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Since the global financial crisis broke in 2008, most OECD member countries have introduced measures intended to restore public finances. Over three quarters of the OECD countries participating in the OECD Fiscal Consolidation Survey 2012 have marked operational expenditures for savings with wage cuts and staffing reductions included in the reform agenda. More than half are introducing wage cuts (e.g. wage freezes in the United Kingdom and the United States, and 5‐10% wage cuts and salary freeze in Portugal and Spain) and a quarter are undertaking staff reductions (e.g. 10‐12% reduction in staff in the Czech Republic, Ireland and Poland, and up to 10 000 staffing positions to be permanently abolished by 2014 in Germany). These are significant orders of magnitude as governments in OECD countries employ 15% of the labour force, and compensation costs account for 23% of government expenditures, representing 11% of GDP on average. However, the effects of salary cutbacks and freezes on staff motivation and the longer‐term consequences on the ‘attractivity' of the public sector as an employer are not clear yet.

Document Type: Review Article

Publication date: November 1, 2012

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