How are they paid? A study of civil service pay in China

Abstract

The importance of pay in developing a professional, effective, and honest civil service is widely recognized. The World Bank and OECD have made uninterrupted efforts to encourage many developing countries to carry out pay reform. This study provides useful information for researchers and practitioners to compare civil service pay reform between China and other developing countries. It assesses the level of civil service pay by comparing it with pay in other sectors in China, using updated and credible data recently made available. It clarifies several points in the debate over civil service pay in China and provides new perspectives on the issue of whether the civil service pay in China is high or low. The analysis and findings in this study will be of interest to researchers and practitioners beyond China because the Chinese experience with civil service pay reform has important points in common with similar reforms elsewhere. For example, the Chinese phenomenon of large, non-wage, largely unreported and unofficial, civil service pay in China resembles practices in developing nations such as Vietnam, Egypt, Tanzania, Zambia, and Uganda. Nonetheless, to the extent that pay reform is driven by internal circumstances, strategies and objectives are likely to differ even though the basic problems of wage disparities, anti-corruption, and low civil service performance are similar. Given its economic importance and valuable reform experiences, China may provide a model for reforms elsewhere. This study also provides a benchmark for future research and cautions researchers to view official pay scales potentially as serious understatements of actual remuneration. Points for practitioners Many developing and transitional countries have attempted to reform their pay systems, with mixed results. This study provides useful information for researchers and practitioners to compare civil service pay reform between China and other countries. China’s experience in establishing a new civil service pay system provides two useful lessons for practitioners elsewhere. First, the elimination of non-wage income is vital to successful pay reform. Second, reining in non-wage income requires budgetary reform, whereby off-budgetary funds that finance non-wage benefits are incorporated into the formal budget and subjected to proper supervision. China can also learn from other developing and transitional countries’ experiences, particularly with regard to public sector downsizing.