Thursday, January 6, 2011

Government Employees Grow And Drain Budget

The Iraqi press recently reported that Iraq has more public employees in proportion to its population than any other country its size. Iraq still lives with the legacy of the socialist economy created under Saddam Hussein. That means the government is the largest employer in the country, which distorts the labor market, drains the budget, and adds inefficiency.

The media said that there were approximately 4 million government workers. That would be an increase from the 3 million reported by the Special Inspector General for Iraq Reconstruction in July 2010. That means that Baghdad employs around 10% of the population. In Kurdistan the numbers are even higher. Out of around 4.5 million Kurds, 1 million work for the government. The authorities provide 60% of all full time work in the Kurdistan Regional Government. That makes the government the largest employer in the country overall. The private sector in comparison only employs 33% of the workforce, and those jobs tend to be informal, insecure, and low waged, which is the reason why most Iraqis seek work with the government.

This huge workforce is a tremendous drain upon government coffers. In the 2010 budget for example, 72% of spending, $52.12 billion was appropriated for operational costs, most of which went to salaries and pensions. This portion of the budget continues to increase each year, as in 2009 only $42.61 billion was for the operational budget. A parliamentarian claimed that the president, prime minister, and parliament are due to receive $1.1 billion alone in the 2011 budget, which is now under consideration. In April 2010 an auditor for the Finance Ministry warned that the budget could eventually be dominated by all these costs, denying investment and development funds.

So many government workers also creates huge inefficiencies. In October 2010 former Planning Minister Ali Baban told the Iraqi press that 70% of state employees don’t have real jobs, and don’t produce anything. Prime Minister Nouri al-Maliki’s new cabinet for instance, is going to have more ministries, and top positions than his previous 2005 one. There will be three instead of two deputy prime ministers and possibly three vice presidents this time around, even though the latter will have no powers and if they’re created, will only exist to appease all of the parties that make up Maliki’s new ruling coalition. Officials also want to fill 115,000 vacant jobs. Maliki attempted to include them in the 2010 budget, but was blocked because his opponents believed he was trying to use them to buy votes in the national election that year. Since the government is now formed those spots will likely be filled as part of the patronage system each party will control through their command of the ministries and offices.

The government’s leading role in employment means that it sets wages and controls the labor market. Many of these workers have no real position, and exist to maintain support for political parties, and keep people off the streets in an attempt to control social unrest. This is similar to many developing countries, especially ones based upon oil since the industry is not labor intensive, so the government ends up creating jobs with the profits. The problem with Iraq is that the number of public employees keeps on increasing each year. That will eventually drain the budget unless priorities are changed. Unfortunately, Baghdad doesn’t seem to have any urge to do so, and will likely continue on with the current path as petroleum revenues are expected to rise with the added production from deals made with foreign companies.

SOURCES

Department of Defense, “Measuring Stability and Security in Iraq June 2010,” 9/7/10

Knights, Michael, Carpenter, J. Scott, and Ali, Ahmed, “After the Elections: Prospects for Democratic Consolidation in Iraq,” Washington Institute for Near East Policy, 3/5/10

Nakhel News, Al-Mada, “Four Million Government Employees In Iraq,” MEMRI Blog, 1/3/11

Radio Nawa, “Minister of Planning: Seventy percent of state employees without a real job,” 10/13/10

Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/10
- “Quarterly Report to the United States Congress,” 4/30/10
- “Quarterly Report to the United States Congress,” 10/30/10

No comments: