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Most generous employer is state: double salary in public sector, triple public-private gap

de Razvan Diaconu , 3.9.2018

Romanians are working harder to maintain an increasingly bureaucratic, inefficient and more expensive administrative apparatus – this is the conclusion of an analysis published on INACO on Wednesday.

Andreea Paul, chairman of the organization, says the evolution of wage indicators shows that entrepreneurship and private work are at a disadvantage in the face of the public apparatus and the situation creates a new type of labour migration: from the school and private sector to the state-owned sector.

By analysing the official INS data, Andreea Paul signals the following series of economic anomalies:

  1. Double salary in the public sector. The net average wage in the public administration reached RON 4,207 in June 2018, double the national average salary of RON 2,115 (according to INS, HERE-LINK), without an increase in the quality of public services. On the contrary, we have the most disorganized and bureaucratic public institutions in the EU. We should be aware that since autumn 2017, official statistics no longer include armed forces or services in the average of the public administration, nor the staff of parliamentary cabinets employed in their own constituencies and paid from the lump sums of MPs. Otherwise, figures would have been even higher for the average salary in the public administration. In reality, gaps between the public and private sectors are even greater.
  2. Public-private gap – tripled. The gap between the public and the private sector has increased threefold, from the average monthly of RON 427 in 2016 to RON 1,285 in 2018 and continues its leap projected to almost RON 1,600 in 2019 (according to calculations based on CNSP data, HERE-LINK). The public sector includes public administration, as well as education, health, and social assistance sectors, but without the armed forces, services and other assimilated areas. Again, the gaps are actually even higher.

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  • The gap between average wages of employees in public and private sectors tripled over the last two years, from RON 427 in 2016 to RON 1,285 in 2018
  • Gross average salary in the public sector (RON)
  • Gross average salary in the private sector (RON)

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  1. Salary in education, half of that in public administration. Net average wage in public administration is 50% higher than in education, 20% higher than in the health sector, even higher than in the research sector in June 2018.
  2. The most crowded public apparatus in the EU. We have the most crowded European government with 28 ministers, first deputy prime ministers, and a prime minister, respectively with 25 ministries, compared to the European average of 14 ministries. On the government model, public administrations have the same bureaucratic structure. What is even more intriguing is the CNSP’s official forecast that suggests this government’s desire to annually increase the number of public servants by 2022 (AICI-LINK), again against the global trend towards increasing the efficiency of the administration and in contradiction with recent statements of the Finance Minister.
  3. The most poorly digitalised European administration. Increases of wages in public administration would not bother anyone if they were correlated with the real economy and the reduction in the staffing scheme of the public administration by digitalising and optimizing public structures in favour of a decrease in the time spent by taxpayers in contact with the bureaucracy. Or, we have the most poorly digitalised public administration in the EU and the most retrograde procedures, while we have a high-speed internet and a world-class Romanian IT sector.
  4. Wages to the detriment of public investment. Public investments are at historical minimum levels, tax revenues are also collected at historically low levels in relation to GDP, and the share of the social bill in the total budget spending is at historical highs. Budget wage spending is in 2018 at the level of 2009 relative to GDP, contrary to the European and world trends towards reducing the state apparatus. Debt increases invariably in this context.
  5. Over-taxed work in the private sector. We are increasingly taxing the labour, not the capital, in an economy where the base of the active workforce in the private sector should be expanded. More precisely, a Romanian employee works over half a year for the state and the last “tax revolution” added another 5 days a year during which a Romanian average worker works for the state. The day of tax freedom became July 20 in 2018, compared to July 15 in 2017. In other words, we work for the state until July 20 and only starting July 21 average Romanian employees work for themselves and their family. From this perspective, of a working employee, we should analyse the results of the latest tax changes for transferring contributions from the employer to the employee (according to INACO analysis, HERE-LINK)
  6. Under 1% of the European money absorbed for human capital. The effective rate of the European money absorption, below 1% for the Romanian human capital, for regional development and the reduction of inequities by August 2018, out of the EUR 11 billion available to Romania, leaves you perplexed. These are official data, published in August 2018 by the Ministry of European Funds. We can neither invoke the beginner’s excuse from 2007-2014. Reality is serious – in the fifth year of this European financial cycle (2014-2020). Obviously, human capital has been almost totally sacrificed and is not part of current priorities. Facts show that. Caring only for the employees from the public sector, not the Romanian human capital as a whole is justified only by the attempts to collect political dividends. These are catastrophic figures that show the real performance of public decision-makers, with no relation to the respect for citizens. No one else can be blamed. Public pressure will have to be directed towards the real growth in the quality of Romanians’ lives and we should not wait for the “big meow” in 2020 that “we could not do that because others did not let us”.
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