April 10th, 2013Labour Economics 432

Public Sector Pay Reform

in Ghana

Group 4

1. Shannon Chapman, 104315522. Alexander Teitelbaum, 104315413. Maame Otiwaa Boateng, 103058614. Samuel Adusei Baaye, 10300112

Introduction

Martin Ankomah of the Ghana Health Service defines employee reward as “all of the

monetary, non-monetary and psychological payments that an organization provides to its

employee in exchange for the work they perform” (Ankomah 1). Monetary payments can be in

the form of a fixed salary or wage and vary according to the level of skill required. Internal and

external relativities can influence employee pay. These relativities compare an employee’s pay to

both an employee in a similar position within and outside of the company or institution. These

levels of pay are then agreed upon through individual agreements and collective bargaining with

unions. Pay is arguably the most critical factor to sustaining a performing institution. From the

employee’s perspective, pay satisfies basic needs, provides incentives, allows for development of

new skills, and increases utility. From the employer’s point of view, pay is necessary to attract

competent employees and provide incentives for efficient, productive work.

Ghana has been a nation with increasing issues between the public sector labourers and

the government pay structure commission. Until 1997, Ghana had no universal, effective

structure for regulating pay, resulting in individual institutions to create their own structures.

From 1997 to 2006, the first major reform resulted in the Ghana Universal Salary Structure

(GUSS), but with little legal backing, few institutions conformed to the new system. Thus, in

2007, the Single Spine Salary Structure (SSSS) was designed to fix the issues that arose from the

first reform. While only two years old, this system is already under major public scrutiny.

Starting on March 18th, 2013, the teachers union for primary school education in Ghana

called for a nationwide strike in order to demand payment from the government. In a statement

to government, the union described concerns related to the non-payment of maintenance

allowance and delays in resolving outstanding promotions. After a two-strike, the teachers

returned to work after leaders of the union met with the President to create an action plan, but

several other groups talked about striking as well, including: the tertiary professors, airport

workers, and doctors (“Teachers Call off Strike”). As these issues continue to come to light, it is

increasingly clear that the public sector pay structure is not meeting the needs of the employees

they hope to serve. Especially in a developing country, the ability for the sector to attract

competent employees in the realms of education, legal, health, and safety is critical to the

development of a nation as a whole. As seen in the recent strikes, when the processes for

maintaining employee satisfaction break down in the public sector, the systems that maintain a

functioning society break down as well.

This paper focuses on public sector pay reform in Ghana; it looks at what caused reforms,

and the effect of such reforms. We intend to introduce and explain the GUSS and SSSS –

Ghana’s past and current public pay structures. We seek to present the intended goals of reforms

as well as the actual outcomes. We hope to present resolved problems and solutions, and uncover

current and possible future issues to be solved. In the end, we aim to provide recommendations

for further reform on the basis of past successes in Ghana, West Africa, and around the world.

Literature Review

This paper used many scholarly references to prepare this report on public sector pay

reform in Ghana. Public sector pay structures all over the world were examined, Ghana’s history

has been taken into account, and possible obstacles to reform have been scrutinized. The

following documents were major sources of information for the findings of this paper.

Simon Burgess and Marisa Ratto wrote The Role of Incentives in the Public Sector on the

issue of incentives in the public sector. Using the United Kingdom as their example, they seek to

“review the important issues in performance pay in the public sector” and find the effects of non-

wage incentives. (Burgess) Their objective is to find the effectiveness of non-wage incentives in

the public sector, and explain why this may be different than in the private sector.

Burgess and Ratto focus on previous studies and previous pay-for-performance schemes,

both in the private and public sectors. They found that in the private sector, productivity

increased through both motivating current employees and attracting better workers. While

warning that there is much more limited evidence in the public sector, Burgess and Ratto offer

both successful examples as well as cautionary tales. The latter include instances in which

employees aimed for quantity over quality, took action at the expense of fellow employees, and

only worked at measured or rewarded tasks, neglecting those that were not rewarded.

In addition, they report that manual labour workers, such as a maintenance worker in a

university, performance pay is equally likely in the public sector as private. However, these

schemes were much less likely for non-manual workers in the public sector, and where they did

they were based on a subjective measure of merit rather than an objective measurement, such as

a numerical goal. Burgess and Ratto conclude that this is most likely an inefficiency in the public

sector and should not be contributed to ineffectiveness.

