(unedited version of the article published on July 3, 2013 in Mr Republica)
Pay hike for government employees has become a thorny issue ahead of the impending budget. All employee unions have been putting pressure on the government to raise their salary level, which has been stagnant for the last three years. They have threatened the government with protests that could potentially impact CA election. On the other hand, political parties during their interaction with government representatives have shown strong aversion to such a raise.
But this does not stem from their concern for the country. Rather, they seem to be reluctant for pay rise of government employees as all its credit will go to the nonpolitical government. Nepal is among the Asian countries that pay very little to government workers, even while the inflation rate is sky high. Inflation is directly related to purchasing power measured by Consumer Price Index (CPI). If the CPI for food is 10 relative to previous year, it indicates that a food item purchased for Rs 100 last year costs Rs 110 this year. In most developed countries and in many developing countries in Asia like India there is a system of regular adjustment of salary in line with the inflation level. In absence of such self-adjustment mechanism in Nepal, salary always becomes a contentious issue during budget formulation.
A second factor that may influence government’s pay scale is the country’s economic position. A country with high per capita GDP may be better placed to pay its civil servants well. However, Nepal’s public employee salaries are poor even when compared to countries with similar per capita GDP. For example, Pakistan with about twice the level of per-capita GDP and Bangladesh with per-capita GDP roughly equal to Nepal’s, both pay more to university teachers than Nepal. According to a 2011 World Bank report, Pakistan has a per capita GDP of $1,030, Bangladesh $638 and Nepal $562.
In 2011, the Higher Education Commission of Pakistan’s revised salary for tenure-track assistant professor was PRs 104,000 and final pay for professor level was around PRs 405,000. A recent job vacancy by the National University of Bangladesh, a public body, announced a salary of Taka 25,720 (1 US dollar=Taka 78) for Associate Professor. Private universities there pay upward of Taka 90,500 to its entry-level professors. In India the going salary of a starting lecturer is IRs 21,600 including academic benefits. The final scale of a full professor is around IRs 80,000. We can take this as a reference for salary comparison in the region.
Inflation adversely affects the salary rate. The inflation rate for the fiscal year 2011-12, calculated by Nepal Rastra Bank, was 9.8. This indicates that if someone earned a monthly salary of NRs 1,000 last year and there was no salary rise, the real salary this year would be Rs 920.
Civil servants and related workers unions are putting pressure on the government for salary raise. In response, the government has shown an inclination towards some kind of a raise. However, there is some disagreement about the amount of increment, especially in the face of the resentment of political parties. One way out would be to go for minimum salary raise that just covers the inflation rate. For example, if a civil servant was getting Rs 15,000 in 2008-09, his salary would be worth only Rs 11,497 in year 2011-12 due to inflation. Hence, he should get a raise of about 23 percent to bring his salary on par with the 2008-09 level. In the same way the minimum salary increment for different salary groups can be calculated.
But this does not stem from their concern for the country. Rather, they seem to be reluctant for pay rise of government employees as all its credit will go to the nonpolitical government. Nepal is among the Asian countries that pay very little to government workers, even while the inflation rate is sky high. Inflation is directly related to purchasing power measured by Consumer Price Index (CPI). If the CPI for food is 10 relative to previous year, it indicates that a food item purchased for Rs 100 last year costs Rs 110 this year. In most developed countries and in many developing countries in Asia like India there is a system of regular adjustment of salary in line with the inflation level. In absence of such self-adjustment mechanism in Nepal, salary always becomes a contentious issue during budget formulation.
A second factor that may influence government’s pay scale is the country’s economic position. A country with high per capita GDP may be better placed to pay its civil servants well. However, Nepal’s public employee salaries are poor even when compared to countries with similar per capita GDP. For example, Pakistan with about twice the level of per-capita GDP and Bangladesh with per-capita GDP roughly equal to Nepal’s, both pay more to university teachers than Nepal. According to a 2011 World Bank report, Pakistan has a per capita GDP of $1,030, Bangladesh $638 and Nepal $562.
In 2011, the Higher Education Commission of Pakistan’s revised salary for tenure-track assistant professor was PRs 104,000 and final pay for professor level was around PRs 405,000. A recent job vacancy by the National University of Bangladesh, a public body, announced a salary of Taka 25,720 (1 US dollar=Taka 78) for Associate Professor. Private universities there pay upward of Taka 90,500 to its entry-level professors. In India the going salary of a starting lecturer is IRs 21,600 including academic benefits. The final scale of a full professor is around IRs 80,000. We can take this as a reference for salary comparison in the region.
Inflation adversely affects the salary rate. The inflation rate for the fiscal year 2011-12, calculated by Nepal Rastra Bank, was 9.8. This indicates that if someone earned a monthly salary of NRs 1,000 last year and there was no salary rise, the real salary this year would be Rs 920.
Civil servants and related workers unions are putting pressure on the government for salary raise. In response, the government has shown an inclination towards some kind of a raise. However, there is some disagreement about the amount of increment, especially in the face of the resentment of political parties. One way out would be to go for minimum salary raise that just covers the inflation rate. For example, if a civil servant was getting Rs 15,000 in 2008-09, his salary would be worth only Rs 11,497 in year 2011-12 due to inflation. Hence, he should get a raise of about 23 percent to bring his salary on par with the 2008-09 level. In the same way the minimum salary increment for different salary groups can be calculated.
The dilemma for the bureaucratic government is whether to side with the political parties and agree to negligible (or no) pay increase and incur the ire of civil servants or to increase the pay substantially risking a political backlash. The challenge will also be to keep a lid on cost of living. If the inflation is very high, just about any amount of salary increase will be meaningless.
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