compensations of public sector workers employed in the education and healthcare sectors with their private sector counterparts. In both industries, public sectors workers enjoy a wage premium over the private sector. F I G U R E 2 0 - Public Sector Wage Premium Varies by Sector of Employment a. Occupation (compared to formal workers) b. Industry (compared to formal workers) 16% 10% 15% 9% Public sector wage premium Public sector wage premium 5% 6% 10% 9% 0% 5% -3% -4% -5% -5 % 0% Clerks Managers Education Health Professionals Technicians Elementary Occupation Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). Public sector enterprises represent another important sectors of employment. However, this remains on the agenda source of variation for public sector wage premiums. for future iterations of the WWBI. As mentioned previously, the definition of the public sector used in the WWBI includes individuals employed Public sector premiums, in general, are likely to be higher in public administration and security services, healthcare, when benefits are taken into account. Another illustration and education, as well as a multitude of public for-profit of the unique nature of the public sector is its primacy in enterprises and SOEs across a wide spectrum of industries. the formal economy. An increased level of formality implies Individuals employed within these public enterprises and a greater prevalence of formal employment benefits in the SOEs, unlike those employed in public administration, have public sector as opposed to the private sector. A much higher more precise comparators in the private sector. Therefore, a proportion of public sector workers enjoy benefits, such as fuller assessment of the public sector wage premiums would job security, as well as receive pecuniary subsidies, including require the decomposition of public sector employment across health insurance or pensions (figure 21). While the WWBI these sectors and industries. Given the immense importance cannot calculate the public sector wage premium taking these and large representation of these two industries within the monetary incentives into account, the literature suggests it is public sector workforce, compensation for two such industries, large and statistically important. In Cameroon, for example, education and healthcare, were decomposed. Unfortunately, per diems for attending meetings were equivalent to the base data limitations hinder the expansion of this analysis to other wages of civil servants (World Bank 2018). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 31 F I G U R E 2 1 - The Public Sector Provides More Benefits than the Private Sector 50% Social safety net coverage, by sector 40% 30% 20% 10% 0% Contract Social Security Health Union Insurance Membership Public sector Private sector Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). Relative Wages and Compression Ratios Relative wages within the public sector are another with similar skills and similar performance are paid equally— important contributor to worker motivation and impacts worker motivation and productivity and can be a major productivity. Much of the focus in the previous section was driver of the wage bill. on the size of the wage differential between a typical worker employed in the public sector and their statistically comparable Wage dispersion is generally higher in the private sector counterpart in the private sector. As discussed above, the than in the public sector. One common metric is the wage public sector workforce represents a specific subset of the compression ratio which is the ratio of the 90th percentile wage national labor force as employment is concentrated within a few to the 10th percentile wage in the salary distribution. This ratio industries (public administration, education, and healthcare) is lower in the public sector for 70 out of 99 countries for which and certain occupational groups (including managerial, there is data (figure 22). The average wage compression professional, and clerical occupations). Therefore, a second ratio for the public sector across 101 counterparts is 4.9 equally important element of public sector wage structure are compared to 6.3 in the private sector. The lower dispersion the differences in wages for workers in different segments of in the public sector reveals a tradeoff between equity and the public sector workforce. Studies have shown that workers pay competitiveness at the top of the salary distribution that compare their wages to their peers in an organization, just governments manage. A growing literature finds that relatively as they do to the private sector, and wage differentials that compressed wage structures in the public sector can lead to are not perceived to be justifiable can be demotivating (Borjas difficulties in attracting and maintaining a cadre of high-skilled 2003). Additionally, wage equity—whether staff in similar jobs, functionaries in the public sector (Borjas 2003). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 32 F I G U R E 2 2 - Public Sector Employees Experience a Flatter Pay Compression Ratio 20 15 Public sector 10 5 0 0 5 10 15 20 Private sector Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). Public sector wages vary by occupation, and pay clerical occupations (figure 23a). Moreover, while managers progressions become flatter with seniority. A second (which includes senior officials), on average, earn about 1.8 metric for relative pay is the ratio of the wages of the indexed times the wages of clerical workers, managers in the private occupations to clerical occupations (as the benchmark). sector earn almost 2.2 times the average private sector clerical Globally, senior officials and judges are some of the highest- workers (figure 23b). Similarly, professionals (which includes paid public sector employees, receiving around five times the judges, doctors and nurses, teachers, and economists) and wages of those employed in clerical occupations in the public technicians experience relatively lower levels of relative sector. Additionally, university teachers receive twice more wages in the public sector. While some occupations in the than secondary and primary school teachers, and doctors earn public sector may not have direct compliments in the private twice nurses’ salaries. Police officers, on average, receive sector, the relative wage ratios are of importance for retaining only marginally higher salaries than individuals employed in and motivating qualified employees in the public sector. