Server salary costs 8.9% of GDP – 08/26/2023 – Market

Privileges of the few, inefficient management and the legacy of an overly generous pension system. These are three important factors that impact spending on servers in Brazil, according to different specialists interviewed by Sheet.

Discussion of how to solve these problems is on the agenda, but the search for solutions has brought back an old debate, whether Brazil wants a minimal state or a welfare state.

“Our Constitution defined that Brazil would have a full rule of law, with public health, a broad school base, from pre-school to higher education, and a social assistance network, and this signaled that there would be greater spending”, says Felipe Drumond, consultant at República.org, an entity dedicated to encouraging debate on public servants.

“Of course, there are distortions that need to be fought, as we have super salaries, careers with earnings far above the market, and many people still doing manual activities that could have already been digitized. But we need to deepen the discussion to know what is the best way .”

Spending on civil servants’ salaries, considering the Union, states and municipalities, for example, is in the global average, show data from the IMF (National Monetary Fund).

In Brazil, the salary paid in the public sector is equivalent to 8.9% of GDP (Gross Domestic Product). It is lower than the average in Finland (10%) and China (9.8%), more than Peru (6.2%) and Chile (6.8%), but roughly equal to Spain and Austria (both with 9%).

Spending in the country is above that of economies that make up the G20 —the bloc of richest countries—, such as France (8%), United Kingdom (7.3%) and Germany (5.9%). Payroll costs, however, distance Brazil from the international average when looking at careers in detail.

The salary difference between public and private, called premium, is an indicator of the distortions that burden the State, says Samuel Pessôa, researcher at FGV Ibre (Brazilian Institute of Economics of the Getulio Vargas Foundation) and columnist for Sheet.

He cites the parallel drawn by a World Bank study, “A Just Fit.” The document shows that the premiums are very low and practically non-existent in the municipalities where the demand for services to the population is concentrated – education, health and social assistance, and there is a shortage of people.

In the states, higher awards already appear for some functions. On average, you pay 30% more, says the study. The Union, in turn, concentrates the imbalances.

Law professionals receive an award of 80% and specialists in public management receive more than 100%, according to a survey that details the differences by activity, carried out by Ipea (Institute for Applied Economic Research).

In 2022, however, looking at the historical series, spending on civil servants in the federal government had reached 3.4% of GDP, the lowest level since 2008.

“This fact, in my opinion, justifies the toughest policy against wages made during the government [Jair] Bolsonaro”, says Pessôa, warning that he considers his speech controversial.

“At the end of last year, I wrote a column saying that Paulo Guedes’s economic heritage was not cursed, because he delivered the most tidy public finances. As Bolsonaro is a difficult figure to describe, the text irritated many people, but, if When we look at the numbers coldly, that’s what happened.”

The government of Luiz Inácio Lula da Silva (PT) disagrees. Guedes himself claims to have carried out a silent reform, recalls José Celso Cardoso Jr., secretary of Personnel Management, at the Ministry of Management and Innovation.

“Actually, he [Guedes] promoted a wage squeeze, paralyzed tenders and hiring, leaving retirements to be emptied and scrapped innumerable areas”, says Cardoso.

“It is the worst kind of reform possible, based on aging, retirement of civil servants and inflationary erosion of their wages.”

The government has changed, but disagreements persist. The mayor, Arthur Lira (PP-AL), again spoke of taking Guedes’ administrative reform out of the drawer, arguing that it is necessary to review the privileges of civil service, contain expenses and improve service to the population.

The proposal is to put the PEC (proposed amendment to the Constitution) 32 to a vote. The text makes hiring and stability more flexible, in addition to remodeling career progression.

Lula’s administration considers the text a punishment for civil servants. It defends gradual changes, through ordinances, decrees or bills, which will seek to improve the selection of personnel, via competitions, reallocation within the public machine and the improvement of careers.

Carlos Ari Sundfeld, full professor at FGV Direito SP, who studies administrative reform, suggests caution in this discussion.

He recalls that the public administration does not support putting everyone in the effective regime within the limited budget. Governments, precisely in an attempt to seek ways to obtain more efficiency and lower costs, have already made the work regime very diversified — and he cites examples.

City halls and state-owned companies outsource labor for health, education, security and social assistance, which has lower costs and also reduces the use of public bureaucracy. The OS (social organization) has become constant in health care.

There is also a strong presence of temporary workers, who have a simpler, faster and cheaper admission and management system.

The public administration even adopted the resident in the legal area. It is a system similar to that used with doctors. It replaces the public competition for new lawyers, whose remuneration is higher and grows very quickly after joining.

In this context, Sundfeld considers it inappropriate to say that the state spends too much.

“There is a ceiling to spend on personnel, Brazil’s pact in this area is in the Fiscal Responsibility Law, and I don’t know of any calculation effort that shows that the limit is high and we spend too much”, he says.

“However, it is true that we need to review certain segments, such as the judiciary —judge, prosecutor, lawyer, defender—, which earn values ​​extraordinarily above the private sector for equivalent functions. You can say that there is no judge in the private sector, but there are high-level legal professionals, such as judges, then, we can compare. In this case, it would be possible to distribute resources better.”

According to a survey by República.org, one of the few international comparisons of this activity was carried out in 2016 by the IMF. The survey showed that local distortion goes beyond borders. Comparing expenditure on the judiciary in 42 countries, Brazil was the highest, at 1.4% of GDP.

Almost 90% of its budget is represented by spending on wages, salaries and subsidies, including benefits such as housing allowances and daycare, despite high wages.

In the last year, according to República.org, judges received an average of BRL 55.6 thousand, when the constitutional ceiling, established by the maximum income of a minister of the STF (Federal Supreme Court), was BRL 39.3 thousand . In April, the value rose R$ 41.6 thousand.

Sought by the report to comment on the issue, the AMB (Association of Brazilian Magistrates) did not manifest itself until the publication of this text.

The peak of distortions, however, occurs when inactive people are included in the account. Spending on servers rises, then, to 13.5% of GDP.

The delay in carrying out social security reforms will weigh on for many years to come. A huge liability is just now coming in, says economist Paulo Tafner, who acted to change social security laws.

The gap in the Civilian and Military Union with Social Security is already close to R$ 95 billion per year. In the states, it exceeds R$ 110 billion.

“In practice, expenditure on personnel is a combination of active and inactive, and if you look you will see that in many states expenditure on inactive already exceeds that on active”, says Tafner.

“What I said 20 years ago is happening: the weight of the inactive will block the increase in wages with assets, as there are still many people working who will retire according to the old rules, before the 1998 reform. They have full salaries. I’m starting to fear that we’re going to need a new renovation sooner than I thought.”