## 1. Assessing Efficiency in Secondary School Education (wpiea2019110)

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### Introduction and high-level findings
- The government wage bill is the largest government outlay and the government is the single largest employer in the Eastern Caribbean Currency Union (ECCU).
- High wage bills reflect diseconomies of scale in small states and political economy considerations; fixed costs of public institutions imply higher per capita costs.
- Methodological approach:
  - Follow IMF (2016a) approach to assess wage bill and employment trends over 2005 to 2015 relative to comparators.
  - Use annual employment and wage bill data (2005–2015), Laspeyre indices to decompose price and employment effects, and construct a real wage index.
- Key findings:
  - Average real wage growth exceeded growth in real per capita GDP over the comparable period, implying government wage growth outpaced productivity growth, ceteris paribus.
  - Composition and distribution of government employment are sub-optimal, with skills mismatches contributing to inefficiency in public service delivery.
  - Short-run wage bill spending is asymmetric: increases strongly in good times but does not decline significantly in downturns, contributing to deteriorating fiscal positions.
  - Wage bill spending as a share of GDP expands with economic development, reflecting expanded government activities for economic and social development.

### Data sources, limitations, and recommended data reforms
- Primary data sources:
  - World Economic Outlook (October 2016) for wage bill indicators and econometric analysis (annual, 2005–2015).
  - Country authorities – Ministry of Finance and Budget documents for central government employment (annual, 2005–2015) and employment apprenticeship programs (annual, 2014).
  - Country authorities, Caribbean Development Bank, Organization of East Caribbean States Commission, UNESCO, World Bank for education, health, and public safety indicators (annual 2015 or latest prior data).
  - Country Social Security Boards and National Insurance Schemes for annual wage by industry (monthly 2014).
- Data issues and limitations:
  - Transition from GFSM86 to GFSM2001 and GFSM2014 methodologies caused comparability limitations across countries and over time.
  - Disaggregated components of wages and distribution by employee groups are often unavailable or not available for extended periods.
  - Data on daily paid/temporary workers and incremental pay amounts/distribution often unavailable in the wage bill.
  - Aggregate government employment data (established vs non-established) generally available from 2005 except Dominica and Grenada.
  - Employee data by Classification of the Function of Government (COFOG) not standardized; administrative function classifications used as proxies.
  - Job categories are not standardized across countries.
- Recommended improvements:
  - Improve personnel management systems to record and monitor staff numbers, composition (age, grade, positions, qualifications), job classifications, and staff skills; make collated data available to improve analysis, fiscal transparency, and cross-country comparisons.

### Trends 2005–2015 — aggregate comparisons and dynamics
- Aggregate comparisons:
  - ECCU average wage bill: 10.1 percent of GDP.
  - ECCU wage bill as percent of total expenditure: 33.8.
  - ECCU wage bill as percent of total revenue: 38.1.
  - ECCU averages are about the same size as other Small Island Developing States (SIDS) in GDP terms but higher in percentage of expenditure and revenue.
- Cross-group observations:
  - Wage bill indicators in ECCU exceed those in advanced economies, emerging markets, and LIDCs.
  - Relationship between country size and public wage bill is negatively related and statistically significant (small states have larger governments due to high per capita fixed costs).
  - High wage bill to expenditure and revenue indicators suggest potential crowding out of asset maintenance and capital expenditures in countries with high debt burdens and low grant financing.
- Temporal patterns:
  - Wage bill indicators declined from mid-1990s until the 2009 global financial crisis, then rebounded until 2013; reductions post-2013 partially reflect higher-than-potential output growth and increased revenue yields.
  - In Grenada, St. Kitts & Nevis, St. Lucia, and St. Vincent & the Grenadines the wage bill during the crisis was as high as in the 1990s.

### Laspeyre decomposition and real wage outcomes (2005–2015)
- Laspeyre index decomposition findings:
  - In general, changes in nominal average wages (price effect) have been more dominant than changes in employment (employment effect) in driving nominal wage bill growth.
  - Dominica, Grenada, St. Lucia, and St. Vincent & the Grenadines: price effect contributed between 73 to 88 percent to growth in the nominal wage bill.
  - In Dominica, restitution of wage price cuts during 2002–2004 significantly impacted the wage bill.
  - In Grenada, a wage freeze and attrition policy is discernible at the end of the period.
  - In St. Kitts & Nevis, the employment effect contributed about 41 percent to nominal wage growth; employment and wage freeze policy stabilized this effect during the fiscal consolidation period 2010 to 2013.
- Real wage indices:
  - Real average wage levels grew annually by 4.3 percent in Dominica in the 9 years to 2015.
  - Real average wage levels in St. Kitts & Nevis, St. Lucia, and St. Vincent & the Grenadines grew between 2.2 and 2.7 percent annually.
  - In other ECCU countries real average wages remained flat or marginally declined over 2005–2015.
  - Average real wage growth exceeded growth in real per capita GDP over the comparable period.

### Government employment size, composition, and efficiency
- Government employment indicators:
  - Reference employment level: 11.6 percent of the working population (noted as a regional reference point).
  - Government employment increased over the last decade and during the 2009/2012 recession in most countries, except:
    - Antigua & Barbuda: declines resulting from initiatives implemented in 2006 to cut the wage bill and reform the civil service.
    - Grenada: government employment numbers declined since 2014 because of their attrition policy rule.
  - Governments often act as de facto employers of last resort where unemployment is high and the private sector cannot absorb surplus labor.
  - Government employment in Antigua & Barbuda and St. Kitts & Nevis (countries with the lowest unemployment rates) exceed the regional average.
- Established vs non-established employees and temporary workers:
  - Established employees form the core of the public service in most countries; exception: Antigua & Barbuda — established employees represented 50 percent of government employees in 2015.
  - Non-established (contract) employees:
    - Numbers have declined in most ECCU countries as part of regularization and wage bill cutting strategies.
    - Composition shifted toward better-paid professional, technical and management positions.
    - Country shares of non-established staff:
      - Dominica: declined from about 47 percent to about 23 percent.
      - St. Lucia and St. Vincent & the Grenadines: about 12 percent.
      - Grenada: 34 percent.
      - St. Kitts & Nevis: 31 percent.
  - Temporary or daily-paid workers used for targeted programs or projects; accounting treatment varies across countries.
- Skill composition and distribution issues:
  - Civil service staffing pyramids show many unskilled and semi-skilled workers and shortages of technical, professional and middle management staff.
  - Antigua & Barbuda (2010): about 69 percent clerical, support and semi-skilled staff; professional staff 4 percent; technical staff 25 percent.
  - Proxy estimates for established employees (2014/15):
    - St. Kitts & Nevis: about 44 percent technical and professional staff.
    - St. Lucia: about 43 percent technical and professional staff.
- Governance metric:
  - Government Effectiveness Indicator significantly declined in ECCU countries since 2013, with a recovery evident in Antigua & Barbuda and St. Kitts & Nevis in 2015; ratings declined below zero for Grenada and St. Lucia.

