GEO

The change in the remuneration rules in the ministries has not had a significant impact on wage inequality

03 October, 2019

 

On January 1, 2018, the Law on Remuneration in Civil Service came into force. As a result, a centrally regulated remuneration system was introduced for the first time in the history of the Georgian civil service.[1] In order to examine the practical impact of the law on the remuneration of employees, in particular the distribution of salaries among different employees, TI compared one-month remuneration in central apparatus of ministries before and after the law was implemented. As a result, it has been revealed that in 2017-2018, wage inequality increased in five out of eight ministries, while in three ministries it reduced. If we look at the figures of all eight ministries, it would appear that wage inequality has almost not changed during the study period.

We requested information from ten ministries[2]. The Ministry of Finance did not provide information and the Ministry of Internal Affairs did it partly. For the analysis, we took the payoffs of one month prior to the enactment of the new law - December 2017 and that of one year later period - December 2018.

The purpose of the study was to analyze the inequality of remuneration in the central apparatus of ministries and to describe the trend following the adoption of the new law. To achieve these goals, we have used mean and median salaries in the ministries. To have a full comparison, salaries of political appointees (ministers and deputies) were also taken into account, even though the new law does not apply to them until 2021.

Remuneration in civil institutions consists of a) salary, b) salary increment and d) bonus. The study compares payrolls, which are the sum of all three components, since the goal is to analyze the actual amount received by the employees.

Prior to the adoption of the new law, salary increments and bonuses were systematically given, often without proper justification.[3] The new law retained the pre-existing factual status quo, and bonuses and salary increments were merged with major salaries. The issue of salary increments and bonuses became subject to strict regulation.

However, in December 2018, we also saw salary increments and bonuses paid based on the justification that is not allowed by the new law. An example of this was the Ministry of Defense, from which we received a written response explaining that the bonuses of GEL 125 were given to all employees for the New Year celebration. Under the new law, a holiday cannot be the basis for a bonus, it is an individual incentive mechanism and depends on the quality of work of an employee.

To determine the disparities between the salaries of the employees in the ministries, we have compared the mean and median salaries of all employees, in particular, the percentage difference between the mean and median salaries. The less the difference between these two indicators, the less the disparity between the salaries of employees of different levels.

According to the obtained data, the largest difference (31.6%) between the mean and median salaries of December 2017 was in the Ministry of Infrastructure and the smallest (11%) - in the Ministry of Justice. In December 2018, the largest difference (30.8%) was reported in the two institutions – the Ministry of Economy and the Ministry of Education, and the lowest was in the Ministry of Infrastructure (6.7%) (See charts 1 and 2).

Looking at the dynamics of one year, in five of the eight ministries, wage inequality increased and in three of them it decreased. In this regard, the Ministry of Infrastructure is particularly noteworthy, which was characterized by the highest rate of wage inequality in December 2017 and the lowest in December 2018. Looking at the figures of the eight ministries, wage inequality has almost not changed during the study period - the average difference in December 2017 was 20.6% and in December 2018 it was 20.9% (see chart 3).


[2] Information was requested from all ministries except the Office of the State Minister for Reconciliation and Civic Equality

economics