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 33 F I G U R E 2 3 - Relative Wages in the Public Vary by Occupations and Seniority a. Relative wages in the public sector, by occupation 5 (compared to clerical occupations 4 Index of wages 3 2 1 0 Doctor teacher school teacher school teacher officer Senior official Judge Nurse Government economist University Secondary Primary Prolice b. Relative wage in the public sector, by occupational group 2 (compared to clerical occupation Index of wages 1 0 Managers Professionals Technicians Public sector Private sector Source: Worldwide Bureaucracy Indicators, 2017 Relative wages within industries also vary by country respectively), university teachers earn a considerable incomes. Another important source of wage comparison premium over both (on average 3.1 times the wages of clerical in the public sector is individuals employed within different workers). This premium over primary and secondary school occupations in the same industry. Data from the WWBI reveals teachers falls with country incomes (figure 24a). However, a that while primary and secondary workers earn relatively similarly clear relationship between the disparities of wages of similar wages compared to clerical workers in most countries nurses and doctors (compare to clerical workers) and country (1.35:1 and 1.56:1 for primary and secondary school teachers, incomes is not found (figure 24b). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 34 F I G U R E 2 4 - Relative Wages of Key Service Delivery Staff Can Vary Significantly a. Relative wages in the public sector, education sector workers 4 (compared to clerical occupations) 3 Index of wages 2 1 0 Low Income Lower Middle Upper Middle High Income Income Income Primary school teachers Secondary school teachers University teachers b. Relative wages in the public sector, healthcare sector workers 4 (compared to clerical occupations) 3 Index of wages 2 1 0 East Asia Europe Latin America Middle East North South Asia Sub-Saharan & Pacific & Central Asia & Carribean & North Africa America Africa Doctors Nurses Source: Worldwide Bureaucracy Indicators, 2017 WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 35 Relative compression ratios of similar occupations may highlight disparities within the public sector. Taking the example of the justice sector, the pay compression ratios for judges is negatively correlated with country incomes while the same for police officers is positively correlated. Moreover, given that police officers make one-fifth compared to the judges, these increasingly polarized rates of compensation for police officers compared to judges in low- and middle-income countries can potentially be a source of demotivation (figure 25). F I G U R E 2 5 - Relative Wages of Key Service Delivery Staff in the Justice Sector Pay compression ratio (police officers) 2 12 Pay compression ratios (judges) 1 6 0 0 2.5 3 3.5 4 4.5 5 Log GDP per capita (Constant 2010 USD) Police officers (LHS) Judges (RHS) Source: Worldwide Bureaucracy Indicators, 2017 Given that certain occupations may only or mostly exist power parity. They reveal that, for example, South Africa in the public sector, a preferred appropriate benchmark provides the highest wages for hospital doctors (relative to may be the public sectors of other countries. Police and the global median) employed in the public sector among Sub- security occupations have limited private sector alternatives. Saharan African countries (figure 26). This difference in the Similarly, over almost 77 percent of education sector workers wages of doctors may result in economic migration of doctors are employed in the public sector, with higher ratios in low- into South Africa. Globally, The United States provides the and middle-income countries. Doctors and nurses have a high highest levels of compensation for public sector doctors in the incidence of migration, and retaining these workers requires world, even after considering its high cost of living. International tracking the wages for these occupations in destination public sector wage benchmarking for high-demand jobs with countries. The ICP’s wage data enable cross-national wage relevant countries can be a valuable complement to public- comparisons for specific occupations adjusted for purchasing private wage comparisons. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 36 F I G U R E 2 6 - Cross-country Public Sector Pays Comparison Ratio: Hospital Doctor Index of wages (compared to clerical occupations) USA Regional 6 maximum HKG KWT 5 SGP Above 4 LUX SAU the median BEL CAN 3 CYP ABW OMN BRN CYM ZAF IND Regional median 2 MYS PRT CRI QAT BMU SWZ MLT Below 1 PAK the median KHM TJK NIC EGY LKA LAO SDN 0 Regional East Asia Europe Latin America Middle East North South Asia Sub-Saharan minimum & Pacific & Central Asia & Carribean & North Africa America Africa Source: Worldwide Bureaucracy Indicators, 2017 Gender Pay Gap The public sector operationalizes its large labor market related responsibilities that limit women’s career progression footprint for improving gender equality in public sector (Kleven et al. 2019) and create biases in task assignments so employment. It is well known that women