Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

Chapter 2: Composition of Public Expenditure and
Key Sources of Fiscal Pressure 23
2.29 Insufficient information is available to say with confidence whether it is wage rates
or employment levels that contribute most to the overall cost of public employment. No
surveys have been done to compare public sector wages with those in the private sector for
similar jobs. Furthermore, international comparisons of public employment as a share of total
population show wide differences across countries. For Montenegro, public employment
(civilian and military) is roughly 6.7 percent of the population (Figure 2.6). Relative to the
countries sampled by OECD/Puma, this appears to be only slightly higher than the median. To
the extent that pay rates may be a contributing factor to the aggregate wage bill costs, it would be
primarily because of very large increases that occurred between 2000 and 2003.
Figure 2.6. Public Employment as a Percent of Population
Montenegro
Canada
Japan
Netherlands
Hungary
Italy
France
Spain
Greece
Germany
Czech Republic
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
Sources: Montenegrin Ministry of Finance; OECD/Puma.
Public Sector Wage Bill Concentrated in Key Functions
2.30 Though the cost of the public administration is high, its capacity to carry out many
of the core functions for effective service delivery or European integration is rather limited.
Eighty-seven percent of the wage bill (excluding local government) is concentrated on just four
functions—public order, defense, education, and health (see Figure 2.7.). All of the other
functions and institutions of government operate on the remaining 13 percent. The numbers of
staff that work in these “Other Ministries and Agencies” as well as in the representative bodies of
government are disproportionately small. Increasing the number of people in these functions
may or may not be appropriate; such assessments would normally be part of a broader functional
review and are beyond the scope of this report. However, the data strongly suggests that any
future reductions in employment should be targeted toward the four dominant sectors.