Not the old way

The first shots have been fired with regard to a revision of government salaries. The demand has been raised for a new central Pay Commission, a committee under the chairmanship of the cabinet secretary has rejected the demand, and some protests have been heard with regard to the decision.

The Left will probably raise the issue in the coming weeks, though most state governments (including those run by the Left parties) are fearful of the denouement because the last round of pay hikes bankrupted them and they have only partially recovered from the consequences of that pay-out.

But the issue will not go away and the decibel level will climb. The government can stonewall for a while, but since it is eight years since the implementation of the last Pay Commission, it cannot ignore the issue forever. Far better, then, to get tactical.

The inescapable fact is that government employees are paid below market in the middle and senior levels (the numbers here are relatively small), and above market when it comes to supporting and clerical staff (the overwhelming majority).

Salaries in the private sector have been going up by between 10 and 15 per cent, depending on the sector you track; so it is a safe bet that private sector salaries have doubled since the implementation of the last Pay Commission's recommendations.

Government salaries have not kept pace, and a career in government service has dropped steadily in young people's preference lists. This is not a desirable situation, since falling governance standards constitute an important and urgent problem.

It is difficult (though not impossible) to raise salaries in the upper echelons without doing something for those lower down. The even bigger problem, though, is that governments at the Centre and in the states will go bankrupt if the 1997 exercise is repeated.

The last Pay Commission's package of recommendations included a gradual reduction in the total number of government employees, by about 3 per cent a year or 30 per cent over a decade. What we have seen instead is expansion of the total from year to year.

Given the state of government finances and the utility of the average government employee, there is only one solution possible: bring down the numbers and pay the rest much more. The first is not possible without a golden handshake.

One method might be to look at all government functions, eliminate those that perform no useful service, put the people involved into a surplus pool, and then offer them an extended and gradually loosening handshake over several years in order to ease the transition""while leaving them free to seek private sector employment.

It is not difficult to go through the telephone directory and pick out many government offices that can be closed down without any loss to the public. The government should then declare that any money saved will be used to pay more to its employees who stay back because they are considered useful. Some hard bargaining will be involved, but an acceptable solution might emerge.