globally earn that women are less likely to receive more visible and career- significantly less in the private sector than men for doing enhancing responsibilities. the same work, with the disparity holding for developed and developing countries. While one source of the gender Women globally earn significantly less than men for pay gap is lower rates of female labor force participation doing the same work in public and private sectors. Figure rates, the issue is multi-dimensional and intersectional. The 27 illustrates the male to female wage ratio in the public and reasons for this inequality in employment are under studied, private sectors across Regions. While this divergence holds but a growing body of literature is devoted to understanding for developed and developing countries, it varies across and rectifying the sources of this disparity. Studies cover Regions. Additionally, the difference is relatively smaller in the social norms and attitudes about what type of work women public sector. Females earn 87 percent in the public sector are more suited to (Boniol et al. 2019); divergent rates of but 74 percent in the private sector compared to the salary salary negotiations between men and women (Babcock of respective male counterparts. The public sector wage and Lashever 2003; Azmat and Petrongolo 2014); levels of gap is substantially less than the private sector wage gap competition (Niederle and Vesterlund 2007; Flory, Leibbrandt, in South Asia while being roughly equivalent in Europe and and List 2015) or influence (Coffman 2014) and selection Central Asia. across task assignment (Babcock et al. 2017); and care- WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 37 F I G U R E 2 7 - The Gender Wage Gap Is Lower in the Public Sector and Varies by Region Ratio of median female wage, by sector 100% 80% (compared to males) 60% 40% 20% 0% East Asia Middle East Latin America Sub-Saharan South Asia Europe & Pacific & North Africa & Carribean Africa & Central Asia Public sector Private sector Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). Female wage penalties persist even in industries with similar hours (figure 28). This disparity, like the public sector high female representation. Figure 14a showed how wage premium, is after accounting for differences in age, females perform most tasks in the public sector education and educational qualifications, and location. The average global healthcare sectors, but their participation is mostly confined to gender wage penalty is 14 percent for education, 20 percent lower-paid occupations. In 191 of 201 observations for gender for healthcare, and 21 percent for public administration wage premiums by industry, women face wage penalty industries, respectively. compared to their male counterparts working similar jobs with F I G U R E 2 8 - Gender Wage Gaps Persist Even in Industries with Large Female Representation 20% Gender wage premium, by industry 0% -20% -40% -60% 2.5 3.0 3.5 4.0 4.5 5 Log of GDP per capita (constant 2010 USD) Public Administration Education Healthcare Source: Worldwide Bureaucracy Indicators, World Development Indicators, latest observations per country (multiple years). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 38 Public Sector Wage Bill The effective management of public sector employment The wage bill represents a large and less flexible and compensation is a vital activity of governments with proportion of government expenditures with significant broad implications for fiscal sustainability, public sector future liabilities. Globally, and noting the difficulties with productivity, and the competitiveness of the overall labor cross-country comparisons, the wage bill represents about market. Government expenditures on employees and retirees 30 percent of government expenditures (figure 29), with represent a large proportion of their expenses. Therefore, significant variation around this average. In many low- and wage bill management has fiscal and expenditure efficiency middle-income countries, the wage bill can take up almost implications. The objective of employment and wage policies is half of all government expenditures. These wage bill numbers to maximize public sector productivity in a fiscally sustainable underestimate the full fiscal costs of public sector workers manner and without distorting the overall labor market. Explicit given the generous pension benefits that they enjoy. In Brazil, in this objective is a difficult technical and political trade-off. for example, the wage bill is 13 percent of gross domestic Wage bill management has traditionally been approached product (GDP), and public sector pension expenditures are primarily from a fiscal sustainability perspective, often in the another 4 percent of GDP (World Bank 2017). context of an economic crisis, prioritizing short-term fixes as opposed to well-designed reforms that take the long-term implications of the recommendations into account. F I G U R E 2 9 - The Public Sector Wage Bill Is a Significant Share of Public Expenditure 60 (share of public expenditures) Public sector wage bill 40 20 0 2.5 3 3.5 4 4.5 5 Log GDP per capita (Constant 2010 USD) East Asia & Pacific Europe & Central Asia Middle East & North Africa South Asia Latin America & Carribean North America Sub-Saharan Africa Source: Worldwide Bureaucracy Indicators, World Development Indicators, latest observations per country (multiple years). