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has recommended that the government reduce the annual salary of central government workers for fiscal 2005 by 0.1 percent, or 4,000 yen from the previous fiscal year’s level, to bring it into closer alignment with the annual salary level for private-sector workers. More importantly, it has called for a long-term reform of the pay system for national public servants.

Under the recommendation for annual pay in fiscal 2005, basic monthly pay for national public servants would be reduced by 0.3 percent, and dependent allowances by 500 yen. But annual bonuses would be raised by an equivalent to 0.05 month’s pay to an amount equivalent to 4.45 months’ pay. This would reduce the central government’s personnel costs by roughly 5 billion yen. If local governments follow suit, their annual personnel costs would decrease by about 19 billion yen.

The NPA has also proposed a gradual cut in basic pay on an annual basis starting in fiscal 2006 to achieve an average reduction of 4.8 percent over a five-year period. Instead of an equal 4.8 percent basic pay cut for all central government workers, the NPA calls for a 7 percent cut for middle-aged and older workers, and a continuation of the current pay level for younger workers. The resulting surplus would be distributed in the form of special cost-of-living allowances or “area allowances” to workers in 271 municipalities in 30 prefectures, including Tokyo’s 23 wards, where the pay level for private-sector workers is relatively high. The allowances would amount to 3 to 18 percent of the basic pay for workers concerned. This measure is in line with the basic principle that the salaries of public servants should match those of private-sector workers employed under similar conditions.

If these allowances are introduced, workers in urban areas would receive higher salaries than those in rural areas. According to an NPA estimate, the average government worker in Tokyo’s Kasumigaseki district, who is 40.3 years old and entitled to the special area allowance, would earn 7.2 million yen annually — 1.2 million yen more than the average worker in a rural area with no locality allowance.

The proposed pay reforms would not lead to a reduction of overall personnel costs, but the NPA has also made a more meaningful recommendation concerning the pay system for central government employees: the introduction of a system that would take the performance of workers into greater account than is done at present. Instead of the current unified pay-raise system under which workers get automatic age-related raises, future pay raises would be based on performance evaluations. Instead of the current 1 percent, under the new system 5 to 10 percent of workers would be entitled to the “hardworking allowances” that are given to particularly high-performing workers.

According to the NPA, the proposed new pay system is aimed at increasing the efficiency of personnel management and improving the morale of workers. It is estimated that under the new pay-raise and allowance system, the annual pay of a high-performing section chief at a government ministry in Kasumigaseki would be as much as 700,000 yen higher than his or her colleagues who do not perform as well. The reform of the pay system would help central government workers — who do not face severe competition or the threat of layoffs — become more conscientious of their efficiency.

In the long run, the NPA’s recommendations would have the effect of reducing total personnel costs for both central and local government workers because local personnel committees usually follow NPA recommendations.

In general, public servants receive more generous salaries than their counterparts in the private sector. For example, a survey shows that central government workers in Hokkaido and Tohoku receive 4.8 percent higher salaries than private-sector workers in those regions.

At present, the salaries of central government workers are determined by taking into consideration the pay level at enterprises where 100 or more workers are employed. Therefore, it is not surprising that workers employed at smaller enterprises think that public servants’ pay is too high.

The Democratic Party of Japan proposes that the total personnel cost for central government workers be lowered by 20 percent. The ultimate goal of various reforms pursued by the administration of Prime Minister Junichiro Koizumi is the realization of smaller government based on a highly efficient bureaucracy. The proposed cut in personnel costs for public servants is only a small step in that direction; yet it is a step worth taking.

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