Tuesday, September 04, 2007

Surely a better way to deal with strikes?

The recent South African public servants strike had me thinking.

Of course our teachers are poorly paid. Of course our police are badly paid.

But we also must have one of the most unproductive, corrupt public services in the world. Some argue that poor pay is at the route of the problem. I wonder.

The flip side of the coin is that our government expenditure runs at about 40% of GDP. Under the inflation targeting regime we have adopted (quite appropriately according to most modern economists), adding to the public servant wage bill quickly works its way into the inflation figure. Add to this the inevitable and soon to be seen dramatic increases in electricity costs, and inflation could enter an upward spiral.

My thoughts ran to a simple solution. Why not accede to the union demands and tie the increases to performance? If productivity improvements match the increase, the increase has a neutral impact on inflation.

It drives me mad when I drive along the streets and see water leaks that have been running for weeks. Of course the phenomenal apathy of residents is largely to blame. But, imagine if the employees of the water authorities had their bonus tied to the percentage of water of the total city water bill that is unbilled / lost? I'd bet we'd see a change in performance.

The same logic can be applied to many other measures. Percentage of failed matric students. Crime rates in an area. Etc.

Of course performance management is legendary for its difficulty in implementing. Read Freakonomics for examples of the difficulty in implementing teacher performance bonuses.

But the beauty is that it is very difficult for unions to argue against. They'd sound like real charlies arguing against a generous offer linked to performance. "What, you don't believe good performance should be rewarded?"

But you know why the whole idea is a non-starter? Most of our public service wouldn't know performance management if it hit them upside the head. And that is the real problem.

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