It is widely believed that Indonesia’s civil servants are poorly paid and have been for decades. Is this really true, and, if so, is it the cause of corruption?
Among academic writers and policy makers alike, Indonesia has been characterised as having a ‘low pay’ civil service. This conclusion is supported by anecdotal evidence and casual empiricism. It is the basis for up to a one thousand per cent increase in allowances, given to some structural staff in April 2000. This study by the World Bank systematically analyses 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 claim that Indonesian civil servants are low paid, though widespread, raises many questions. Salaries may be low, but relative to what or whom? Are government salaries low relative to international levels or to domestic alternatives? With a civil service, including the armed services and police, of over 4.6 million, is everyone low paid, or only those at higher ranks? Beyond these matters of fact, the consequences of low pay warrant further scrutiny. Is low pay a primary determinant of corruption? How can the prevalence of petty corruption by lower ranking government workers be explained if they earn a premium over the private sector? Can the alleged ‘big corruption’ among higher-ranking officials realistically be tied to the pay they receive relative to their non-government counterparts?
The analysis suggests that:
- Presidential decrees in April 1999, and again in April and May 2000, significantly raised nominal government salaries well in excess of price inflation
- With more limited recovery in the market economy, government pay may now exceed private pay for all but a fraction of the nation’s 4.6 million government employees
- 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 is commonly alleged and is in keeping with public/private differentials in other countries.
If the assumption of low pay is inaccurate, so must be any simple linkage between pay and corruption. Rather than identifying corrupt behaviour as a consequence of ‘low pay’, the following points may be more relevant:
- It is more helpful to view corruption as a response to opportunity
- Soliciting bribes, arranging kickbacks or practicing extortion all represent calculated risks where costs and benefits of corrupt behaviour are weighed
- If the risks of getting caught are low and punishment minimal, corruption is apt to flourish
- Rises in official pay increase the expected costs of losing one’s job
- However, unless actions are taken to punish corrupt behaviour, pay increases will do little to change the cost/benefit calculation
- 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.