As noted, there is not yet enough evidence to conclude the role of performance pay in the

public sector. The evidence pointing towards the inefficiency is” weak,” as is noted in The Role

of Incentives in the Public Sector. This is due both to a lack of study, as well as to complicating

factors such as output measurement and intrinsic motivations.

In October 2008, Victoria J. Cooper-Enchia introduced her paper Pay Reform in Ghana at

the African Association for Public Administration and Management’s Annual Roundtable

Conference. Her objective is to prevent an overview of the history of Ghana’s public sector pay

policy, and examine the latest reforms and their objectives. She explains that an efficient and

effective public sector is crucial to successful carrying out “the nation’s…development agenda,”

and if properly organized could potentially be the motivator for that progress (Cooper-Enchia).

Ghana Universal Salary Structure (1997) is cited as Ghana’s first attempt at reform. The

goal was to create more equitable pay among the entire public sector. GUSS was not all that

effective as much of the public sector did not convert to the new system. This is followed by the

Single Spine Salary Structure in 2006, which similarly tried to level the playing field in pay

levels, but had the added goals of encompassing all public sector employees and attracting

“requisite skills and competencies to the public sector” (Cooper-Enchia). The Fair Wages and

Salaries Commission was established in 2007 to carry out these tasks.

This paper concludes that Ghana has all the factors required for a successful, fair public

pay scheme, but implementation will present considerable obstacles.

Damian Grimshaw’s paper National systems of public sector pay surveys different

European nations’ public pay structures. Grimshaw “seeks to contribute to the debate on the

benefits of local versus national bargaining structures in the public sector” (Grimshaw). He

assesses national versus local bargaining, characterizes national systems of public sector pay, and

examines wage structure.

National systems of public sector pay explains public sector pay systems in three different

ways. It looks at fragmentation, centralization, and bargaining power. Fragmentation is

contrasted with integration and describes how different divisions of the public sector are paid

within the national structure. Centralization is defined by the extent to which a country’s pay

structure is controlled by its national government, as opposed to smaller districts. Lastly, the

spectrum of employee bargaining power stretches from free collective bargaining, in which the

employees and government agree on a wage level together, to unilateral employment regulation,

where the government sets the wage that its employees will be paid. Grimshaw goes on to

associate wage inequality with decentralization and fragmentation.

Grimshaw concludes that high levels of centralization and integration in the public sector

pay structure allow for more flexible pursuit and achievement of goals, such as economic

development. He states that, “In the short term…there is greater potential in these countries for

public protest and worker resistance against the planned budget cuts” but there is higher potential

for long term economic stability.

Martin Ankomah’s paper Enhancing Public Sector Employee Reward: The Case of Single

Spine Pay Policy focuses on employee compensation. Compensation includes “all of the

monetary, non-monetary and psychological payments” disbursed to an employee for duties

performed. Wage is only one aspect of compensation. The Single Spine Pay Policy is designed to

maximize compensation for public service employees. Ankomah seeks to survey the single spine

salary structure and the reasons for reform.

This paper cites three reasons for reform: an over-budget wage bill, wage inequality, and

wage compression. It states that SSPP seeks to solve these issues through a policy of equal pay

for work of equal value and linking pay to productivity. Ankomah ends by presenting

apprehensions to reform, such as a lack of confidence in the government and leaders in charge of

implementing and operating the new policies.

Methodology

The research is based on a thorough review of past literature pertaining to public sector

pay reforms in Ghana and abroad. The research was conducted by compiling information from

scholarly articles, conference publications, and government surveys over the last 20 years. This

allowed for a greater understanding of the evolution of public sector pay reform. In analyzing

this research the following objectives were identified.

While general conclusions were made in the writing of this paper, the major limitation is

the inability to conduct original econometric study or fieldwork. Since the most recent reform,

SSSS, was implemented in 2007, the challenges and issues are not fully realized. Systemic

evaluation of the new reform is becoming more critical in order to better understand pay

disparities and changes in external relativities. Given more time and resources, this would have

been possibility, but under the given conditions, this paper uses global comparisons to provide

recommendations for future study and policy implications. This however in its self is limited

since there is little research done on other countries with similar socio-economic qualities, like

other countries that are low to middle income as rated by the World Bank. Thus, conclusions

were draw from comparative study of pay structures around the world, comparisons of countries

with similar characteristics is limited.

