In many instances, Issues pertaining to public sector workers and how much they cost us have become the subject of astonishment and criticism on the part of various representatives within our society. After glancing at the state’s expenses, one could be forgiven for not realizing Georgia is one Europe’s poorest countries. For those who can’t be bothered to flip through the budget books and other administrative documents, they can just take a look at Facebook. Not a day goes by without one of our cyber friends sharing some amusing article regarding this issue. But should we really be amused by this? Let’s see what the numbers and various indicators tell us and then decide.
According to the most recent population census (2014), there are 3.7 million people residing in Georgia. However, only 1.7 million of them are employed. As reported by the National Statistics Office of Georgia, 1.5 million work in the private sector, and 249,000 work in the public sector. The percentage distribution of this figure is as follows: 84.6% are employed in the private sector and 15.4% work in the public sector. However, because Georgia has the lowest per capita GDP on the European continent, and an economy that grows at a snail’s pace, there is merit in questioning the wisdom of supporting such a large state bureaucracy.
All of us, including the majority of government officials, have the same response to this issue: we all agree on the necessity to cut costs. However, so far we have failed to embark on this optimization policy. Despite the muchanticipated belt-tightening measures and the promises made to reduce bureaucracy, a steady growth in bureaucracy has taken hold instead of a steady decline over the past three years. In illustrating this phenomenon, in 2013, there were a total of 247,300 people employed in the public sector. In 2014 it grew to 252,200, and in 2015 there were 274,900 public sector employees.
Reasons for avoiding these painful changes and cutting budget costs are self-explanatory. Mostly they are political in nature – no one wants to lose voters. And this is particularly true of the government. It is also noteworthy that the costs related to public employees are not only reflected in their salaries, but also cover numerous expensive financial off-shoots. Most frequently, the state budget covers bonuses, premiums, as well as telephone, travel and inventory expenses. These costs are often overlooked, while budget funds are largely spent on these very services.
In addition to the trends and indicators we have cited from recent years, we can gain further clarity to this vexing issue by using the examples of other countries. The internationally approved practice of counting public sector employees is used to identify the level of bureaucracy in relation to the overall rate of employment in a particular country. We decided to use the same method for our comparison.
Many countries with higher population and economic growth rates compared to Georgia’s have a smaller percentage of bureaucratic apparatus. Take Japan for example, where the population is 128 million and GDP per capita is USD 37,800, while the size of bureaucracy 3.5 million people. In relation to the overall employment rate, the Japanese bureaucracy ‘weighs’ 7.9 percent, which is almost half as much as the similar figure in Georgia.
According to a survey conducted by the Organization for Economic Cooperation and Development (OECD) conducted in 2013, the following countries have a lower rate of public sector employment compared to Georgia:
1) Turkey – 12.9%, 2) New Zealand – 12.4%, 3) Mexico – 11.8%; 4) Chile – 10.7%; 5) Japan – 7.9%, 6) Korea – 7.6%, 7) Brazil – 12.1%, 8) Columbia – 4.1%; 9) Ecuador – 9.8%.
Let me remind you that in 2013, this figure was 14.4% in Georgia, and according to the most recent survey, this number has now ballooned to 15.4%.
The current situation on our continent is also very interesting.
The rate of bureaucracy in various European countries is just a little higher compared to Georgia’s. For instance, in Spain the figure is 16.4%, Italy – 17.3%, Austria –18.2%, France – 19. 8%- and so on. At first glance, one might think that compared to Europe, the Georgian bureaucracy is smaller and therefore the situation in this regard is not so bad after all. However, we should take into account the fact that wealth indicators in the above countries are also significantly higher compared to Georgia. Therefore, the public sector-related costs are prompted by economic development trends. Several decades ago, when the aforementioned countries where in their initial stages of economic development, they spent much fewer resources on the public sector, and the people employed by the bureaucracy. As such, Georgia too must focus on strict reforms and cutting public spending to the maximum, as was the case for most European countries over the past century.
According to the OECD data, Sweden has the highest bureaucracy rate in Europe at 28.1%, Latvia –31. 2% %, Norway– 34.6%, and Denmark –34.9%.
When Georgian Prime Minister Giorgi Kvirikashvili speaks about economic models worth emulating, he often refers to Estonia’s model as a golden example. For exactly that reason, we decided to conduct a brief overview of the Estonian public sector.
The population of Estonia is approximately 1.5 million people, while the size of its bureaucracy is 26%. If we break down this indicator, we see that the number of public employees is 134,000, and the majority of them are employed in local government. Average salaries of employees working within the central apparatus are €1,338, while local government employees receive € 1,077 on average.
Despite the fact that the bureaucratic apparatus of Estonia is much larger, compared to Georgia, it should be noted that the Estonian government has prepared a new action plan, which prescribes a reduction in the size of bureaucracy. The authors of the new action plan aim to reduce the Estonian public sector by 700- 1,000 employees every year. This change was necessitated by the fact that in recent years there was a significant increase in the number of public employees hired by the central government. It would behoove the government of Georgia to follow the example of Estonia by implementing a similar reform here in Georgia.
To a certain extent, such a large public sector is the result of the socialist pasts of some of these countries. This past can have an economic impact.
According to 1989 data, during the Soviet Union, 90% of employed citizens worked for the public sector, which later continued via inertia – Ukraine and Belarus are clear examples of this trend. The case of China is also interesting in this regard. Before its implementation of the wellknown reforms of 1978, 100% of employed citizens were hired by the state. This figure was later modified, and by 2003, it was reduced to 32.8%. In our case, it is very important to focus on radical reforms and inflated costs, since there is simply no other way for us. In view of the country’s current economic resources, Georgia cannot afford such costs, and the existing numbers are proof of this.
Note: Before I finished working on this article, two very important pieces of information became public, both of which have direct relevance to the topic at hand. According to a January 16, 2017 study conducted by the National Democratic Institute (NDI), the majority of those surveyed stated that their income in the past month ranged from H261-H400. At the same time, the Mediator Monitoring Center presented another report, which shows that in the first 11 months of 2016, H34.6 million was spent on bonuses within the Legal Entities of Public Law (LEPL).
Unfortunately, continuing down this road will lead us to nowhere.