### Sectoral findings — Education (secondary focus)
- Staff and inputs:
  - ECCU countries in 2015 employed more public-school teachers relative to comparators — reflected in lower student/teacher ratios.
  - Percentage of trained teachers (ECCU averages):
    - Primary: "71.4" percent.
    - Secondary: "54.7" percent (ECCU average excludes St. Vincent & the Grenadines).
    - Upper Secondary: "53.5" percent.
  - Pupil/teacher ratios for regular and trained teachers generally lower in ECCU than other Caribbean economies; St. Kitts & Nevis and St. Lucia show particularly low pupil/teacher ratios.
- Expenditure and output:
  - Secondary education is about 40 percent of the education budget in ECCU countries except Grenada.
  - Expenditure in GDP terms higher in Dominica and St. Vincent & the Grenadines; lower in Antigua & Barbuda and St. Kitts & Nevis.
  - Percentage of students passing at least 5 CSEC subjects is above 50 percent for most ECCU countries; pass rates for 5 subjects including Mathematics and English are lower in Antigua & Barbuda and, adjusted for exam registration, in Grenada and St. Kitts & Nevis.
- Cost-effectiveness indicators (selected exact values from source):
  - Student/Teacher Ratio (Primary): ECCU "15.1", Small States "22.9", Upper Middle Income "18.6", OECD "15.9", Latin America & Caribbean "21.9".
  - Percentage of Trained Teachers (Primary): ECCU "71.4", Small States "79.0", Upper Middle Income "85.4", Latin America & Caribbean "87.9".
  - Pupil/Teacher Ratio (Secondary) (selected countries): Antigua & Barbuda "10.5", Dominica "10.7", Grenada "11.9", St. Kitts & Nevis "8.3", St. Lucia "12.3", St. Vincent & the Grenadines "15.0".
  - Percentage of Trained Teachers (Secondary) (selected countries): Antigua & Barbuda "44.0", Dominica "44.0", Grenada "42.0", St. Kitts & Nevis "66.0", St. Lucia "71.0", St. Vincent & the Grenadines "60.0".
  - Cost of Secondary Education per Student (% GDP per capita): Antigua & Barbuda "10.9", Dominica "33.3", Grenada "2.9", St. Kitts & Nevis "15.5", St. Lucia "27.7", St. Vincent & the Grenadines "22.0".
  - Per Student Passing ≥ 5 subjects (% GDP per capita): Antigua & Barbuda "93.6", Dominica "222.5", Grenada "130.4", St. Kitts & Nevis "162.8", St. Lucia "283.6", St. Vincent & the Grenadines "266.9".
- Policy implication: reducing teacher numbers reduces the wage bill but will not necessarily improve educational outcomes unless non-wage inputs (teacher training, materials, technologies) are improved.

### Sectoral findings — Health and Public Safety
- Health:
  - Increases in health worker numbers noted, but continued shortage of nurses and medical specialists.
  - Specialized nurses in the mid-2000s: about "1.25 nurses per 1,000 population".
  - Emigration contributes to shortages, particularly in primary care; shortages impact NCD prevention and care.
  - NCDs were the leading cause of premature deaths in 2015, ranging from "43 to 80 percent" among adults.
- Public order and safety:
  - Number employed in public defense and safety has been stable.
  - Police to citizen ratios in the ECCU range from "1:110 to 1:190".
  - Crime detection rates for serious crimes generally range from "25% to 40%" of reported crimes; conviction rates are lower.
  - Growth in private security firms; 2011 estimates of staffing in private security firms relative to police officers ranged from "40 percent" (Dominica and St. Vincent & the Grenadines) to "150 percent" (St. Kitts & Nevis).

### Empirical analysis — drivers of wage bill and fiscal impact (2000–2015)
- Dynamic panel models (2000 to 2015) results:
  - Finding: increase in the real wage bill growth rate of 0.32 percentage points for every 1 percentage point in real economic growth (2000–2015).
  - When using output gap:
    - The rate of growth in the real public wage bill accelerates by 0.61 percentage points for every 1 percentage point that economies grow above potential.
    - Real wages are procyclical in the ECCU countries.
    - During an election year the wage bill is 1.68 percentage points higher than in a nonelection year.
    - The wage bill tends to decline in countries under an IMF program arrangement.
    - Positive and significant relationship between revenue growth of the previous year and the wage bill.
- Fiscal balance regression (Table 3: Response Variable: Fiscal Balance/GDP):
  - Fiscal Balance/GDPt-1 coefficient: 0.291*** (standard error (0.064))
  - Wages Bill/GDPt coefficient: -0.640*** (standard error (0.256))
  - Revenue/GDPt coefficient: 0.651*** (standard error (0.056))
  - GDP per Capita t coefficient: 11.333** (standard error (5.404))
  - R-Squared: 0.783
  - F-statistic: 34.479
  - Durbin-Watson Statistic: 1.827
  - Sample Period: 2000-2015
  - Countries: 6
  - Observations: 96
  - Interpretation: For every percentage point increase in the wage bill, as a share of GDP, the fiscal balance deteriorates by about 0.64 percentage points.
  - Policy implication: keep the wage bill within fiscally sustainable limits to reduce adjustment needs during fiscal consolidation and preserve countercyclical fiscal scope.