Findings

Ghana Universal Salary Structure

From the time of independence in 1957 to 1992, Ghana went through turbulent political

reform. The continual coup d’etat’s and changing of government compounded the issue of pay

disparities and the growing wage bill. During the 1970’s until 1997, the government attempted to

set up various commissions to oversee pay in the public service, such as Issifu Ali Committee in

1973, Azu Crabbe commission in 1979, the National Committee for Wage and Salary

Rationalization in 1983, among many others. However, they commissions were unplanned and

unprepared to create significant change. Thus, most segments of the government, such as

customs, police, or education, created their own salary and grading structures unique to their

service. This led to the formation of more than 30 unions and employee associations to negotiate

individual sector pay reforms. With the establishment of the fourth republic in 1992, the

Government of Ghana began to lay the foundation for broader, more dramatic reform. In 1997,

the Ghana Universal Salary Structure (GUSS) was introduced (Cooper-Enchia 2).

A result of the Price WaterHouse pay reform recommendations, the GUSS was a 22-level

salary structure intended to resolve the inequities in pay across the public sector (Ghana Health

Service 4). Prior to implementation, a nationwide job evaluation was undertaken in order to

develop an enhanced salary structure and new grading structures. The intention was to transfer

all institutions over to the new system; however, many institutions did not transfer and without

legal backing or financial resources, little was done against them. The institutions that did not

transfer often held higher wages, making incentives to not adhere to the new system large. Thus,

the first comprehensive reform in Ghana had little lasting effect.

Single Spine Pay Policy

With the GUSS only have a marginally effect on the issues with public pay structures, in

2006, the government decided to adopt a new structure, the Single Spine Pay Policy (SSPP). The

change to an entire new system was part of the recommendations of CoEn consulting, who

identified the following major issues:

1. Low levels of pay

2. Inequalities within and across the sector

3. Multiplicity of allowances

4. Lack of control over the wage bill

Moving from a 22-level salary structure to a 25-level salary structure, the Single Spine Salary

Structure (SSSS) did not allow for any institution to opt out and unified all public service

workers under Article 190 of the 1992 Constitution ("Historical Background"). Instead of a

variable base pay and variable relativities across sectors, SSSS has a common base pay and

relativity for jobs of equal value. Other than this objective, several other goals were identified,

including:

Managing the wage bill more efficiently

Ensuring compliance and enabling monitoring

Minimizing union group tensions related to distortions and low pay

Connect pay with productivity

There were eleven stages of implementation, including the design and determination of

wages, which allowed for the negotiations of conditions with unions and association as well as

the development of a public sector-wide performance system (Ghana Health Service 7).

The Job Evaluation Exercise that allowed for the creation of SSPP was more thoroughly

conducted to guarantee the best results. It was developed with extensive consultation of

stakeholder groups, such as institutions, civil service members, and unions during its design and

implementation. This evaluation included gathering job content data from more than 5,000

public servants across 150 entities, development of more than 1,800 job specifications, and

placement of all public sector jobs onto this new grading structure. It was raised the minimum

wage from GH¢3.11 to GH¢3.73, effective February 15th, 2011 and will increase to GH¢4.48 in

February 2012. It established a base pay of GH¢1,329.70 per annum with a relativity ratio of

1.7% (Controller & Accountant's General Department). Figure 1 shows the level and grading

structure implemented with the new pay reform. It correlates to Appendix A, which shows the

monetary values for each level as of January 1st, 2011. The determination of grade steps for the

SSSS is based on the number of years, with before one year placing an employee on the first

step, one to three years placing them on the second, four to seven years placing them on the

third, above eight years placing them on the fourth, and so on.

Sourced: Controller & Accountant's General Department, 2011.

The evaluation took into account four broad factors: knowledge and skill, responsibility,

work conditions and environment, and effort. Below is the list of thirteen sub-factors taken into

account for the job-analysis & evaluation (Controller & Accountant's General Department).

