Does Indonesia Have a "Low-Pay" Civil Service?

Abstract:     
Indonesia has long been characterized as having a "low-pay civil service," which is in turn used to explain corruption at various levels of government. Analysis of individual and household level data show that the earnings of government employees, on average, is comparable to what they might earn in the private sector. Changing the structure of compensation may be an important part of civil service reform, but should not be seen as the main instrument to address corruption.

Government officials and policy analysts maintain that Indonesia's civil servants are poorly paid and have been for decades. This conclusion is supported by anecdotal evidence and casual empiricism. Filmer and Lindauer systematically analyze the relationship between government and private compensation levels using data from two large household surveys carried out by Indonesia's Central Bureau of Statistics: The 1998 Sakernas and 1999 Susenas. The results suggest that government workers with a high school education or less, representing three-quarters of the civil service, earn a pay premium over their private sector counterparts.

Civil servants with more than a high school education earn less than they would in the private sector but, on average, the premium is far smaller than commonly is alleged and is in keeping with public/private differentials in other countries. These results prove robust to varying econometric specifications and cast doubt on low pay as an explanation for government corruption.

This paper - a product of Public Service Delivery, Development Research Group - is part of a larger effort in the group to understand ways to improve the delivery of public services.

Number of Pages in PDF File: 19

working papers series