### Constraints, political economy, and typical reform measures
- Constraints on shrinking the wage bill:
  - Social distress from redundancies in societies with high double-digit unemployment and lacking social safety nets.
  - Concerns over negative spillovers to retail, financial and other sectors.
  - Political economy requires building consensus with labor unions, private sector and civil society.
  - Example: Grenada’s Home-Grown Program supported by IMF established a Social Compact to build consensus.
- Short-term wage bill containment measures:
  - Freezing wages; abolishing overtime; attrition while freezing recruitment; stopping or rationalizing wage increments; removing employees older than mandatory retirement age; rationalizing allowances; cleaning the payroll.
  - Such measures may achieve targets but do not address structural problems.
- Second-stage measures (mixed results):
  - Voluntary separation programs, compulsory redundancy, outsourcing — generate additional up-front pension and gratuity costs.
  - Need for functional and efficiency reviews and consultation with employees and trade unions.
- Incremental pay progression (Box 2 highlights):
  - Establishment position-based wage grids with annual incremental increases that have cumulative effect.
  - Governments typically provision for a two percent increase in wages in budgets toward anticipated increment pay.
  - Recommendation: increments should be merit or performance-based rather than automatic; practice varies by country.
- Recommended public-sector reform measures:
  - Legal reforms supported by functional reviews; HR management audits; adequate information management systems; a framework to measure, monitor, and evaluate productivity; shift to position-based systems; reform compensation and wage grids; shift to wage bargaining ahead of budget formulation; promote performance-based budgeting and management information systems; adopt consultative change-management processes.

### Box 3 — Summary of public service reforms since 2005 (selected country highlights)
- Antigua & Barbuda:
  - Voluntary separation and early retirement package (VSEP) in 2006 cost 1.4 percent of GDP but lowered the wage bill subsequently.
  - 10 percent wage increase in 2009.
  - 2013 grade reclassification reform upgraded teaching service; retroactive payment of EC$2.9 million (0.1 percent of GDP).
- Dominica:
  - Wage freezes in 2001 and 2003; 5 percent remuneration cut; laid off many temporary workers (1,800); hiring freeze in 2004/06 IMF-supported program.
- Grenada:
  - Hiring and wage freezes and an attrition policy under home-grown adjustment plans (2014-17); employment declined by 10 percent and the wage bill declined by 2.3 percent of GDP by end-2016.
  - 2015 Fiscal Responsibility Act limits the wage bill to 9 percent of GDP.
- St. Kitts & Nevis:
  - Employment restraint and wage freeze (2011-14); payroll audit and functional reviews completed in 2015.
- St. Lucia:
  - Capped costs associated with non-established employees in 2009; revised pay grid in 2011 and abolished increments; wage freezes during 2014/15 and 2015/16.
- St. Vincent & the Grenadines:
  - 2007 reclassification produced a single spine salary structure and caused a 6 percent increase in the wage bill.

### Implementation, capacity, and data needs
- Strengthen legal and institutional frameworks to improve wage bill management and public sector efficiency.
- Reforms should be informed by diagnostics: civil service census, functional reviews, job audits, user surveys, productivity assessments, HR audits.
- Adequate financial and technical resources required for implementation.
- Appropriate performance indicators needed to link financial allocations to outcomes and inform wage bargaining; publish government performance indicators.
- Improved public employment datasets would facilitate broader research into wage management policy, civil service productivity, input efficiency, social welfare systems, and labor market structures.

### Key statistics and exact timeframes (preserved)
- ECCU average wage bill: 10.1 percent of GDP.
- ECCU wage bill as percent of expenditure: 33.8.
- ECCU wage bill as percent of revenue: 38.1.
- Analysis period: 2005 to 2015 (annual data).
- Real average wage growth: Dominica grew annually by 4.3 percent in the 9 years to 2015.
- Real average wage growth: St. Kitts & Nevis, St. Lucia, and St. Vincent & the Grenadines grew between 2.2 and 2.7 percent annually.
- Laspeyre decomposition: price effect contributed between 73 to 88 percent to nominal wage bill growth in Dominica, Grenada, St. Lucia, and St. Vincent & the Grenadines.
- Employment effect contribution in St. Kitts & Nevis: about 41 percent to nominal wage growth.
- Reference employment level noted: 11.6 percent of the working population.
- Empirical model sample period: 2000-2015 (drivers of wage bill and fiscal regressions).
- Fiscal regression result: Wages Bill/GDPt coefficient: -0.640*** (standard error (0.256)); interpretation: every percentage point increase in the wage bill (share of GDP) deteriorates the fiscal balance by about 0.64 percentage points.

*Source: wpiea2019110 - 1. Assessing Efficiency in Secondary School Education (PDF chapter/section; content pages excerpt on ECCU wage bill, 2005–2015).*

### 1. Assessing Efficiency in Secondary School Education .........................................................18

### 1. Assessing Efficiency in Secondary School Education .........................................................18

### Introduction
- The government wage bill is the largest government outlay and the government is the single largest employer in the Eastern Caribbean Currency Union (ECCU).
- High wage bills reflect diseconomies of scale in small states and political economy considerations; fixed costs of public institutions imply higher per capita costs.
- Average ECCU wage bill and government employment are around the median for small states and advanced economies, but higher than emerging markets and low income developing countries (LIDCs).
- Methodological approach:
  - Follow IMF (2016a) approach to assess wage bill and employment trends over 2005 to 2015 relative to comparators.
  - Use annual employment and wage bill data (2005–2015), Laspeyre indices to decompose price and employment effects, and construct a real wage index.
- Key high-level findings previewed:
  - Average real wage growth exceeded growth in real per capita GDP over the comparable period, implying government wage growth outpaced productivity growth, ceteris paribus.
  - Composition and distribution of government employment are sub-optimal, with skills mismatches contributing to inefficiency in public service delivery.
  - Short-run wage bill spending is asymmetric: increases strongly in good times but does not decline significantly in downturns, contributing to deteriorating fiscal positions.
  - Wage bill spending as a share of GDP expands with economic development, reflecting expanded government activities for economic and social development.

### Data Sources and Issues
- Primary data sources:
  - World Economic Outlook (October 2016) for wage bill indicators and econometric analysis (annual, 2005–2015).
  - Country authorities – Ministry of Finance and Budget documents for central government employment (annual, 2005–2015) and employment apprenticeship programs (annual, 2014).
  - Country authorities, Caribbean Development Bank, Organization of East Caribbean States Commission, UNESCO, World Bank for education, health, and public safety indicators (annual 2015 or latest prior data).
  - Country Social Security Boards and National Insurance Schemes for annual wage by industry (monthly 2014).
- Data issues and limitations:
  - Transition from GFSM86 to GFSM2001 and GFSM2014 methodologies caused comparability limitations across countries and over time.
  - Disaggregated components of wages and distribution by employee groups are often unavailable or not available for extended periods.
  - Data on daily paid/temporary workers and incremental pay amounts/distribution often unavailable in the wage bill.
  - Aggregate government employment data (established vs non-established) generally available from 2005 except Dominica and Grenada.
  - Non-established employee data for Grenada not available prior to 2013.
  - Employee data by Classification of the Function of Government (COFOG) not standardized; administrative function classifications used as proxies.
  - Job categories are not standardized across countries.
  - Recommendation implicit: improve personnel management systems to record and monitor staff numbers, composition (age, grade, positions, qualifications), job classifications, and staff skills; make collated data available to improve analysis, fiscal transparency, and cross-country comparisons.