1. Knowledge and Skill

a. Knowledge (knowledge required for satisfactory performance of job duties);

b. Learning Experience (practical work experience required to perform the job duties

satisfactorily); and

c. Judgment (exercising judgment in decision-making).

2. Responsibility

a. Consequence of Error (consequences of errors in decision making);

b. Financial Responsibility (responsibility for financial resources);

c. Responsibility for Assets (responsibility for assets and people – patients, students,

inmates, goods, tools, equipment, etc);

d. Supervisory Responsibility (supervision of others); and

e. Responsibility for relationships (responsibility for effective handling of personal

contacts with staff, clients, visitors, general public, government officials, private

sector, etc).

3. Work Conditions/Environment

a. Working Environment (exposure to undesirable conditions); and

b. Hazards (frequent exposure to hazards or the safety requirement under which the

work is performed).

4. Effort

a. Dexterity (the level of physical agility required by a job);

b. Physical Effort (physical fatigue that result from performing the duties of the job);

and Mental Effort (mental, visual and auditory fatigue that results from

performing the duties of the job).

Finally, it revised the categories of allowances. Category 1 includes allowances related

to normal job duties and responsibilities. Category 2 and 3 were isolated as the main issue during

the pay reform. These categories relate to special conditions, like overtime, and staff benefits.

These are often the areas where there are pay disparities across the sectors occur. The evaluation

therefore called for the standardization of these allowances. Lastly, Category 4 relates to benefits

with providing accommodation or standard of living for particular positions (Controller &

Accountant's General Department).

Based on past failures, a variety of issues were addressed, in addition to those stated

above. First, public service jobs were placed into nine classifications, such as health services,

security services, and regulators, based upon requirements for training, skills, and education as to

better determine equity in pay. One difference from the GUSS is that the SSPP does not include

public officials and the military into its pay structure, which could have far reaching implications

in the future. This also requires all unions within a service classification to negotiate at the same

time, allowing the Government to focus attention on only nine sessions a year, and reformed the

negotiation strategy to include only one round of negotiations between parties increasing the

likelihood of compromise and reducing transaction costs (Fair Wages and Salaries Commission

5).

Through the Fair Wages and Salaries Commission Act of 2007, there was a provision for

legal backing to carry out the new reform. This also established the Fair Wages and Salaries

Commission, which provides the oversight and regulatory duties to sustain the pay policy. Also,

it includes market premiums and inducements in order to attract certain, critical skill sets that are

lacking from the current population of public servants. The premiums would be directed towards

skills in short supply, such as petroleum engineers, but inducements would be directed towards

workers who are willing to work in underserved areas like teachers and health officials in rural

areas of Ghana. Figure 2 represents how market premiums can close the gap between public and

private sector employment wages.

Sourced: Lucifora, 2004.

However it recognizes that no single classification is eligible, thus, it created clear

guidelines for identifying jobs that do qualify and reviews them periodically. Finally, in attempt

to make the transition smoother, the government created a Conversion Difference for employees

whose salaries would be negatively affected, reducing the difference year by year (Fair Wages

and Salaries Commission 7). For example, if an employee has a salary of Gh¢250 on the SSSS,

but their current salary is Gh¢200 plus a category 1 allowance of Gh¢100, then the employee’s

total current salary will be Gh¢300, with a conversion difference of 50. This payment of the

conversion difference continues until the amount reaches zero (Controller & Accountant's

General Department).

Challenges

Creating a coherent wage and salary structure that will keep millions of employees

satisfied is a very difficult task, but it is the task undertaken by every government in the world,

including Ghana's Single Spine Salary Structure. The first problem to be solved is to decide upon

an appropriate wage bill. How much of a country's budget should be devoted to the public

sector? Too high, and money is wasted, but too low and productivity is not up to expectations.

Another issue to be solved is how to measure productivity. Public enterprises are not

profit-turning endeavors, so success can be hard to measure. It is not simply a monetary value. It

may be measures as a distance of road created, but the quality of road must also be taken into

account, and similar measures must be taken for all public sector positions.

There are two common issues that recur in public sector wage and salary. These are

salary erosion and wage compression. In salary erosion, real wages fall although nominal wages

may be holding constant. Wage compression is a situation in which low wages rise while high

wages stay constant. Both of these cause problems among public sector employees.

