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

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Chapter 2: Composition of Public Expenditure and
Key Sources of Fiscal Pressure
comparator countries (Table 2.7). The average annual salary of a teacher in Montenegro,
including all the allowances is €7,103, which amounts to more than 160 percent of per capita
GDP. This is very high in international terms.
2.37 To make matters worse, average
salaries for both teaching and non-teaching
staff in non-university education increased
by between 8 and 9 percent in 2006. This was
the result of a new branch collective agreement
which increased salary coefficients. The
projected salary budget for these staff for 2006
as against 2005 showed an increase of only
three percent. This means the government
faces a simple choice. Either, allow spending
on salaries to eat further into the non-salary
expenditures, which, as noted above, are
already low, or, reduce the number
2.38 of staff in the sector so that the overall
wage bill fits within the projected budget. The
Bank team has been advised that the
government has adopted the second option.
This means that the government needs to
reduce wage expenditure in non-university
education 29 from the approximately €65.9m it
would be if all staff remained in the sector 30 to
the €60.7m allocated in the Ministry’s budget
Table 2.7. Average Teacher Salaries and
Benefits, as a Ratio of PPPGDP per Capita,
2003
Montenegro (2004) 1.61
OECD Average 1.31
Indonesia 0.50
Slovak Republic 0.56
Poland 0.82
Hungary 0.98
Czech Republic 1.06
Finland 1.12
France 1.12
Peru 1.13
United States 1.17
Spain 1.42
New Zealand 1.51
Germany 1.71
Korea 2.42
Note: For Montenegro, the figure is based on the
average salary for all teachers; for other countries, the
base is the average salary for primary education
teachers with fifteen years of experience.
PPP: Purchasing power parity
Source: Education at a Glance 2005, Bank staff
estimates for Bosnia and Herzegovina and Montenegro.
for 2006. The Government has not said how it intends to reduce employment and the time for
reductions before the beginning of the 2006-07 school year has passed. Had the reductions been
made over the summer, a reduction in the 2006 wage bill of €5.2m would be equivalent to a
reduction in education staff of 1,800. 31 In fact, even more savings are needed because making
people redundant costs money. In 2005, the Government went through a redundancy program
which offered any teacher who wished to leave the profession €2,000. These funds were paid
from the budget of the Ministry of Labor and Social Welfare. If this same approach were
adopted in 2006, it would mean that the net savings to the government in 2006 from each person
29 The university is excluded from these calculations because no information is available on spending allocations, as
the government gives a lump sum transfer to the university which covers all types of spending.
30 Assuming an average salary increase of 8.5 percent.
31 The average gross salary including allowances of staff (including both teaching and non-teaching) is estimated to
be €5,780 (for just teachers, €7,103). This implies that for each person made redundant the total savings in 2006
will be €2,890 (€3,557), since staff can now only be released from their duties at the end of the school year (i.e.,
after six months work in 2006).