### Trends (2005–2015)
- Scope: Compare ECCU government wage bill with other country groups; assess staffing and pay policy contributions over 2005–2015; examine size and composition of government employment; assess employee compensation.
- Aggregate comparisons:
  - ECCU governments’ wage bill averages 10.1 percent of GDP.
  - ECCU wage bill as percent of total expenditure averages 33.8.
  - ECCU wage bill as percent of total revenue averages 38.1.
  - ECCU averages are about the same size as other Small Island Developing States (SIDS) in GDP terms but higher in percentage of expenditure and revenue.
- Cross-group observations:
  - Wage bill indicators in ECCU exceed those in advanced economies, emerging markets, and LIDCs.
  - Small states have larger governments due to high per capita fixed costs and diseconomies of scale; relationship between country size and public wage bill is negatively related and statistically significant.
  - High wage bill to expenditure and revenue indicators suggest potential crowding out of asset maintenance and capital expenditures in countries with high debt burdens and low grant financing.

### Government Wage Bill Dynamics and Laspeyre Decomposition
- Temporal patterns:
  - Wage bill indicators declined from mid-1990s until the 2009 global financial crisis, then rebounded until 2013; reductions post-2013 partially reflect higher-than-potential output growth and increased revenue yields.
  - In Grenada, St. Kitts & Nevis, St. Lucia, and St. Vincent & the Grenadines the wage bill during the crisis was as high as in the 1990s.
- Laspeyre index decomposition (2005–2015):
  - In general, changes in nominal average wages (price effect) have been more dominant than changes in employment (employment effect) in driving nominal wage bill growth.
  - Country-specific contributions:
    - Dominica, Grenada, St. Lucia, and St. Vincent & the Grenadines: price effect contributed between 73 to 88 percent to growth in the nominal wage bill (reflecting wage increases, incremental pay progression, promotions).
    - In Dominica, restitution of wage price cuts during 2002–2004 also significantly impacted the wage bill.
    - In Grenada, a wage freeze and attrition policy is discernible at the end of the period.
    - In St. Kitts & Nevis, the employment effect contributed about 41 percent to nominal wage growth; employment and wage freeze policy stabilized this effect during the fiscal consolidation period 2010 to 2013.
- Real wage indices:
  - Real average wage levels grew annually by 4.3 percent in Dominica in the 9 years to 2015.
  - Real average wage levels in St. Kitts & Nevis, St. Lucia, and St. Vincent & the Grenadines grew modestly (between 2.2 and 2.7 percent annually).
  - In other ECCU countries real average wages remained flat or marginally declined over 2005–2015.
  - Average real wage growth exceeded growth in real per capita GDP over the comparable period, implying government wage growth outpaced productivity growth, ceteris paribus.

### Government Employment and Efficiency
- Available data indicate issues with size and composition of government employment that lead to inefficiency in public service delivery:
  - Composition and distribution of employment are sub-optimal and reflect skills mismatches.
  - Insufficient disaggregation and standardization of employment data limit detailed assessment of functional staffing needs and productivity.
- Observed policy behaviors:
  - Short-run asymmetry: wage bill spending increases strongly during good times but does not significantly decline during downturns, contributing to worsening fiscal balances.
  - Long-run trend: wage bill spending as a share of GDP expands with economic development, reflecting expanded government involvement in economic and social development.

### Institutional and Legal Reform Elements (summary of needs)
- Critical reforms identified (summarized from discussion):
  - Legal reforms supported by functional reviews.
  - Human resource (HR) management audits.
  - Adequate information management systems to improve HR management capacity and planning and to facilitate right-sizing of the civil service.
  - A framework to measure, monitor, and evaluate productivity to improve public service delivery and facilitate performance-based compensation.

### Key Statistics and Timeframes (preserved exactly as in source)
- ECCU average wage bill: 10.1 percent of GDP.
- ECCU wage bill as percent of expenditure: 33.8.
- ECCU wage bill as percent of revenue: 38.1.
- Analysis period: 2005 to 2015 (annual data).
- Real average wage growth: Dominica grew annually by 4.3 percent in the 9 years to 2015.
- Real average wage growth: St. Kitts & Nevis, St. Lucia, and St. Vincent & the Grenadines grew between 2.2 and 2.7 percent annually.
- Laspeyre decomposition: price effect contributed between 73 to 88 percent to nominal wage bill growth in Dominica, Grenada, St. Lucia, and St. Vincent & the Grenadines.
- Employment effect contribution in St. Kitts & Nevis: about 41 percent to nominal wage growth.
- Data source years noted: World Economic Outlook (October 2016); country employment data generally available from 2005 (exceptions noted for Dominica and Grenada).

*Source: wpiea2019110 - 1. Assessing Efficiency in Secondary School Education (PDF chapter/section; content pages excerpt on ECCU wage bill, 2005–2015).*

### 11.6 percent of the working population. This is similar

### wpiea2019110 - 11.6 percent of the working population. This is similar

### Government employment levels and trends
- Government employment indicators across ECCU countries: reference point of "11.6 percent of the working population" as noted.
- Government employment increased over the last decade and during the 2009/2012 recession in most countries, except:
  - Antigua & Barbuda: declines resulting from initiatives implemented in 2006 to cut the wage bill and reform the civil service.
  - Grenada: government employment numbers declined since 2014 because of their attrition policy rule.
- Governments often act as de facto employers of last resort where:
  - unemployment is high,
  - alternative social support mechanisms or unemployment insurance are absent,
  - the private sector cannot absorb surplus labor.
- Government employment in Antigua & Barbuda and St. Kitts & Nevis (countries with the lowest unemployment rates) exceed the regional average.