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 39 A negative relationship exists between the relative size low-income countries; roughly 27 percent of total public of the public sector wage bill within GDP and country spending in high-income countries to 28 percent in low- income. While high-income countries spend a larger income countries. The large difference in the relative size of proportion of their GDP on the public sector wage bill, this the public sector wage bill (as a fraction of GDP) is partly due expenditure represents a slightly smaller if not roughly similar to the greater demands on public services that accompany proportion of their total public outlays as compared to low- and higher levels of economic development. The relatively stable middle-income countries (figure 30). Public wage bill spending share of public wages (within government expenditures) is (as a share of GDP) differs more substantially between high- most likely due to the sticky nature of public expenditures that and low-income countries—63 percent higher for high-income increase countercyclically but do not contract as elastically countries compared to low-income countries. The difference in growth periods, thus further necessitating a systematic in the relative spending of countries within different income review of public expenditures through a robust and evidence categories is relatively less muted with high-income countries driven framework. spending differing by just over 3 percent between high and F I G U R E 3 0 - Variations in the Public Sector Wage Bill by Country Income 10 30 Public sector wage bill (share of GDP) (share of public expenditures) 8 28 Public sector wage bill 6 26 4 24 2 22 0 20 Low Income Lower Middle Upper Middle High Income Income Income Percent of GDP (LHS) Percent of public expenditure (RHS) Source: Worldwide Bureaucracy Indicators, latest observations per country (multiple years). The wage bill can potentially have a major effect on fiscal balances, but there are no simple benchmarks of the “right” size of the wage bill. The most used metric for estimating the size of the wage bill (i.e., the wage bill as a share of GDP) is not a good indicator of fiscal impact given the cross-national heterogeneity in government functions, scope, and size. While the global wage bill average is about 9 percent of GDP, it is incorrect to conclude that countries with wage bills below this number, or below some other average for comparable countries, have more fiscally sustainable wage bills than countries with higher averages. Cross-nationally, there is no correlation between the size of the wage bill and fiscal balances. For example, Denmark has one of the highest wage bills in the world at over 17 percent of GDP, but has generally achieved budgetary surpluses. A better measure is the wage bill as a share of expenditures and revenues, but even here, there is no discernable relationship with fiscal deficits (figure 31). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 40 F I G U R E 3 1 - The Public Sector Wage Bill Is Uncorrelated with Fiscal Deficits and Surpluses a. Wage bill (percentage of GDP) b. Wage bill (percentage of public expenditures) 25 70 60 Share of public expenditures 20 50 Share of GDP 15 40 30 10 20 5 10 0 0 -10 -5 0 5 10 -10 -5 0 5 10 General government net General government net lending/borrowing (percent GDP) lending/borrowing (percent GDP) Source: Worldwide Bureaucracy Indicators, IMF World Economic Outlook, latest observations per country (multiple years). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 41 4. Potential Applications of the Dataset Chapter 3 provided a glimpse into the many new insights that the WWBI can provide. Chapter 4 discusses how the true potential of the WWBI is not limited to the findings of this summary analysis. Instead, its potential rests in its ability as a tool for benchmarking progress and disparities between countries and regions, its usefulness for analytical assessments and diagnostics of differences, and as an ingredient in empirical exercises. Regional and Country Profiles The WWBI can be a source for global benchmarking on pay and employment that policy makers and development practitioners can use as part of their regular monitoring activities. Benchmarking is used widely in the private sector to identify areas where processes might be improved and similar gains could be achieved in the public sector. The global nature of WWBI’s coverage allows for comparisons of public sector employment and wages, both within and across geographical regions, income groups, and lending categories. An interactive online dashboard facilitates easy benchmarking as a performance instrument and support tool for policy making and can be found here. It includes country profiles for each of the 202 countries included in the WWBI and can be used to generate benchmarks, with a single click, for any of the indicators. These include the most recent data on public sector employment and compensation alongside the wage bill assessment for each country, such as figures capturing key labor market themes for each country (e.g., gender and educational attainment). WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 42 Fiscal Sustainability Analysis and accountabilities of “street-level” bureaucrats, like doctors, police officers, and teachers, are the main determinants Public Expenditure Reviews of service delivery outcomes (Finan, Olken, and Pande 2017). Moreover, given the high proportion of education and health personnel in the public sector, the dataset provides a Effective management of public sector employment and reasonably comprehensive measure for a large segment of compensation is a vital activity for fiscal sustainability and the public sector. It can contribute to this literature by analyzing expenditure efficiency. The WWBI can inform core World whether increased spending on the public sector education Bank analytical products, such as public expenditure reviews and healthcare workforce is correlated with improvements and wage bill assessments. Detailed data on the levels and in student learning outcomes or health outputs, such as the distribution of public employment and wages can help identify number of consultations or patients discharged per doctor. more nuanced, targeted, and politically feasible