After years of discussions, assurances and uncertainty, the much-talked-about Ninth National Pay Scale has finally been approved. Since the Eighth National Pay Scale was introduced in 2015, the prices of many essential goods and services have increased significantly. In effect, the new pay scale broadly addresses the erosion of purchasing power caused by cumulative inflation over the past decade. However, mindful of the risk of fuelling inflation and the pressure on public finances, the government plans to implement the new pay scale in four phases. The new pay scale will see a salary increase in the range of 100-142 percent, with the lowest basic salary being Tk 20,000 and the highest being Tk 1,56,000. The phased roll-out will cost the exchequer an additional Tk 1,05,580 crore yearly, per government estimate.
There has been considerable debate on whether the salary increase will help reduce bribery and corruption in the public sector. When there is a persistent mismatch between an employee’s income and the cost of maintaining an acceptable standard of living, financial pressure could influence behaviour. This may be particularly important for public employees whose jobs carry certain social expectations. Some may seek additional income through legitimate part-time activities, while some may respond by cutting back on consumption and other necessities. In the worst cases, however, employees with weak ethical constraints may turn to bribery and other forms of corruption to maintain their existing standard of living.
However, some studies suggest that the relationship between salary and corruption is not always straightforward. Higher salaries do not necessarily make public officials more honest. In some circumstances, better-paid officials may become even more tolerant of corrupt practices. The pertinent question is whether the new pay scale will reduce the incentive for public officials to engage in bribery and corruption.
To answer this question, we need to look at some of the theories explaining corruption in the public sector. The relative wage hypothesis suggests that public employees consider their official income in relation to alternative legal earnings and the potential gains from accepting bribes. When public sector wages are substantially lower than what an employee could earn elsewhere, the opportunity cost of losing a government job may be relatively low. Consider, hypothetically, a public security officer earning Tk 50,000 a month when a comparable private-sector position pays Tk 100,000. If the officer can obtain Tk 1,000 through an illicit payment on a particular occasion, the perceived risk of losing the government job may not be sufficiently large to deter such behaviour. Raising the official salary can increase the opportunity cost of corruption and, therefore, potentially reduce the incentive to accept bribes.
The subjective perception or fairness adds another dimension. If employees believe that they are unfairly compensated relative to their peers, their sense of loyalty and commitment to the organisation may weaken. Perceived unfairness can complement the purely income-maximising explanation of corruption.
The subsistence-wage hypothesis is even more straightforward. When wages are insufficient to cover basic household needs, it can create a powerful incentive for petty corruption. This argument is particularly relevant to lower-level public employees, for whom a significant rise in food, housing, education, healthcare and transportation expenses can create considerable financial pressure.
The empirical evidence, however, is mixed. A growing body of research suggests that higher public-sector wages may reduce corruption by narrowing the gap between public-sector and alternative legal earnings, particularly among lower-paid officials. But there is also research that finds that higher-paid public servants can become more accepting or tolerant of corruption. In other words, the effect of a salary hike may depend on the paygrade of the employee, the size of potential bribes, the probability of detection, institutional enforcement, and the perceived fairness of the remuneration structure.
This has important implications for Bangladesh. Remuneration in public and private sectors may differ significantly for jobs involving broadly comparable responsibilities. There are also differences in allowances, facilities and other non-wage benefits among officials of similar grades across different ministries and public agencies. Some of these differences may be justified by variations in job security, workload, occupational risk, pension arrangements and other benefits. However, public employees inevitably compare their remuneration not only with private-sector employees but also with colleagues working in other government offices.
Such comparisons matter because the Ninth Pay Scale will not necessarily eliminate differences in total compensation. If one group of public employees receives substantially better non-wage privileges than another group at a similar level, perceptions of relative deprivation may persist even after the pay hike.
What, then, can we expect from the new pay structure?
The increase could reduce some forms of petty corruption among lower-level officials, particularly where financial hardship is a significant motivation. For middle- and higher-level officials, however, the picture may be different. Where bribes are large and corruption is associated with the exercise of administrative, regulatory, procurement or law enforcement authority, a salary increase may have a much smaller deterrent effect. Indeed, some officials may simply adjust the size of the bribes they demand.
There is another reason why higher salaries alone cannot solve the problem. Corruption is not driven by income alone. The expected benefit from corruption must be weighed against the probability and cost of detection. If an official believes that the likelihood of being caught is negligible, even a substantial salary may not provide an adequate deterrent, particularly when the potential illicit gain is many times larger than the official salary.
Therefore, a pay rise should be viewed as one component of an anti-corruption strategy, not as a substitute for one. The Ninth Pay Scale can improve the financial security and morale of public employees and may reduce the temptation to engage in petty bribery. But its effect will ultimately depend on the institutional environment in which public servants operate. Stronger monitoring, transparent administrative procedures, effective accountability, credible punishment, and consistent enforcement are essential to changing the incentives surrounding corruption.
The problem becomes even more complicated when highly placed officials control substantial administrative or regulatory power. For such officials, the potential gains from corruption can vastly exceed their legitimate income. In such cases, what is needed is a credible institutional framework in which the probability of detection is sufficiently high and the consequences of corruption are sufficiently certain.
Political commitment is indispensable as well. Some officials occupying strategically important positions in administration, regulation and law enforcement may be particularly vulnerable to political influence. If anti-corruption institutions are weakened or enforcement is selectively applied, even the best-designed pay scale will have limited impact.
Dr Md. Bakhtiar Uddin is head of the Department of Economics at Jatiya Kabi Kazi Nazrul Islam University in Mymensingh. He can be reached at [email protected].
Views expressed in this article are the author's own.
Follow The Daily Star Opinion on Facebook for the latest opinions, commentaries, and analyses by experts and professionals. To contribute your article or letter to The Daily Star Opinion, see our guidelines for submission.