### Training, apprenticeship programs, and accounting treatment
- Counter-cyclical measures: training and apprenticeship programs implemented as unemployment worsened, involving on-the-job training, internships, and short-term employment in public and private sectors.
- Country-specific treatment of stipends and trainees:
  - Antigua & Barbuda and St. Vincent & the Grenadines: stipends paid to trainees are included in the wage bill and trainees are included in a separate category of employment (0.3 percent of GDP and 6 percent of government employment in Antigua & Barbuda in 2014, respectively).
  - Grenada: costs are reflected in Goods and Services.
  - In remaining countries, spending often reflected in special projects in capital expenditure and excluded from government employment.
- Accounting guidance (GFSM 2014, 6.33-34) summarized in the source:
  - Payments should be recorded as "Compensation of Employees" when an official employer-employee relationship (contract) exists.
  - If no such relationship exists, payments should be classified as use of "Goods and Services."

### Composition of public employment: established vs non-established and temporary workers
- Established employees form the core of the public service in most countries; exception:
  - Antigua & Barbuda: established employees represented 50 percent of government employees in 2015.
- Non-established (contract) employees:
  - Hired on a temporary basis with different remuneration and benefits from established staff.
  - Numbers have declined in most ECCU countries as part of regularization and wage bill cutting strategies.
  - Composition shifted toward better-paid professional, technical and management positions.
- Country shares of non-established staff:
  - Dominica: declined from about 47 percent of the public service (post-2006 reforms) to about 23 percent.
  - St. Lucia and St. Vincent & the Grenadines: currently about 12 percent.
  - Grenada: 34 percent.
  - St. Kitts & Nevis: 31 percent.
- Temporary or daily-paid workers are used for targeted programs or projects (e.g., construction, maintenance); such workers may be included in employment statistics.

### Skill composition, distribution, and institutional effectiveness
- Staffing problem identified as composition and distribution rather than size.
  - Civil service staffing pyramids show a wide base: many unskilled and semi-skilled workers, shortages of technical, professional and middle management staff.
- Antigua & Barbuda (2010 aggregate by job category):
  - About 69 percent of the Civil Service were clerical, support and semi-skilled staff.
  - Professional staff comprised 4 percent.
  - Technical staff comprised 25 percent.
- Proxy estimates (government grades) for established employees (2014/15):
  - St. Kitts & Nevis: about 44 percent technical and professional staff.
  - St. Lucia: about 43 percent technical and professional staff.
- Government Effectiveness Indicator (World Bank - Worldwide Governance Indicators):
  - Government effectiveness significantly declined in ECCU countries since 2013, with a recovery evident in Antigua & Barbuda and St. Kitts & Nevis in 2015.
  - Ratings declined below zero for Grenada and St. Lucia.

### Sectoral findings — Education
- ECCU countries in 2015:
  - Employed more public-school teachers relative to comparators (Small States, Latin America & Caribbean, OECD) — reflected in lower student/teacher ratios.
  - Percentage of trained teachers in ECCU varies by level:
    - Primary: "71.4" percent (ECCU average) vs comparators; exact figures listed in Table 2.
    - Secondary: ECCU average percentage of trained teachers reported as "54.7" percent (ECCU average excludes St. Vincent & the Grenadines).
    - Upper Secondary: ECCU average percentage of trained teachers "53.5" percent.
  - Nevertheless, number of trained teachers, particularly in secondary education, was significantly lower in some countries and may contribute to subpar outcomes.
- Box 1 — Assessing Efficiency in Secondary School Education (2014-15 academic year):
  - Expenditure patterns:
    - Secondary education is about 40 percent of the education budget in ECCU countries except Grenada.
    - Expenditure in GDP terms higher in Dominica and St. Vincent & the Grenadines; lower in Antigua & Barbuda and St. Kitts & Nevis.
  - Input efficiency:
    - Pupil/teacher ratios for regular and trained teachers generally lower in ECCU than other Caribbean economies.
    - St. Kitts & Nevis and St. Lucia show particularly low pupil/teacher ratios.
  - Output quality:
    - Percentage of students passing at least 5 CSEC subjects is above 50 percent for most ECCU countries.
    - Pass rates for 5 subjects including Mathematics and English are lower, notably in Antigua & Barbuda and, adjusted for exam registration, in Grenada and St. Kitts & Nevis.
  - Implied cost-effectiveness:
    - Costs per student in GDP per capita terms indicate Antigua & Barbuda and St. Kitts & Nevis have more efficient secondary education systems; inefficiencies more apparent in Dominica and Grenada.
  - Table 2 selected indicators (preserve exact values from source where relevant), examples:
    - Student/Teacher Ratio (Primary): ECCU "15.1", Small States "22.9", Upper Middle Income "18.6", OECD "15.9", Latin America & Caribbean "21.9".
    - Percentage of Trained Teachers (Primary): ECCU "71.4", Small States "79.0", Upper Middle Income "85.4", OECD "..." , Latin America & Caribbean "87.9".
    - Pupil/Teacher Ratio (Secondary): Antigua & Barbuda "10.5", Dominica "10.7", Grenada "11.9", St. Kitts & Nevis "8.3", St. Lucia "12.3", St. Vincent & the Grenadines "15.0", Barbados "17.5", Belize "16.3", Jamaica "16.4".
    - Percentage of Trained Teachers (Secondary): Antigua & Barbuda "44.0", Dominica "44.0", Grenada "42.0", St. Kitts & Nevis "66.0", St. Lucia "71.0", St. Vincent & the Grenadines "60.0", Barbados "52.3", Belize "47.2", Jamaica "85.2".
    - Cost of Secondary Education per Student (% GDP per capita): Antigua & Barbuda "10.9", Dominica "33.3", Grenada "2.9", St. Kitts & Nevis "15.5", St. Lucia "27.7", St. Vincent & the Grenadines "22.0", Barbados "19.2", Belize "23.6", Jamaica "23.8".
    - Per Student Passing ≥ 5 subjects (% GDP per capita): Antigua & Barbuda "93.6", Dominica "222.5", Grenada "130.4", St. Kitts & Nevis "162.8", St. Lucia "283.6", St. Vincent & the Grenadines "266.9", Barbados "335.5", Belize "555.2", Jamaica "355.7".
  - Policy implication: reducing teacher numbers reduces wage bill but will not necessarily improve educational outcomes unless non-wage inputs (teacher training, materials, technologies) are improved.