When it comes to correcting some of these public sector pay problems, there are many

barriers that may be encountered in reform. The most inhibiting barrier is politics. A government

must try to correct problems while keeping its people happy. If a country's wage bill is too large,

it may have to lay off employees, or at the very least freeze hiring. Neither of these would be a

popular decision. To fix wage compression or salary erosion, a selective increase in wages may

be prescribed, but this may also cause unrest. One example of this is in Peru, where a populist

movement prevented the government from a selective wage increase.

The Single Spine Salary Structure which was hailed by many workers in the country on

its Implementation and has faced some challenges and some of these challenges are; Firstly,

whiles the workers in the Ghana Police Service were very happy with the structure because their

salaries increased drastically which was not so before, others were not very satisfied with this

reform mainly because it lacked equity, transparency and fairness. For examples health workers

have complained about lack of transparency in the structure and the Ghana Prisons Service has

also come strongly against the policy because they thought it lacked equity.

Also, before salaries were negotiated collectively under the Public Services Joint

Negotiation Committee (PSJSNC) but now unions have agitated that the implementation of the

SSSS will lead to legal ramifications and gagged collective bargaining agreements. Again, the

Labour Act, 2003 (Act 651)10 grants workers the right to collectively bargain and stipulates that

a collective agreement on the terms and conditions of employment may be concluded between

trade unions and employer’s organisations. Under the provisions of Act 651, a certified union,

which is issued with a Collective Bargaining Certificate (CBA), is entitled to establish, with the

employer concerned, a Standing Joint Negotiating Committee to negotiate all matters connected

with the employment or non-employment or with terms of employment or with the conditions of

employment of its workers. People think with the implementation of the SSSS these rights will

be disregarded and workers not being able to fight for future improvements in their salaries and

conditions of service.

Another challenge with the implementation of the SSSS is the issue of payment of market

premiums. Market premium is a form of incentive paid for workers to keep them still working

for the country. Under the SSSS, not all jobs are eligible for market premiums. For instance

workers such as doctors, nurses and the police need to be paid market premiums to motivate

them and keep them still working in the country and prevent them from moving to the private

sector. Especially the health professionals need to be paid this premium to keep them at home.

As noted by Abbey11, their absence or insufficient presence could mean an

intensification of socio-political instability, which could flow out of poor health service delivery

in the country. Also, weak human resource management system in the public institution is

another challenging issue with the implementation of the SSSS. The human resource

departments and units of the various public institutions are expected to be at the forefront of this

change agenda of the new pay policy. The human resource departments and units lack the

capacity in terms of human resource professionals to effectively manage this change system.

The human resource information, monitoring and evaluation systems in the public institutions

are not quite effective. For example, there are problems with staff data and record keeping. As a

result of this, and also because of the way recruitment is done, staff are not always posted to

places of greatest need and also most human resource departments are vulnerable to corruption.

Moreover, it is argued that the implementation of the SSSS will cost the government of Ghana a

great deal of money that is an increase in the government wage bill. There are other areas where

money can be channelled to such as the provision of road networks and other infrastructures for

improvement instead of increasing the pay of workers.

Lastly, the various heads of agencies and the institutions in the public sector lack the

commitment to the implementation of the policy. They don’t fully acquaint themselves to the

SSSS. Most of these agencies and human resource departments lack accountability. Figure 3

describes common problems and measures taken to address public sector reforms.

Sourced: Antwi, 2008.

Most of these challenges are written in response to theoretical questions. No recent

studies have adequately researched the actual implementation of the SSSS, but the recent labour

crisis in Ghana signals key observed issues. As of April 9th, 2013; Ghana National Association of

Teachers (GNAT), the National Association of Graduate Teachers (NAGRAT), University

Teachers Association of Ghana (UTAG), and Ghana Medical Association (GMA) have gone on

strike. As previously stated, the GNAT and NAGRAT suspended their strike after a meeting with

the President; however UTAG and GMA have continued their strike even after meeting with the

National Labour Commission (NLC). The teachers were quoted saying that the government

owed them certain portion of their allowances. The doctors and pharmaceutists of the GMA

demanded payment of their market premium in arrears from 2012, and rejected the NLC’s ruling

for a payment schedule instead of in full ("Striking Doctors to boycott NLC meeting

Wednesday”). The Judicial Service Staff Association have also called for a strike in relation to

their salaries in arrears from 2012 ("Workers at Ghana’s courts threaten another strike”). Each

of the groups have also claimed that they have written to the FWSC and the government with

their grievances, but no action has taken place.

