NEW RESEARCH by ActionAid, Public Services International, and Education International warns that the International Monetary Fund’s demands to cut public sector employee costs undermine progress on health and education.
The International Monetary Fund’s advice to cut government spending in the global south has wiped nearly $10 billion from public sector wage budgets in 15 countries: Bangladesh, Brazil, Ghana, Kenya, Liberia, Malawi, Nepal, Nigeria, Senegal, Sierra Leone, Tanzania, Uganda, Vietnam, Zambia, and Zimbabwe.
This is the equivalent of cutting more than three million essential jobs, such as teachers, nurses, and doctors, despite the growing need for such professionals during the pandemic.
David Edwards, General Secretary at Education International stated: ‘Public sector wage bill constraints have a devastating effect in the education sector.
‘When the teacher wage bill is cut, students’ right to quality education is threatened by a lack of qualified teachers and unacceptably large class sizes.
‘Given the global teacher shortage and rising attrition levels due to the pandemic, the IMF should be supporting low and lower-middle income countries to recruit and retain more well trained and highly qualified teachers rather than pushing for countries to reduce their spending on these workers that are so crucial for countries’ post-pandemic recovery.
‘Teachers are key for quality education and are crucial for achieving the global goal to ensure inclusive education for all.’
The public versus
austerity
As G20 finance ministers met for the IMF annual meetings on Tuesday 12th October, the research revealed that despite IMF claims that wage bill containment is a temporary measure, all the 15 countries studied have been advised to cut or freeze public sector wage bills for three or more years and most for at least five years.
The report, The Public Versus Austerity, shows how cutting budgets used to pay public sector workers is undermining progress on health, education and gender equality while blocking Covid-19 responses and the transformations needed to address the climate crisis.
Analysis of IMF documents, including Article IV reports that provide policy advice which shape countries’ economies for years, also reveals how data is being misused at country level to drive down public employment funding.
It finds that countries with wildly different spending on public sector wages as a percentage of GDP were all advised to make cuts, from Zimbabwe with 17% of GDP to Nigeria with just 1.8% of GDP.
Despite these huge variations, the IMF’s advice is consistently to cut spending.
Out of 69 IMF documents examined, only Liberia’s included calculations on existing staffing shortfalls in the education and health sectors – despite such information being of vital importance in determining public employment funding levels.
Liberia’s Article IV report showed the country’s ratio of health professionals per 10,000 people is only five, compared to the World Health Organisation target of 41.
Yet despite the clear need for more public service workers across a range of sectors, Liberia was still advised to make a 1.1 percentage point cut to the public sector wage bill.
The report comes just weeks after the World Bank ditched its annual Doing Business report following calls from civil society for change and a damning investigation, which revealed significant internal bias and data manipulation.
The new research further highlights the need for reform at both the International Monetary Fund and the World Bank, towards a new policy direction which revalues the role of public employment and services in fostering development and growth.
Accounts from the frontline
Teachers, doctors, and nurses from the countries involved in the study, shared shocking accounts of fragile health and education systems brought to their knees during the height of Covid-19 due to shortages of key workers.
In Zimbabwe, teachers’ salaries (around ZWL$28,666, or US$335 per month) are less than the total consumption poverty line, the amount needed to buy enough food and non-food items to support a family of five each month.
Farai, a teacher from Zimbabwe, says: ‘Our wages feel like slave wages, teachers are facing so many challenges. We are suffering from stress and surviving teachers feel as if they have become beggars. Morale is at its lowest.
‘We have become a laughingstock in society, living from hand to mouth. We go to work in tattered clothes, and we are living in squalid conditions. I have heard of marriages breaking down. But through all this we are still reporting for duty.’
Broken austerity policies such as wage bill containment, highlight how the IMF has undermined public services and prevented countries responding to multiple crises, such as the climate crisis and the Covid-19 pandemic.
Across the 15 countries studied, if governments were to raise the amount of GDP spent on public sector wage bills by just one percentage point this would allow for the recruitment of eight million extra teachers, doctors, nurses, and other key workers.
Key findings of the report:
- Despite IMF claims that wage bill containment is only ever temporary, all of the 15 countries studied were given a steer to cut and/or freeze the public sector wage bill for three or more years, and eight of them for up to six years.
- In just those 15 countries, the recommended IMF cuts add up to nearly US$ 10 billion – the equivalent of cutting over 3 million frontline public sector workers.
- In just those 15 countries, a one-point rise in the percentage of GDP spent on the public sector wage bill would allow for the recruitment of 8 million nurses, teachers and other workers.
- There is no clear logic, rationale or evidence to justify when cuts are needed, or how much is enough. Zimbabwe, with a wage bill at 17.1% of GDP, was advised to cut, but so was Liberia which spends 10.1%, Ghana at 8.7%, Senegal at 6.5%, Brazil at 4.6%, Nepal at 3.7%, Uganda at 3.5% and even Nigeria, which spends just 1.9% of its GDP on public sector workers.
- The latest IMF medium-term advice is to drive every country below the global average for public sector wage bill spending as a percentage of GDP, contributing to a long-term downwards spiral.
- Despite claims that public sector wage cuts should be accompanied with action to expand tax revenues, most countries experienced decreasing, stagnating and/ or inadequate tax-to-GDP ratios. Even the few countries that expanded tax revenues were advised to cut spending on the public sector wage bill.
- Public sector wage bill constraints undermine progress on health, education, gender.
- There was no serious or systematic ex-ante or ex-post assessment of key worker shortages in health and education to inform cuts or freezes, and no attempt to project the impact of wage bill constraints.
- Cuts to public sector wage bills were often justified as essential to free up funds for capital expenditure investments, giving the absurd impression that spending on the public sector workforce is not a valuable part of social spending. In practice, infrastructure fundamentalism actually diverts spending away from health and education.
- The impact is felt triply and most acutely by women and girls, as they are more likely to be excluded from accessing basic services, to lose opportunities for decent work in the public sector, and to bear a disproportionate share of the unpaid care and domestic work that rises when public services fail.
- IMF documents routinely used dodgy data and inappropriate country comparisons to drive down public sector wage spending.
• Secrecy in IMF discussions with Ministries of Finance is now a key weapon in the fight to preserve a failing ideology.