### Sectoral findings — Health and Public Safety
- Health sector:
  - Increases in health worker numbers noted, but continued shortage of nurses and medical specialists.
  - Specialized nurses in the mid-2000s: about "1.25 nurses per 1,000 population" — one-tenth the concentration in some OECD countries.
  - Emigration contributes to shortages, particularly in primary care; shortages impact NCD prevention and care.
  - NCDs were the leading cause of premature deaths in 2015, ranging from "43 to 80 percent" among adults.
- Public defense and safety:
  - Number employed in public defense and safety has been stable.
  - Police to citizen ratios in the ECCU range from "1:110 to 1:190".
  - Crime detection rates for serious crimes generally range from "25% to 40%" of reported crimes; conviction rates are lower.
  - Growth in private security firms; 2011 estimates of staffing in private security firms relative to police officers ranged from "40 percent" (Dominica and St. Vincent & the Grenadines) to "150 percent" (St. Kitts & Nevis).

### Efficiency challenges and policy recommendations
- Cost-cutting measures (recruitment freezes, attrition, outsourcing, employment cuts) can reduce wage bill growth but will not improve efficiency unless:
  - public-sector modernization and skill levels are addressed,
  - non-wage inputs critical to productivity (teacher training, teaching materials, technologies) are improved.
- Rightsizing composition and distribution of public service employment would address efficiency concerns, but constraints exist:
  - Insufficient fiscal space to finance comprehensive public-service transformation (separation benefits, training, hiring more qualified staff).
  - Institutional and legal frameworks of public administration are inadequate and need reform.
  - Change-management systems are required to overcome resistance from stakeholders including policy makers and labor unions, particularly where downsizing may be necessary.
- Classification of stipends and trainees should follow GFSM 2014 guidance to ensure accurate fiscal reporting and policy implications for the wage bill.

*Italic: Source — IMF Wage Bill and Government Employment database, national authorities, and IMF staff calculations as reflected in the provided content.*

### 2. Gros s  Enrol l ment Rate i s  the total  number of enrol l ees  i n s econdary educati on regardl es s  of age as  a

### wpiea2019110 - 2. Gross Enrolment Rate is the total number of enrollees in secondary education regardless of age as a percentage of school age persons in secondary school.

### Definitions and education indicators
- Secondary education: "academic education for children generally from the age of 11 to 16."
- Gross Enrolment Rate: "the total number of enrollees in secondary education regardless of age as a percentage of school age persons in secondary school."
- Repetition Rate: "percentage of students enrolled in a given grade for an academic that repeat the grade the following year."
- Drop Out Rate: "percentage of students enrolled in the beginning of a given school year that are no longer enrolled at the end of the year."
- CSEC pass measure: "Reflects subject passes (from grade I to grade III) for students in public and private secondary schools in CSEC examinations sitting at ≥ 5 subjects. CSEC is a standardized examination applied across the Caribbean."

### Employment by function of government (per population)
- Figure content: employment by function categories shown (per thousand): "General Civil Service", "Education", "Public Order & Safety", "Health".
- Countries and year ranges illustrated in figure: Dominica (2005–2014), Grenada (2003–2015), St. Lucia (2007–2015), St. Vincent and the Grenadines (2007–2015), St. Kitts and Nevis (2009–2015), Antigua & Barbuda (2006, 2008, 2010–2015).
- Note: chart source listed as "Country Authorities and IMF Staff calculations."

### Compensation and wage structure findings
- Wages paid to government employees are higher, on average, "10 to 30 percent" than those of the private sector except for those employed in financial intermediation and utility companies (which are "60 to 70 percent" higher than the public sector).
- "Average wages of persons in public education are lower than those in public administration but higher than those in public health."
- Public-sector semi and unskilled jobs are better paid than private-sector counterparts; higher-skilled civil servants (managerial, professional, technical) are paid less than those employed in medium to large private entities, particularly in financial intermediation and utility companies.
- Allowances increase pay flexibility but "have also made the current remuneration system considerably more complex."
- The higher compensation premium to the private sector is partially explained by "the higher risk of redundancy" and reward for "higher productivity and longer hours of work relative to the job security provided by government employment."
- Compression ratios: example range between Permanent Secretary and an Office Attendant "ranged from 5:1 in Dominica to 10:1 in St. Lucia."
- International reference: "Schiavo-Campo (1996) indicates that internationally compression ratios range from 3:1 to 20:1 with a norm of 7:1."
- Consequences of low compression ratios: "difficulty of governments in attracting and retaining high-skilled workers as well as a deterioration in public services and the business climate for the private sector."

### Average annual wage and occupation-level data (selected excerpts)
- "Average Annual Wage in Select Industries in 2014" (US$'000) — source: Social Security Boards and National Insurance Schemes (/1. 2014 or latest available).
- "The Distribution of Wages Across Select Occupations in Public and Private Sectors in Antigua & Barbuda" — occupations listed include: General Manager, Accountant, Secretary, Junior Clerk, Messenger (US$'000 scale shown).
- "Average Annual Wage by Occupation in Public Service in 2015" (US$ '000) — occupations: Permanent Secretary, Accountant, Office Attendant; countries: Antigua, Dominica, Grenada, St. Kitts, St. Lucia, St. Vincent; displayed Ratio values (chart).

### Empirical analysis: drivers of wage bill spending (2000–2015)
- Data period: "2000 to 2015."
- Model specification (dynamic, fixed effects panel):
  - Equation (1): 푦푖푡 = 훼 + 훽푦푖푡−1 + 휆푂푢푡푝푢푡푖푡 + ρRevenue푖푡-1 + 휀푖푡
    - where 푦푖푡 is growth in real wages; 푂푢푡푝푢푡 is real GDP growth; Revenue-to-GDP ratio is lagged.
  - Finding: "increase in the real wage bill growth rate of 0.32 percentage points for every 1 percentage point in real economic growth over the 2000 to 2015 period."
  - Additional model with output gap (Equation (2)):
    - 푦푖푡 = 훼 + 훽푦푖푡−1 + 휆푂푢푡푝푢푡퐺푎푝푖푡 + 훿퐸푙푒푐푡푖표푛푠푖푡 + 훾IMF Program푖푡 + ρRevenue푖푡-1 + 휀푖푡
    - Output gap derived using the Hodrick–Prescott filter.
    - Dummy variables: Elections (general election held in year), IMF Program (number of years under an IMF program).
    - Result: "The rate of growth in the real public wage bill accelerates by 0.61 percentage points for every 1 percentage point that economies grow above potential."
    - "Real wages are procyclical in the ECCU countries."
    - "During an election year the wage bill is 1.68 percentage points higher than in a nonelection year."
    - "The wage bill tends to decline in countries under an IMF program arrangement."
    - "Positive and significant relationship between revenue growth of the previous year and the wage bill."