Andy Asamoah, a former member of the FWSC, has shed some light on the current

labour issues in statements to the Daily Graphic, the largest newspaper in Ghana. He stated that

the job evaluation meant to classify wages did not consult with stakeholders, and that allowances

and market premiums should be determined before the implementation of the policy. In reality,

as seen with the doctor’s strike, these issues are being discussed now. He also acknowledged that

not enough education of the policy was given to the labour force. When the salaries of the Police

Service rose with the implementation of SSSS, other workforces hoped for similar treatment.

There was no explanation of why certain jobs were placed on certain pay grades, such as the

Prison Service versus the Police Service. Finally, there is especially increased animosity between

public service employees, on SSSS, and public officers, who are not on the new pay structure.

He stated, “there would certainly be a problem when the government was reported to have paid

GH¢47 million as ex gratia to 230 Members of Parliament but had pleaded with public sector

workers to accept payment by installment” ("Place public sector workers on SSSS – TUC”).

Pay Structure Cross-Country Comparison

Public sector pay structures can be broken down in different ways. Three categories that

can be analyzed are fragmentation, centralization, and bargaining power. Here, different

countries pay structures will be compared. Ghana has employed a single spine, or integrated pay

structure, with centralized wages and collective bargaining.

In fragmented pay structures, such as the UK, different occupations have different pay

structures. The opposite of a fragmented pay structure is known as an integrated pay structure, or

single spine. In this system, which is used in Norway and Denmark, one uniform pay scale

applies to all government employees.

Centralization of wage scales is determined by whether wages are determined locally or

by the central government. Wages are highly centralized in Germany and the Netherlands, while

the UK and Sweden provide examples of very decentralized pay structures. In Sweden, the

public sector wage bill sets aside 1% for local negotiation costs.

Free collective bargaining is a very rare power for public servants. Denmark is one of the

few countries it exists in. Here, two-year agreements apply to all public sector staff. In most

countries where collective bargaining exists, it is qualified by the requirement of government

approval after negotiation or constrained by some other state-set limit. Sweden and the UK are

examples of countries that allow for collective bargaining with government approval. Very few

countries have completely unilateral wage setting; when this is the case it is very rarely for the

entire public sector. Germany unilaterally sets wages for 40% of their public sector, called the

Beamte, but even they benefit from the wage negotiations of the other 60% of the public sector.

(Grimshaw)

Determinants of public sector pay are different all over the world. Countries determine

how to pay their civil servants individually, and as a result there are many different systems.

Within the European Union, public servant wages differ greatly. There are many similarities and

differences between, for example, Britain, France, and Italy. In Britain and France, public sector

employee's have the ability to unionize to argue for higher wages. In France, however the

outcome of collective bargaining is not legally binding for the government. Collective bargaining

in Britain is binding, but not all that effective. Review bodies help to determine wage levels, and

contracting out has increased privatization in recent years. In Italy, wages are decided by the

central government. Other differences include private sector comparison, which is used in Britain

but not France and Italy, and a minimum wage, which is absent in Italy but present in Britain and

France. (Lucifora)

In Germany, one set of standard national agreements covered the entire public sector until

recently. In 2005, new collective agreements replaced the previous system. The new structure

placed greater impetus on performance and less on seniority. In addition, a low-wage pay grade

was introduced and separate agreements were reached for different employee groups such as

hospitals and transport. (Bosch)

It is widely believed that as relative pay for public sector positions declines, so will the

relative quality of the people seeking that position. In many cases, the public sector is in direct

competition with the private sector for employees, and the private sector often wins out. There

are many reasons for this; the private sector may be able to offer a higher wage or more non-

wage benefits. It is a concern of the public sector that as relative wage decreases, so will the

quality of employees. In the 1988 paper Public Sector Pay and Employment Reform, Barbara

Nunberg focuses mainly on developing countries in her analysis of how the World Bank has

influenced reform. The World Bank suggests selective wage increases to attract better

employees. This correlation between relative wage and quality of worker is not unique to the

developing world. It is also true of Great Britain.

