Romanian Govt Should Limit Wages, Freeze Hiring, Scrap Bonuses – World Bank

In a report addressed to Romanian authorities, the World Bank said the lack of a coherent public sector wage strategy has allowed unions to become excessively demanding, which led to uneven wages and distorted the labor market.

Staff costs are an important and increasing component of Romania’s state budget. Staff expenses increased 73% from 2005 to 2007, while the gross domestic product only increased 40% in the same interval. Increased spending was partly caused by an increase in the number of jobs, especially with locale authorities and special sectors (police, firefighters), but the main cause was considerable wage hikes, the World Bank said in its report, obtained by MEDIAFAX.

World Bank experts noted that bonuses have a disproportionate share in the final wages of public sector employees, higher than the EU level, wages are not correlated with performance criteria and transparency is impaired. Analysts added wages in the public sector aren’t based on comparisons with the private sector.

For the short term, the World Bank recommended that the government should only hike public sector wages to cover inflation, freeze hiring in the public sector and create an office to coordinate public administration reform.

For the medium term, the government should set ceilings for staff expenses and develop a multiannual plan to eliminate bonuses.