Ghana’s Large Public Sector Compensation Bill- Agitations, Policies, Implications, Causes and Recommendations [Occasional Paper No. 22]

The government of Ghana has long complained about the growth of the public sector compensation bill. It has therefore adopted different policy measures over the years to address this phenomenon. However, these policies have not had a lasting impact on the compensation bill growth. Data therefore reveal that the size of the country’s compensation bill as a ratio of total revenue/expenditure has reached alarming proportions in recent years, despite having seen strong declines in the 1980s. We find that the compensation bill is currently posing serious fiscal and macroeconomic difficulties for the country. Although a few studies have been carried out by researchers in recent years about the compensation bill, which have also highlighted its large nature, these studies are not comprehensive enough and the solutions they proposed are too generic in nature. The reason for the latter is that these studies did not identify the fundamental causes of the country’s large compensation bill. Using lessons drawn from (1) a historical analysis of wage agitations by public sector workers, (2) the government’s responses to the agitations, (3) the government’s policy behavior with regard to the compensation bill over the years, (4) trend and comparative analyses of the compensation bill (the latter using a sample of 56 countries), (5) analyses of a number of indicators from the Worldwide Bureaucracy Indicators (WWBI) database of the World Bank, etc., this paper identifies the fundamental factors causing the country’s large compensation bill. Therefore, specific and actionable recommendations are provided, which, when adopted, can help the government rightsize the compensation bill to help ensure that the country achieves better fiscal and macroeconomic performance. Read full report here