reforms that make explicit the difficult trade-offs in pay and compensation The WWBI can be used to explore the behavioral policies. Such evidenced-based policy advice is necessary as, determinants of productivity, such as public employee historically, wage bill diagnostics have often been done in the motivation. While it may be reasonable to expect better- context of economic crises, with a primacy toward blunt, short- paid public employees to be more motivated and less corrupt, term fixes, such as across-the-board wage freezes or cuts. cross-national estimates of public sector effectiveness and Quick fixes can have adverse impacts on long-term growth accountability using measures of the quality of governance, and welfare as well as political viability, and often create such as the WGI, reveal no clear relationship with public distortions and perverse incentives (IMF 2016). For example, sector wage premiums. Therefore, a second equally important freezing basic wages has often resulted in a mushrooming set of determinants of public sector productivity, the human of less transparent allowances and salary supplements that resource management aspects of the public sector, warrant reduce wage bill transparency, harm pay equity, and hurt consideration. For example, whether public sector employees productivity. Political economy factors are paramount in these are productive depends on merit-based recruitment and policies, either explicitly so, as in the role of trade unions, or performance management as much as the appropriate implicitly. Public sector employees are a powerful stakeholder number of staff numbers and competitive pay (Behn 1995; group in most countries and have a significant voice in what Christensen, Paarlberg, and Perry 2017; Moynihan and reforms are on and off the table. Better data can help with Pandey 2010; Wright 2001). Unlike individuals employed implementing more incentive-compatible reforms, such as in frontline service delivery (such as doctors and teachers), reducing pay inequity by curtailing extremely high pay or non- literature on the motivations of public administrators— transparent allowances. responsible for policy making, regulating, financing, and monitoring the work of frontline service providers—is relatively less developed. The WWBI can be used to perform more Public Sector Productivity nuanced investigations into the relative ability of pecuniary and non-monetary incentives for boosting worker efficiency Diagnostics and productivity and reducing employee turnover. The indicators included within the WWBI can be combined with others, based on complementary prosocial motivations A key question the WWBI can help answer is whether the from other sources, to explore the relative importance of public sector workforce is performing well and delivering motivation on public employee productivity and their initial high-quality infrastructure, services, and regulations, decision to join and remain in the public sector (Hasnain et which is a question of public sector labor productivity. al. 2019; U.S. Merit System Protection Board 2008; Perry and Productivity measures the efficiency with which inputs (e.g., Vandenabeele 2015). labor) are converted into outputs and is a more precise and economically meaningful concept than “performance” since presumably performance can be improved by spending more. In contrast, productivity measures whether more is produced Jobs and Economic Transformation and delivered for a given wage bill. While productivity has a variety of measurement difficulties, the WWBI can be used to generate useful proxies for productivity, such as service The need for more and better jobs is a top development delivery outcome indicators per service delivery staff. A priority, particularly in low- and lower-middle-income large body of research shows that the skills, incentives, and countries with a high proportion of youth. The challenge of WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 43 this task is significantly impacted by public sector employment from senior management to clerical staff and along income and compensation policies. While the private sector will quintiles within the public sector. A large body of research have primary responsibility for growing jobs, research and shows the demotivating impact of large disparities in wages policy advice need to examine the public and private sectors for peers working within the same or similar functions. For holistically, exploring the interactions between the two, given example, the diverging trends in compensation for men and the major role that the public sector has as an employer. This women judges and police officers by country incomes can is particularly so in low- and middle-income countries in which potentially be a source of demotivation. the public sector is the dominant formal sector employer. Presently unanswered questions on the appropriate levels of employment and compensation for public sector workers— Worker Adjustment Costs and Wage sufficient for attracting and motivating quality staff without distorting the overall labor market and causing misallocations Rigidities of labor—require particular attention. Given its nuanced coverage of public and private sector employment along with decomposition by occupations, industries, and levels of Persistent differences in public sector wage premiums education, the WWBI can be useful in shedding light on the for different segments may instead point to the existence public sector’s ability to affect labor allocations between the of large adjustment costs or opportunity costs for some public and the private sectors. Analysis of the public-private individuals to transition out of the public sector. Given the wage gap provides a good indication of these labor market unique composition of the public sector workforce, along with effects, which can be complemented