Since the mid 1970s, public sector investment in Great Britain has fallen in most sectors.

Those with significant pay decrease include manual workers, nurses, teachers and general

administrators, while police, related groups, and medical staff have not suffered similar wage

decrease. Male teachers’ test scores are significantly lower in the mid 1990s than in the mid

1970s, which correlates with the fall in compensation. Over the same time period, there was no

marked decrease in test scores for those groups whose relative pay did not fall. (Nickell)

Nunberg also discusses the impact of non-wage incentives on public sector employees.

She states that these incentives could include housing or housing credits, family and health

benefits, and pension plans. A 2003 paper by Simon Burgess and Marisa Ratto discusses the

effects of public sector incentive benefits in multiple countries around the world. They warn that

there are far more examples of similar programs in the private sector, but provide several public

sector examples. First, an incentive system for the Brazilian tax collection authority is examined.

Based on performance, Brazilian tax collectors could earn up to twice the mean annual wage.

After implementation, fines collected increased by 75 percent.

Performance pay for teachers has been looked at more intensely than any other public

sector. One study examined a Dallas, Texas, US school district. Rather than awarding bonuses to

individual teachers, bonuses were awarded to each school employee (teachers, administrative

staff, cleaning crews, etc…) based on a school wide improvement in performance. They found

that about 20% of schools met their goal and were awarded bonuses every year. A 2002 paper by

Lavy studied two different incentive schemes in Israeli schools. Both were tournament based. In

the first, schools competed based on average performance and bonuses were awarded to all the

teachers of the winning school. In the second, teachers whose students were in the top 25% of

test scores were awarded large bonuses. Both incentive schemes showed positive results in

performance. (Burgess)

Despite the positive results shown in schools, performance schemes have generally been

shown to be more effective in the private sector. (Burgess)

Today, the United States’ wage structure reflects what is generally expected. Highly-

skilled work will fetch a much higher price in the private sector than the public sector. Another

way to state this is to say that an individual in the highest echelon of earners in the public sector

is likely to transfer to the private sector, while an individual earning a high wage in the private

sector is not likely to move to the public sector. The implications of this are not good for the

public sector: the most qualified employees are most likely to seek public sector positions. In

addition, the American public sector has shown increased wage compression relative to the

private sector. In summation, highly skilled workers in the American labor market are more

likely to seek work in the private sector due to wage inequality and wage compression. This is an

issue faced in all economies. In order to attract the most skilled workers, the public sector must

do one of two things: mend these weaknesses, or attract workers with other incentives. (Borjas)

Both developed and developing countries tend to face a similar list of challenges in the

public sector pay structures. The variability of structures is not all that wide among countries. We

can see many similarities between Ghana’s single spine structure and many of Europe’s public

sector pay structures, as well as vast differences. We also observe that the challenges faced by

most public sectors tend to be shared; that includes preventing wage compression and salary

erosion, attracting workers to the public sector, and maintaining productivity in addition to others

mentioned.

Conclusion

Public Service pay reform requires a commitment by all stakeholders, institutional heads,

employees, and labour unions, in order to realize their effect and create lasting change. In 2007,

Ghana went through a major reform in the measurement, evaluation, and management of the pay

and grading structure for public servants across all sectors of government. The reform was

considered a landmark change, because of its consultations with labour unions, extensive job

evaluation exercise, and overall ability to fix past failures. However, just six years later, that

belief is diminishing. Institutions whose salaries are overdue have called nationwide strikes, and

there is a loss of faith in the ability of the government to commit the necessary resources and

follow through with the policy in order to truly correct the past pay inequities.

Future research on this subject should focus on how the policy was implemented and

evaluation over the next coming years, especially given the current political situation.

Additionally, research should investigate placement of jobs on the salary structure as well as the

determination of market premiums and inducements.

The future of the public sector in Ghana is dependent on enacting changes to the

implementation of the SSSS. In a statement to the press, Andy Asamoah suggested the creation

of an independent committee to work in a limited period and draft recommendations for the

government to move forward with the implementation of the policy ("Let’s have truce between

govt, labour”). However, this solution requires commitment by the heads of institutions and

political officers in order to ensure public support and belief in this being an effective answer.

Sourced: Controller & Accountant's General Department (2011).

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