Civil servants and the uniformed services have been paid badly over the last five years. When Zimbabwe switched currencies everyone was paid badly; but over the last few years, salaries and wages in the private sector, while far from ideal, have moved steadily upward. The small gap between civil servants and private workers in 2009, is now a far wider gap.
So what was done right in the private sector?
For a start, there was what amounted to a general agreement that as revenues rose so would salaries. Secondly, salaries were given a high priority. Most private employers recognise that a contented and skilled workforce is a necessary condition for a profitable business. Other things are needed but you have to start with that.
Obviously a lot depends on what sort of things a private company does as to the percentage of expenditure goes on human costs. An accountancy company, for example, will spend a far higher percentage of its revenue on human costs than a factory. Generally service industries, where the prime "raw material" is a skilled human being, use a higher percentage of revenues on salaries and wages than a manufacturer.
The civil service was not treated like this. A lot of silly and damaging statements were made that staff costs -- salaries, wages, medical aid and pension mostly -- should be well below a third of total expenditure. Since Zimbabwe was spending more than this then there was need, as revenues rose, for salary rises to be kept tight so that the percentage spent on salaries would fall.
We have argued several times that this analysis was flawed. Most ministries were not making things but providing services and the bulk of the cost of these services was providing skilled human beings to do things.
To take two obvious examples. The largest single group of state employees are the teachers; the second largest group are the police. Both are pretty much ultimate service units.
The prime job of the Education Ministry is to place a trained teacher every day in front of every group of 30 to 40 Zimbabwean children. Books and chalk are needed, but in relative terms, these are a tiny cost when compared to the cost of the actual teacher and can often be funded, and have been funded, through aid schemes. So if the Education Ministry uses 80 percent, say, of its total expenditure to pay teachers that is not unreasonable.
The prime job of the police is to prevent crime and ensure everyone is safe. And the only real starting point to do this job is to have a lot of policemen on the streets. Crime simply does not happen near a patrolling policeman and almost all drivers do remember the Highway Code when they see a traffic policeman. Technology can help, but a lot of this is cheap: bicycles, desktop computers, those cheap radar speed readers and a few cars. So the bulk of the expenditure of this unit must, once again, be salaries.
Even where a Government department might be thought to have to spend most of its money on things, such as the units responsible for roads, we find that some imaginative thinking over the decades has produced the required income from user fees, rather than taxes. Roads, for example, are now being paid for with car licence and toll gate money. Zinara funds are "off budget". The Government might set priorities, but does not provide the cash.
So it must be recognised in the State sector as well as the private sector that staff costs are not "waste" but might be the cost of providing the required service. So if the bulk of tax money is spent on salaries then that is probably right. So the Finance Ministry should not be frightened of having salaries forming a high percentage of State spending.
That said, State employees have to recognise that the State does not have bottomless pockets. Every dollar spent on salaries has to come from taxes. No one lends money for salaries and any employer borrowing money for salaries will soon be bankrupt. So there are limits to what the State can pay.
But as the economy is growing, and the State takes a constant percentage slice, then tax revenues are growing. Couple that increase with a willingness to recognise that the bulk of State expenditure should be going on salaries since the Government is pretty much the ultimate service industry, and something should be arranged. It will never be good enough, but it will be better than what State employees get now.