by exploring whether gender, educational qualifications, occupations, and industries, the public sector is a wage leader and influences private certain occupations mostly if not entirely exist in the public sector wage setting; and if a large and sustained demand for sector. Additionally, research has shown diverging effects of public sector jobs results in the crowding out of workers in extrinsic sources of motivation (including money and benefits) the private sector or skills shortages, including long periods of for public versus private sector workers in some settings unemployment as individuals queue for public sector jobs and (Frey, Homberg, and Osterloh 2013). In these countries, the reject private sector job offers. existence of a public sector wage premium is shown to further amplify the intrinsic motivation of public employees (Hasnain and Manning 2014; Liu and Tang 2011). However, public sector premiums are not distributed equally across all public servants Equality in the Public Sector but differ extensively in magnitude from large premiums to strong penalties. These combined may point to the inability of some individuals to find suitable employment in the private Building representative bureaucracies should be an sector or the disinterest of individuals to transition out of the important policy objective of governments, and the WWBI public sector into the private sector, given the premiums. represents an ideal tool for benchmarking the varying successes of different countries.Improving equality of Development professionals and researchers can use opportunity in the public sector is key to improved service the WWBI to understand the relationship between these delivery (Headley, Wright, and Meier 2021; Kennedy, Bishu, premiums and the ability to select between the public and Heckler 2019; Wise and Tschirhart 2000). Furthermore, the and private sectors. For example, the WWBI shows there public sector’s large footprint means that it can be a strategic are relatively lower levels of disparities between the wages leader in changing norms and behaviors and promoting greater of nurses and doctors compared to the wages of primary employment equality in the overall labor market. Governments and secondary school teachers and university teachers. This and donors commit susbtantial resources to equality and may be due to the higher levels of cross-border economic diversity programs, and they must have the knowledge and migration for healthcare workers which does not allow for large evidence needed to develop the most effective programs and differences in the wages of nurses and doctors to develop. policies. The WWBI can help practitioners and policy makers Therefore, while public sector wages may not directly respond expand their understanding of representative bureaucracy and to price-setting mechanisms in the private sector, workers’ provide evidence on the innovative approaches that can be ability to switch between the private and public sectors operationalized. The dataset provides clear indicators on the may create equilibrating effects between public and private share of employment at various levels of occupations ranging sector wages. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 44 Myth of Bureaucratic Neutrality: the WWBI’s country-level indicators, its global coverage, the credibility of its primary sources, and an extensive suite of Political Economy of the Public Sector harmonization make it a unique and comprehensive dataset to explore these issues. The report details the methodology employed in the construction of the indicators, showcases The existence of electoral budget cycles can potentially some of the main findings from the dataset, and suggests have large implications related to the size of the public some of its analytical and operational applications. sector workforce and consequently the wage bill. A relationship between the proximity of elections and public The WWBI is envisioned as a live database that will be sector hiring practices can have impacts on public sector regularly updated and expanded to meet its objective as a spending patterns. While there is theoretical evidence to show source of more evidence-based policy design on the public a relationship between the contiguity of the bureaucracy (as a sector workforce. To achieve this, the WWBI also represents monolith voting block) and propensity for incumbent support a call for more and better data on the public sector workforce. (Frey and Pommerehne 1982; Golden 2003), empirical While the dataset already boasts global coverage, regional literature is missing. WWBI, given its coverage across 19 imbalances remain in terms of the coverage across countries, years and 202 countries, is ideally suited for an exploration of indicators, and years. These imbalances are primarily due this topic from a comparative studies perspective. to limited access to the labor force and other household surveys that are the primary sources of data. This results in irregular or dated coverage for certain regions over others. For Conclusion example, WWBI coverage for European and Latin American countries is relatively comprehensive, with 44 percent of the countries having data after 2015 with an average of 7.5 years The WWBI was developed to satisfy the need for a global, of coverage across the two regions. However, Middle East cross-nationally comparable, and analytically rigorous and East Asian countries are less represented in the dataset dataset. As this report shows, the WWBI enables researchers, with only 5 percent of countries having data past 2015 and development practitioners, and policy makers to answer some an average of only 1.5 years of coverage between 2000 and of the most important questions on the appropriate level and 2018. The future success of the WWBI rests on the ability distribution of employment in the public sector; the equity, of WWBI the team to leverage World Bank and government transparency, and market competitiveness of public sector counterparts to improve the country and temporal coverage of wages; and their impact on fiscal sustainability, the labor the WWBI in the planned yearly updates of the dataset. market, and service delivery. The micro-founded nature of WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 45 References Andrews, Rhys, George A. Boyne, Kenneth J. Meier, Laurence J. O’Toole, and Richard M. Walker. 