Macedonia Pay

1
Macedonia Pay Employment Modeling
2
Wage Bill Reduction Simulation Model

• Purpose
• Inter-budget user wage bill reduction
  prioritization
• Budget user-specific employment reduction
  targeting

3
Summary of Model

• Central authorities triage budget users.
• Model determines wage bill percentage reductions
  required for each group of budget users required
  to meet pre-specified overall wage bill reduction
  target.
• Budget users decide where and when to cut staff
  required to meet their assigned wage bill
  reduction targets.
• Model predicts fiscal impacts, by BU and year,
  including NPV.

4
What the model showed

• Budget User implications Net savings are
  sensitive to seniority and months of
  contributions to the employment system.
• Potential for wage bill savings Employment
  reductions can readily yield net budget cost
  increases during and immediately following the
  period in which employment reductions are
  accomplished, while yielding positive NPV only
  after about five years.
• Government policy implications The Government
  could increase net savings by revising the
  countrys severance payment and unemployment
  compensation policies.

5
What happened in Macedonia?

• Ministry of Finance was intrigued, but was
  unwilling to use model to target employment
  reductions.
• Ministry of Finance decided, instead, to convert
  certain functions from public administration
  functions to contracted functions and make all
  decisions itself.

6
Civil Service Salary Scale Model

• Purpose
• Predict fiscal impacts of implementing new Civil
  Service salary scale mandated by Civil Service Law

7
Story of model development and use

• CS Law mandated complicated salary structure
• Position-specific impacts were unclear
• Overall fiscal impacts were unclear
• Model made all fiscal impacts clear
• Allowed Ministry of Finance to
• Use pay and employment database they developed
• Notice unanticipated impacts of CS Law salary
  scale implementation.
• Hold harmless CS Law provision
• Pattern of point changes across positions

8
Results?

• Ministry of Finance team decided to model
  individual salary changes, rather than averages.
• Government revised CS Law to eliminate hold
  harmless provision.
• Government decided to review the salary structure
  mandated by the CS Law.

9
Development costs of these models

• PE model developed during two-week PEIR mission
• Civil Service salary scale model developed
  during two-week lending operation mission and
  revised during subsequent missions