### Fiscal impact of wage bill (regression results)
- Model specification for fiscal balance:
  - Equation (3): 푦푖푡 = 훼 + 훽푦푖푡−1 + 휆WageBill푖푡 + 훿Revenue푖푡 + 훾GDPpercapita푖푡 + 휀푖푡
    - where 푦푖푡 is Fiscal Balance, WageBill is public wage bill as share of GDP, Revenue is revenues/GDP, GDP per capita captures Wagner’s Law.
- Key regression results (Table 3: Response Variable: Fiscal Balance/GDP):
  - Fiscal Balance/GDPt-1 coefficient: 0.291*** (standard error (0.064))
  - Wages Bill/GDPt coefficient: -0.640*** (standard error (0.256))
  - Revenue/GDPt coefficient: 0.651*** (standard error (0.056))
  - GDP per Capita t coefficient: 11.333** (standard error (5.404))
  - R-Squared: 0.783
  - F-statistic: 34.479
  - Durbin-Watson Statistic: 1.827
  - Sample Period: 2000-2015
  - Countries: 6
  - Observations: 96
  - Significance notation: ***,**, * indicate statistical significance at the 1%, 5%, 10% levels, respectively. Standard errors in parenthesis.
- Interpretation: "For every percentage point increase in the wage bill, as a share of GDP, the fiscal balance deteriorates by about 0.64 percentage points."
- Policy implication: "It is critical to keep the wage bill within fiscally sustainable limits. This would reduce the need for adjustments during fiscal consolidation and strengthen scope for countercyclical properties of fiscal policy."

### Constraints on shrinking wage bill and political economy
- Reasons governments avoid downsizing:
  - Social distress and dislocation from enforced redundancies in societies with high double-digit unemployment rates and lacking adequate social safety nets.
  - Concerns that retrenchment would have negative consequences for the retail, financial and other sectors.
- Sustainable approach: addressing political economy issues and building consensus with labor unions, the private sector and civil society.
- Example: "This was successfully achieved in Grenada during its Home-Grown Program supported by the IMF, through the establishment of a Social Compact."

### Wage bill management and public sector reform measures
- Short-term measures used to contain/reduce the wage bill:
  - freezing wages;
  - abolishing overtime;
  - attrition while freezing recruitment;
  - stopping or rationalizing wage increments related to pay progression, promotions and upgrading of posts;
  - removing employees older than the mandatory retirement age;
  - rationalizing allowances;
  - cleaning the payroll to eliminate errors and fraud.
- Assessment: such measures "may facilitate the achievement of the wage bill target they do not address structural problems."
- Second-stage measures attempted (mixed results):
  - voluntary separation programs through early retirement and redundancy;
  - compulsory redundancy;
  - outsourcing.
  - Note: these measures "generate additional pension and gratuity costs which are often required up-front."
- Implementation challenges:
  - Need for functional and efficiency reviews to establish objective basis for redundancy and minimize adverse selection.
  - Procedures for voluntary retirement and redundancy require consultation with employees and trade unions.
  - Other challenges slowed or halted the scope and pace of implementation.

### Box 2 — Incremental Pay Progression (summary)
- Public service uses an "establishment position-based system" with a wage grid mapping positions to grades and steps.
- Separate but closely aligned grids exist for the teaching service, health and police/defense services.
- Incremental pay progression systems in Antigua & Barbuda, Dominica, Grenada, St. Kitts & Nevis and St Vincent & the Grenadines provide annual incremental wage increases that "have a cumulative effect."
- Governments typically provision "for a two percent increase in wages in their budgets towards anticipated increment pay during the upcoming year."
- Inadequate personnel records limit forecasting of eligible employees and amounts to be paid; "actual payouts vary."
- Recommendation within box: "Ideally payments of increments should be merit or performance-based rather than automatic."
- Practice in some countries: in Antigua & Barbuda increments paid upon attainment of relevant qualifications; in Dominica increments paid following a favorable annual performance appraisal or attainment of relevant qualification. Completion of appraisals has been delayed in recent years.
- Unless laws/regulations change, "increments would continue to automatically accrue at the beginning of each fiscal year."

*Source: Country Authorities and IMF Staff calculations.*

### Box 3. A Summary of Public Service Reforms in the ECCU since 2005

### Box 3. A Summary of Public Service Reforms in the ECCU since 2005

### Overview
- Civil service reforms (CSRs) in the ECCU have focused on stabilizing or cutting the wage bill and modernizing the public sector to be smaller but better paid.
- Reforms aimed to facilitate private sector development and reduce state intervention distortions, and to create a government workforce with the right size, skills-mix, motivation, professional ethos, client focus, and accountability.
- Implementation varied by country and was often short-lived; outcomes were mixed where financial resources and implementation capacity were inadequate.

