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Downsizing the public workforce due to fiscal pressures - really?
As fiscal pressures are growing nearly everywhere, many governments are revisiting public sector workforce expenditures in search for savings. Reducing the size of the public workforce is hereby presented as a primary lever, while cutting back benefits and modifying the terms of employment are equally considered. The new French government, for example, proposes the extension of leave without pay for absence from the workplace for health reasons from one to three days for the budget 2025. Other countries are considering much more radical measures.
In view of the size of public sector employment, its status as a relevant source of budgetary savings is not surprising. Globally, the share of public employment is on average around 11 percent, falling to 7 percent in developing countries. Across OECD countries, it accounts on average for nearly 20 percent of total employment while reaching more than 30 percent in a few of them. Compensation of public employees averages about 20 percent of general government budget expenditures in OECD countries, representing the second largest expenditure category.
Considering public sector downsizing as a potential buffer in times of tight budgets is not a new option. In fact, cyclical adjustments of the number of public employees have been tried before, independently from more structural arguments of employment reductions, such as, for example, those in favor of “small government”.
What can be said about the relevance and value of this approach under current circumstances?
First, considerations of downsizing the public sector workforce, like other proposals of public expenditure reduction, should be accompanied by cost-benefit analyses or similar impact assessments. This will greatly improve the chances of quality decision-making related to public employment. After all, identifying the priorities and targets of public sector reduction requires precise analysis and insights about changes of employment in specific sectors, ministries and agencies, with regard to positions and qualifications of staff, age structures, gender balance, and many other parameters. In addition, issues related to allocating the modifications across different levels of government will need to be specified and addressed.
A comprehensive assessment will also allow for a better understanding of appropriate implementation strategies for public sector downsizing in terms of range, depth and timeframes as well as of the expected savings in the short- or medium-term when they are most needed.
Second, in view of the urgency to achieve the Sustainable Development Goals by 2030, strong public institutions, including a competent public sector workforce, have been identified as one of the key drivers of acceleration. Reduction of the public sector workforce will, therefore, most likely hamper progress in implementing the 2030 Agenda. The soon to be finalized UN DESA/IASIA Review and Upgrade of the Standards of Excellence for Public Administration Education and Training has for the first time addressed the importance and challenges of the 2030 Agenda for public employees. It is envisaged to strongly recommend to governments that investments in learning and skills should lead to building a SDG-based mindset among public employees.
Third, rebuilding and strengthening trust in government critically depends on the effective delivery of public goods and services, especially at the sub-national and local level. While the use of digital technology can lead to productivity gains in public service delivery, responding to the call for inclusiveness and leaving no one behind also means maintaining in-person delivery channels. Based on empirical evidence, the factors influencing trust in government are, among others, satisfaction with administrative services, bureaucratic integrity, and fair treatment of people by public employees.
Fourth, beyond skills and competences, the performance of policymaking and implementation depends on the commitment and attitudes of public sector employees towards the creation of public value. For a well-functioning government machinery, political leaders are responsible for showing appreciation for the public value created by the public sector. The COVID-19 pandemic has led to valuable insights regarding the importance of acknowledging and rewarding public service frontline staff. These insights can represent useful guidance for political leaders to apply similar practices on a (more) regular basis. As a case in point, the IMF Managing Director addressed the 2024 Annual Meetings Plenary “on behalf of the talented and dedicated staff of the IMF”.
No doubt, the size, compensation and other benefits of the public sector workforce are subject to public expenditure scrutiny. In times of fiscal stress, possible savings through modifications of one or more of these parameters must be explored. At the same time, evidence-informed assessments are necessary to calibrate downsizing measures in an effective, efficient, fair and transparent way. This also includes paying attention to the ongoing serious delays in achieving the SDGs and the low level of trust in government, while recognizing the important role of the public sector in overcoming the challenges of adverse developments in many public policy areas.
While political leaders must be able to rely on an agile, committed, and performing government machinery, they are also responsible and accountable for providing and maintaining adequate employment conditions for the public sector workforce. A forward-looking approach leading to continuous rightsizing of a capable public sector workforce would be best suited to avoid ad-hoc crisis management decisions, likely to be costly not only in financial terms.
By Rolf Alter, Vice-Chair of the Committee of Experts on Public Administration (CEPA)