2005. “Representative Bureaucracy, Organizational Strategy, and Public Service Performance: An Empirical Analysis of English Local Government.” Journal of Public Administration Research and Theory 15 (4): 489–504. Azmat, Ghazala, and Barbara Petrongolo. 2014. “Gender and the Labor Market: What Have We Learned from Field and Lab Experiments?” Labour Economics 30 (C): 32–40. Babcock, Linda, and Sara Lashever. 2003. Women Don’t Ask. Princeton, NJ: Princeton University Press. Babcock, Linda, Maria P. Recalde, Lisa Vesterlund, and Laurie Weingart. 2017. “Gender Differences in Accepting and Receiving Requests for Tasks with Low Promotability.” American Economic Review 107 (3): 714–747. Baig, Faisal A., Xu Han, Zahid Hasnain, and Daniel Rogger. 2021. “Introducing the Worldwide Bureaucracy Indicators: A New Global Dataset on Public Sector Employment and Compensation.” Public Administrative Review 81 (3): 564-571. Barton, Nicholas, Tessa Bold, and Justin Sandefur. 2017. “Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya.” Center for Global Development Working Paper No. 457, Center for Global Development, Washington, DC. Bender, Keith A., and Robert F. Elliott. 2002. “The Role of Job Attributes in Understanding the Public-Private Wage Differential.” Industrial Relations 41: 407–421. Behn, Robert D. 1995. “The Big Questions of Public Management.” Public Administration Review 55 (4): 313–324. Boniol, Mathieu, Michelle McIsaac, Lihui Xu, Tana Wuliji, Khassoum Diallo, and Jim Campbell. 2019. “Gender Equity in the Health Workforce: Analysis of 104 Countries.” Health Workforce Working Paper 1, World Health Organization, Genève, Switzerland. Borjas, George J. 2003. “The Wage Structure and the Sorting of Workers into the Public Sector.” In For the People: Can We Fix Public Service? edited by J. D. Donahue and J. S. Nye. Washington, DC: Brookings Institution Press. Cho, Yoonyoung, David N. Margolis, David Newhouse, and David A. Robalino. 2012. “Labor Markets in Low and Middle-Income Countries: Trends and Implications for Social Protection and Labor Policies.” Discussion Paper 1207, 2012–2022 Social Protection and Labor Strategy, World Bank, Washington, DC. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 46 Christensen, Robert K., Laurie Paarlberg, and James L. Perry. 2017. “Public Service Motivation Research: Lessons for Practice.” Public Administration Review 77 (4): 529–542. Christofides, Louis N., and Maria Michael. 2013. “Exploring the Public-Private Sector Wage Gap in European Countries.” IZA Journal of European Labor Studies 2 (15): 1–53. Coffman, Katherine B. 2014. “Evidence on Self-Stereotyping and the Contribution of Ideas.” Quarterly Journal of Economics 129 (4): 1625–1660. Crampton, Suzanne M., and Jitendra M. Mishra. 1999. “Women in Management.” Public Personnel Management 28 (1): 87–106. de Castro, Francisco, Matteo Salto, and Hugo Steiner. 2013. “The Gap between Public and Private Wages: New Evidence for the EU.” Economic Papers No. 508, European Commission, Brussels, Belgium. European Commission. 2014. “Government Wages and Labour Market Outcomes.” Occasional Papers No. 190, European Commission Directorate-General for Economic and Financial Affairs, European Commission, Brussels, Belgium. European Communities. 2008. “NACE Rev. 2: Statistical Classification of Economic Activities in the European Community.” Eurostat Methodologies and Working Papers, European Commission, Brussels, Belgium. Finan, Frederico, Benjamin A. Olken, and Rohini Pande, 2017. “The Personnel Economics of the State.” In Handbook of Field Experiments, edited by E. Duflo and A. Banerjee. Amsterdam, Netherlands: North-Holland. Flory, Jeffrey, Andres Leibbrandt, and John List. 2015. “Do Competitive Workplaces Deter Female Workers? A Large-Scale Natural Field Experiment on Job Entry Decisions.” The Review of Economic Studies 82 (1): 122–155. Forret, Monica L., and Thomas W. Dougherty. 2004. “Networking Behaviors and Career Outcomes: Differences for Men and Women?” Journal of Organizational Behavior 25 (3): 419–437. Frey, Bruno S. 1997. Not Just for the Money: An Economic Theory of Personal Motivation. Cheltenham, UK: Edward Elgar Publishing. Frey, Bruno S., and Werner W. Pommerehne. 1982. “How Powerful Are Public Bureaucrats as Voters?” Public Choice 38 (3): 253–262. Frey, Bruno S., Fabian Homberg, and Margit Osterloh. 2013. “Organizational Control Systems and Pay-for-Performance in the Public Service.” Organization Studies 34 (7): 949–72. Gibson, John. 2009. “The Rising Public Sector Pay Premium in the New Zealand Labour Market.” New Zealand Economic Papers, 43 (3): 255–261. Gindling, T. H., Z. Hasnain, D. Newhouse, and R. Shi. 2020. “Are Public Sector Workers in Developing Countries Overpaid? Evidence from a New Global Dataset.” World Development 126 (C): 1–16. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 47 Giordano, Raffaela, Manuel C. Pereira, Domenico Depalo, Bruno Eugène, Evangelia Papapetrou, Javier J. Perez, Lukas Reiss, and Mojca Roter. 2015. “The Public Sector Pay Gap in a Selection of Euro Area Countries in the Pre-crisis Period.” Review of Public Economics 214 (3): 11–34. Hasnain, Zahid, and Nick Manning. 2014. Pay Flexibility and Government Performance: A Multicountry Study. Washington, DC: World Bank. Hasnain, Zahid, Daniel Rogger, John Walker, Kerenssa Mayo Kay, and Rong Shi. 2019. Innovating Bureaucracy for a More Capable Government. Washington, DC: World Bank. ILO (International Labour Organization). 