### Country reform summaries
- Antigua & Barbuda
  - Introduced a voluntary separation and early retirement package (VSEP) in 2006 which cost 1.4 percent of GDP but lowered the wage bill subsequently.
  - A 10 percent wage increase was granted in 2009.
  - 2010-2013 National Economic and Social Transformation plan (supported by an IMF arrangement) aimed to reduce the wage bill to 36 percent-of-revenue or 8 percent-of-GDP by 2013; this was not achieved.
  - 2013 grade reclassification reform aimed at upgrading the teaching service and aligning compensation with the rest of government.
- Dominica
  - Instituted wage freezes in 2001 and 2003 and later cut employee remuneration by 5 percent, reduced allowances and overtime pay, laid off many temporary workers (1,800) and implemented a hiring freeze in the 2004/06 IMF-supported program.
  - Remuneration cuts were temporary and to be restored once fiscal situation improved under memorandum with Public Service Unions.
  - Broad modernization efforts included streamlining ministerial functions, outsourcing, commercialization, privatization, management modernization, and capacity strengthening.
- Grenada
  - 2006-10 public-sector modernization plan implementation limited to corporate planning and Disclosure of Information Policy; Public Service Management Bill drafted but not enacted.
  - Under home-grown adjustment plans supported by IMF programs (2014-17) deployed hiring and wage freezes and an attrition policy.
  - Employment declined by 10 percent and the wage bill declined by 2.3 percent of GDP by end-2016.
  - 2015 Fiscal Responsibility Act limits the wage bill to 9 percent of GDP.
  - Government planned comprehensive public-sector modernization during 2017 to 2019.
- St. Kitts & Nevis
  - Exercised employment restraint and had a wage freeze (2011-14).
  - Payroll audit and functional reviews in Education, Health and Public Infrastructure ministries and Human Resource Management Department completed in 2015.
- St. Lucia
  - Costs associated with non-established employees capped in 2009; operational and efficiency reviews of MDAs initiated.
  - 2011 pay grid structure revised; system of increments abolished; performance assessments implemented.
  - Wage restraint exercised during fiscal years 2014/15 and 2015/16 with wage freezes.
- St. Vincent & the Grenadines
  - Overhauled public service grading and compensation through a reclassification exercise in 2007 resulting in a single spine salary structure.
  - The 2007 single-spine reclassification caused a 6 percent increase in the wage bill as most civil servants moved into higher pay scales.

- Cross-country note on reclassification impacts
  - Antigua and Barbuda teachers’ reclassification in 2013 yielded a retroactive payment of EC$2.9 million (0.1 percent of GDP) and led to a net annual increase in the wage bill of the same amount.

### Identified legal and institutional shortcomings
- Abolishing staff positions is challenging; clear procedures for establishment and abolition of public offices are lacking in many ECCU states (exceptions: Barbados, Jamaica, to a lesser extent Dominica).
- Constitutional provisions constrain governments’ ability to reduce employee remuneration; Grenada’s 1973 Constitution prohibits altering salaries and conditions following appointment, while Barbados and Trinidad & Tobago have different provisions.
- HR and personnel management systems are outdated:
  - Guaranteed employment tenure and dismissal impediments reduce flexibility.
  - Hiring of new staff is constrained while vacant positions are rarely questioned.
  - Incentives exist to increase employment of non-established staff with no fixed salary scales.
- Manpower planning and recruitment practices have been expedient and adhoc, with conflicting data on non-established employees in the late 1990s.

### Considerations and recommended reforms
- Frame wage bill management within civil service reforms aimed at optimizing service delivery in a fiscally sustainable manner.
- Conduct periodic diagnostic assessments: civil service census, functional reviews, job audits, user surveys, productivity assessments, and HR audits of policies and procedures.
- Legislative and institutional reforms to:
  - Guide and facilitate “rightsizing”.
  - Provide flexibility in personnel management and ensure required skills are available.
  - Improve information management systems to support personnel and HR management.
  - Shift to a position-based system rather than a career-based system to allow greater flexibility in employment adjustment.
- Reform compensation systems and wage grids to attract and retain qualified staff while aligning with fiscal objectives; diagnostics to inform changes.
- Shift to wage bargaining ahead of budget formulation to improve wage bill management and forecasting.
  - Wage negotiations should be guided by macro indicators including GDP and revenue growth, cost of living adjustments, affordability or fiscal sustainability, performance outcomes, and pay comparators with the private sector and statutory bodies.
- Performance-based pay systems (including increments) are challenging to implement effectively:
  - Require high delegation of HR and budget management responsibilities.
  - Impact is ambivalent and may motivate only a minority of staff.
  - Non-monetary incentives such as job content and career development prospects can be better motivators.
  - Effective systems require rigorous performance evaluation, adequate funding, checks and balances, training, and ongoing evaluation.
- Align corporate plans of MDAs and performance-based budgeting with national and sectoral strategies to improve efficiency; requires identification of policies, programs and performance indicators, administrative structures for cost-effective delivery, and management information systems for monitoring and evaluation.
- Promote accountability and transparency by reporting outcomes and outputs to the public.
- Adopt a highly consultative process with political directorate, managers, staff, unions, and private sector to establish domestic ownership; Grenada’s Committee of Social Partners in its 2014/17 Home Grown Program cited as a positive example.
- Ensure significant coordination across MDAs, build capacity, allow time for implementation and change management, and establish reporting mechanisms and clear lines of authority and individual responsibilities.

### Empirical findings and diagnostics
- Wage bill as a percentage of GDP, revenue and expenditure remains high despite reforms over the past two decades.
- Econometric results indicate:
  - Wage bill spending is asymmetric: it increases when economic growth is above potential but is rigid during downturns.
  - Wage bill spending increases during election years.
  - Wage bill declines when countries are undertaking reforms supported by IMF arrangements.
  - Positive relationship between revenue growth and the wage bill, suggesting revenue considerations influence wage bargaining.
  - Overall fiscal balance deteriorates significantly when the wage bill increases.
- Composition of employment skewed toward unskilled and semi-skilled employees who are on average better paid than private sector counterparts; shortage of skilled employees adversely affects service delivery and government effectiveness.
- Adoption of GFS 2014, including proper classification of capital expenditures and temporary work programs, could result in larger wage bills.

### Implementation and data needs
- Strengthening legal and institutional frameworks is critical to improve wage bill management and public sector efficiency.
- Reforms should be informed by diagnostics that consider regionalization prospects and economies of scale for common services.
- Adequate financial and technical resources are required for implementation.
- Appropriate indicators are needed to link financial allocations to budget performance, monitor and assess performance and productivity, and inform wage bargaining and policy; indicators of government performance should be published.
- Improved public employment datasets would facilitate broader research into wage management policy, civil service productivity, input efficiency, social welfare systems, and labor market structures.

### Conclusions
- ECCU wage bill management reforms achieved some success but wage bills remain high and need further restraint to avoid fiscal deterioration.
- Deeper commitment, sustained implementation, consultative processes, clear accountability, and better data and indicators are essential for successful civil service reforms.
- Timing matters: periods of economic prosperity provide more fiscal space and stakeholder traction for implementation than crisis periods.

*Source: Box 3. A Summary of Public Service Reforms in the ECCU since 2005 (wpiea2019110).*

### REFERENCES

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*Source: wpiea2019110 - REFERENCES*

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_Source: https://www.imf.org/-/media/files/publications/wp/2019/wpiea2019110.pdf_