There are several areas for improvement in wage setting in the public administration sector in Poland. Public administration pays a lower premium for tertiary education and offers lower wages for young employees than the business sector. Instead, public administration provides large returns to job tenure, incentivising lifelong employment. Such a model is conducive to the smooth functioning of the administration. However, it limits the possibilities of structural changes in employment. The present remuneration system may also lead to negative selection, where low-productivity workers remain in the public administration till retirement. In contrast, high-productivity workers choose employment in the business economy. To address these issues, we propose a reduction in automatic seniority premiums, an increase in basic wages, and a better valuation of scarce skills.
The authors would like to thank Andrzej Halesiak, Jan Rutkowski, and Cristina Savescu for their valuable comments on the earlier version of this paper. The World Bank Group funded this study. This publication’s content reflects the authors’ opinions, which may diverge from the positions of the Institute for Structural Research. The usual disclaimers apply.