2013. Report of the Conference: 19th International Conference of Labour Statisticians, Geneva, 2–11 October 2013. Geneva: International Labour Office, Department of Statistics. ILO (International Labour Organization). 2016. Women at Work: Trends 2016. Geneva: International Labour Organization. IMF (International Monetary Fund). 2014. Government Finance Statistics Manual. Washington, DC: IMF. IMF (International Monetary Fund). 2016. Managing Government Compensation and Employment: Institutions, Policies, and Reform Challenges. Washington, DC: International Monetary Fund. Johnston, Kate, and John Houston. 2016. “Representative Bureaucracy: Does Female Police Leadership Affect Gender-Based Violence Arrests?” International Review of Administrative Sciences 84 (1): 3-20. Kleven, Henrik, Camille Landais, Johanna Posch, Andreas Steinhauer, and Josef Zweimuller. 2019. “Child Penalties across Countries: Evidence and Explanations.” AEA Papers and Proceedings 109 (2019): 122–126. Lanfranchi, Joseph, and Mathieu Narcy. 2015. “Female Overrepresentation in Public and Nonprofit Sector Jobs: Evidence from a French National Survey.” Nonprofit and Voluntary Sector Quarterly 44 (1): 47–74. Liu, Bangcheng, and Thomas Li-Ping Tang. 2011. “Does the Love of Money Moderate the Relationship between Public Service Motivation and Job Satisfaction? The Case of Chinese Professionals in the Public Sector.” Public Administration Review 71 (5): 718–27. Melly, B. 2005. “Public-Private Sector Wage Differentials in Germany: Evidence from Quantile Regression.” Empirical Economics 30: 505–520. Miaari, Sami H. 2020 “An Analysis of the Public–Private Wage Differential in the Palestinian Labour Market.” Defence and Peace Economics 31 (3): 289–314. Moynihan, Donald P., and Sanjay K. Pandey. 2010. “The Big Question for Performance Management: Why Do Managers Use Performance Information?” Journal of Public Administration Research and Theory 20 (4): 849–866. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 48 Munnell, Alicia H., and Rebecca Cannon Fraenkel. 2013. “Public Sector Workers and Job Security.” State and Local Pension Plans Briefs Number 31, Center for Retirement Research at Boston College, Chestnut Hill, Mass. Niederle, Muriel, and Lise Vesterlund. 2007. “Do Women Shy Away from Competition? Do Men Compete Too Much?” The Quarterly Journal of Economics 122 (3):1067–1101. Niederle, Muriel, and Lise Vesterlund. 2015. “Public Management, Context, and Performance: In Quest of a More General Theory.” Journal of Public Administration Research and Theory 25 (1): 237–56. Nielsen, H.S., Simonsen, M., and Verner, M. 2004. “Does the Gap in Family-Friendly Policies Drive the Family Gap?” Scandinavian Journal of Economics 106: 721–744. OECD (Organisation for Economic Co-operation and Development). 2017. Government at a Glance. Paris, France: Organisation for Economic Co-operation and Development. Park, Sanghee. 2013. “Does Gender Matter? The Effect of Gender Representation of Public Bureaucracy on Governmental Performance.” American Review of Public Administration 43 (2): 221–42. Patrinos, Harry Anthony. 2016. “Estimating the Return to Schooling Using the Mincer Equation.” IZA World of Labor 2016: 278. Peacock, Alan T., and Jack Wiseman. 1961. The Growth of Public Expenditure in the United Kingdom. Princeton, NJ: Princeton University Press. Peacock, Alan T., and Jack Wiseman. 1979. “Approaches to the Analysis of Government Expenditure Growth.” Public Finance Quarterly 7 (1): 3–23. Perry, James L., and Wouter Vandenabeele. 2015. “Public Service Motivation Research: Achievements, Challenges, and Future Directions.” Public Administration Review 75 (5): 692–99. Psacharopoulos, George, and Harry Antony Patrinos. 2018. “Returns to Investment in Education: A Decennial Review of the Global Literature.” Policy Research Working Paper No. 8402, World Bank, Washington, DC. United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development, and World Bank. 1993. System of National Accounts 1993. New York: United Nations. United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development, and World Bank. 2009. System of National Accounts 2008. New York: United Nations. U.S. Merit System Protection Board. 2008. Attracting the Next Generation to Mining. Washington, DC: Merit System Protection Board. World Bank. 2016. Serbia: Horizontal Functional Review of Central Government. Washington, DC: World Bank. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 49 World Bank. 2017. A Fair Adjustment: Efficiency and Equity of Public Spending in Brazil. Washington, DC: World Bank. World Bank 2018. Aligning Public Expenditures with the Goals of Vision 2035. Cameroon Public Expenditure Review. Washington, DC: World Bank World Bank. 2019. “Romania: Deliverable 1.1, Baseline Review of National Framework for HRM and Its Institutionalization.” World Bank, Washington, DC. World Bank, 2021. “Worldwide Bureaucracy Indicators version 2.0: Codebook and Explanatory Note,” World Bank, Washington, DC. Wright, Bradley E. 2001. “Public-Sector Work Motivation: A Review of the Current Literature and a Revised Conceptual Model.” Journal of Public Administration Research and Theory 11 (4): 559–586. Zhang, Youlang. 2019. “Representative Bureaucracy, Gender Congruence, and Student Performance in China.” International Public Management Journal 22 (2): 321–342. WORLDWIDE BUREAUCRACY INDICATORS: METHODOLOGY, INSIGHTS, AND APPLICATIONS 50 More information about the World Bank Worldwide Bureaucracy Indicators, including an online data visualization dashboard, can be found here. The dataset, detailed explanatory note, and codebook are publicly available in the World Bank Data Catalog here. The entire Stata code used in cleaning and estimation has been archived on GitHub here.