Public sector employment-the perception and reality

Public sector provide employment to nearly 7.5% of labour force in Pakistan

The general perception is that both the public sector enterprises and government departments are overstaffed. The size of the government and public sector is huge and needs to cut down. We will examine this perception and try to find out the reality in this article. PTI government has openly declared on many occasions that government is not in the position to provide employment in the public sector. PTI government also believes that it is not the government's responsibility to provide employment in the government sector. Instead, it believes that government should facilitate the private sector and in return private sector should provide employment.
PTI leadership made tall claims of providing 02 (two) million jobs each year after taking power.
Traditionally, governments was used to made promises of providing employment in the public sector. It was integral part of the election campaigns. Both the political parties and candidates were used to promise employment in the public sector. Both the PPP and PML-N has been accused to recruit thousands of people in the government sector and overburdening the state institutions and public sector enterprises.
The people prefer government jobs for three main reasons. One, permanent nature of government jobs means job security. Two, pensions after retirement at the age of 60 years. Three, better wages and employment conditions, more protection and rights.
Let's see whether public sector is so big and pensions and wages of public sector has become a ticking bomb for Pakistani exchequer. We need to separate the fiction and reality.
Public sector employment in Pakistan, as a share of its total employment, is relatively small. According to World Bank data, the public sector employed around 7.5 percent of the labour force in 2014. The ratio was 50% percent in China (according to government data it is 63%), 8% in Bangladesh, 17% in Bhutan, 20% in Brazil, in Egypt 26.5%,in Sri Lanka 15.1%,  21 % in the United Kingdom, and 19.2% in the United States in recent years. India is the only country in South Asia which provides lowest employment in public sector with just 4.7% labour force employed in public sector. 
For developing countries, the average is 10% to 15%. While in OECD , the average is around 23%. In Russia, public sector employment still accounts for nearly 40%. Singapore provides 35% employment to labour force in public sector. In Malaysia, it stands around 19%. So Pakistan provides employment in public sector below the average of developing countries.
In the Scandinavian welfare states like   Sweden, Denmark and Norway, The average is around 32%. Only Sweden has the public sector employment less than 30%. In France, Belgium, United Kingdom etc, the average of public sector employment is more than 20%.

Another myth prevalent here is that a very large share of GDP is devoted to the salaries of government servants in Pakistan. According to the recent World Bank statistics, Pakistan spends less than 1 percent, (0.62 percent to be specific), of its GDP on the wages of its public sector employees. Even Bangladesh spends 1.7 percent of its GDP on its public sector employees. The wage bill of public sector employees in the United States and the United Kingdom is 9 percent and 10 percent of the GDP, respectively.
Policymakers generally tend to look at the wage bill as a share of public expenditure. While Pakistan spends a meager 3 percent of public expenditure on the wages of its public sector employees, Bangladesh spends 12 percent. The wage bill of public sector employees is 23 percent and 26 percent of public expenditure in the United Kingdom and the United States respectively.
A related question is why is there always a scramble for government jobs in Pakistan? A number of factors may explain the preference for government jobs but the wage differential between the public sector and the private sector is, arguably, one of the most important reasons behind a worker’s preference for public sector jobs. When the public sector offers a higher wage rate, it is technically called, the public sector wage premium. For example, a 5 percent public sector wage premium means that wages in the public sector are 5 percent higher than the wages of the private sector on average.
The public sector wage premium in the United Kingdom is 1 percent, which means that, on average, government employees in the UK earn 1 percent higher income than the employees in the private sector. The public sector wage premium is -4 percent in the US which means that public sector employees earn 4 percent less than their private sector counterparts. Public sector wage premium in Bangladesh was 11 percent in 2015, and a whopping 49 percent in Pakistan in 2014.
Expanding public sector employment can be an effective means of reducing unemployment in the short term, providing a stabilising effect during recessions or in relatively disadvantaged regions. Public sector employment can create demand in other sectors of the economy (e.g., private services). Public sector employment supports equitable policies, such as encouraging employment of the marginalised and/or disadvantaged groups.
In Pakistan’s current situation, when the historical share of government jobs in total employment is just 7.5 percent and macroeconomic indicators do not seem to improve radically in the near future, the government’s capacity for economic maneuvers is very limited. 

The previous governments have tried to make governments leaner with varying degrees of success. Governments in the past, at times, replaced permanent jobs with contract-based jobs (some of which were subsequently made permanent) and, on other occasions, offered a golden handshake to employees of other state-run institutions. PML-N governments made repeated efforts to privatise public sector colleges in the Punjab but had to step back in the face of fierce resistance by the employees in the higher education sector.
The average wage differentials between the public sector and the private sector (public sector wage premium) in Pakistan are significantly higher than those in developed economies. Employment in the public sector almost always guarantees job security, irrespective of the level of commitment and dedication to work shown by the employees. Governments have provided a modicum of social security in the form of retirement benefits to their employees, while such benefits are either negligible in the private sector or are non-existent.
The difference in the public sector and private sector with respect to wage level, job security, and social benefits after retirement largely explain why the government job is the first choice of most people. For well educated people, a government job is nearly the only option.
Pakistan needs to create decent wage jobs in private sector to attract more people towards private sector. The employment conditions need to be improved. With low wage jobs, the private sector is the last choice for many people. the overwhelming private jobs are created in informal sector where wages are low. Nearly 80% of workers employed in both formal and  informal sector of the economy earn between Rs 7, 000 to Rs 30,000 per month. that is the stark reality of employment and wages in private sector.
Pakistan needs to develop a rational and realistic policy towards public sector keeping in mind the ground realities of Pakistan. IMF and World Bank dictated policies are not going to solve the basic issues as history shows us. 

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