Inflation-adjusted pay hike of public servants

Dhaka,  Tue,  22 August 2017
Published : 14 Mar 2017, 20:21:26

Inflation-adjusted pay hike of public servants

The idea of linking pay-hike of public servants to annual rate of inflation demands dispassionate scrutiny. That the government would not institute in the future any pay commission for fixing public servants' pay-scales was earlier stated by the finance minister when he had announced the new pay scale in 2015. At a meeting this week, which was attended by some key policymakers of the government, a suggestion for inflation-adjusted annual pay hike, instead fixing salaries after every five years, came up for discussion. And the finance minister sounded positive about such a possibility. 

However, nothing has yet been decided. A committee, formed to look into the issue thoroughly, is due to submit its report within the next three months. A cell, headed by the finance secretary, will look into the pay-hike issues. But the public servants, according to newspaper reports, are not happy over the idea of introducing inflation-adjusted pay-rise. They are opposed to the proposal of avoiding any pay-hike in the event of inflation rate remaining at 4.0 per cent or below, on the one hand, and have deep reservations about the authenticity of inflation data of the Bangladesh Bureau of Statistics (BBS), on the other. 

The pay increase of employees, be they in private or public sectors, is a routine job on the part of the employers since the cost of living index (CPI) is never static and keeps on rising. What varies is the pace of rise in CPI, from country to country and year-on-year. But the practice of hiking salaries of public servants by a big margin in one-go after every five years does not appear to be prudent and sound, judging the issue strictly on rational economic grounds. It does add to inflationary pressure. The number of government servants is usually a few hundred thousand. But the major brunt of the rising prices is borne by millions of people who are left with hardly any option to increase their income levels.  

In this context, annualized inflation-adjusted pay rise for the government servants makes a fair proposition. Such small increases would hardly influence the general price situation in the economy. But the proposal relating to avoidance of pay-hike in the event of inflation remaining at 4.0 per cent or less seems to be somewhat debatable on different grounds. Furthermore, there are other issues - the size of the government, efficiency, performance, etc. - that are involved here. On its part, the government may avoid any hike in salaries of public servants up to a certain minimum limit of the rate of inflation. Above that, the case for a pay-increase does otherwise make a strong case. The CPI is the basis of core inflation calculation. For any pay-increase, an appropriate measurement of CPI, taking into account the most commonly purchased goods and services by the households across the country, merits consideration.

Meanwhile, there are many sceptics in the country who continue to raise questions about the methods of data preparation, compilation and dissemination by the national statistical organization, including the ones concerning the rate of inflation and, of course, not without some valid reasons. If the government eventually decides to go for inflation-adjusted hike in salaries of public servants, the whole gamut of issues about the methodology of CPI estimation must come under a close scrutiny in order to make it transparent. An appropriate calculation of CPI or inflation is all the more necessary for the benefit of all - the government, people and public servants in particular.

Editor : A.H.M Moazzem Hossain
Published by the Editor for International Publications Limited from Tropicana Tower (4th floor), 45, Topkhana Road, GPO Box : 2526 Dhaka- 1000 and printed by him from City Publishing House Ltd., 1 RK Mission Road, Dhaka-1000.
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