Average salary indicators in 2023 in the public and private sector and the need for productivity

In the latest publication of INSTAT on average salaries in the public and private sector in the fourth quarter of 2023, it can be seen that the increase in salaries is with a continuous increase, as it happened in the two previous quarters of 2023.

As can be seen in the table below, there is a greater increase in the public sector, where the average salary for an employee in the average of 2022 is 74,450 ALL/month and in the quarters of 2023, except for the first quarter, there is an increase that reaches to 18% in the fourth quarter of 2023.

Whereas, in the private sector, the indicator of the average salary for an employee for all sectors of the economy is ALL 62,198/month in the average of 2022. In the four quarters after 2022, there is also a decrease in the first quarter of 2023 and a growth peaking at 11.6% in the fourth quarter of 2023.

In the comparison of average salaries between the public and private sectors, it is observed that the increase in the public sector is at least 6.4% higher. But, if we extend the comparison for two years in a row, 2022 and 2023, as analyzed by ALTAX for the year 2022 average salary, the average salary increase in the public sector is only 1.9% and in the private sector it is 10.2%.

In an extension of the comparative analysis for these two years, it is understood that the salary increase in the private sector is 21.8%, while the increase in the public sector is 19.92%. From these two indicators, it can be seen that the salary increase has an upward dynamic for salaries both in the private sector, but also in the public sector.

But, while in the public sector the salary increase is by government decision and there is a much higher level of marketing due to public appearances and more focused debates and analyses, in fact it has not happened that the same attention is paid to the dynamics of private sector wages.

This upward dynamics of private sector salaries can be seen in detail in the table below.

From all the sectors summarized in groups of activities in the table, it can be seen that the biggest increase with 23.2%, except for public administration, which has in this group all the state administration, keeps the activities included in tourism and trade with an increase of 22.6%.

Likewise, all other sectors have double-digit growth, where agriculture records an increase in the fourth quarter of 2023 by 21.2%. But the construction and real estate sector also saw further growth with 19.6%.

What is observed in all these salary increases for the sectors is the lack of coordination of the government’s employment policies and the needs of the private sector for support during periods of the year and qualified employees.

In the analysis of employment and salary trends in the activities involved in tourism, a support for the employees of this sector from the government in the periods outside the traditional tourist season during summer and autumn is seen as necessary. The policy that would be valid to maintain a professional workforce in every season should be looked at carefully since the main interest for the labor market, but also for this sector, is to keep the employees of this sector connected to the workplace. This support policy also affects the tendency to leave the workplace or even abroad.

In terms of the problems that arise from an increase in wages without being accompanied by an increase in productivity, it can lead to a significant increase in costs for the private sector, as well as the public sector. The private sector would also be affected by the decrease in productivity, from the already increasing demands of new employees and those who are part of the market, since this increase in costs does not have the valuable product to expand the circulation of businesses, but also the expansion of the market theirs. The growth of the market for them is also related to other economic reform policies, as well as those related to the problems dictated by the inappropriate structure of the Albanian market dominated by small and self-employed businesses, where the opportunity for growth is also challenged by systemic informality.

In the public sector, after the salary increase with a lack of presentation to the public of a performance and productivity analysis, it is seen that there is an urgent need to reform the administration based strictly on the feasibility analysis of each main institution and mainly at both levels of governance.

Further, we posit the need for an analysis that should come alongside wage increases to plan in medium-term budget programs for declining civil service expenditures using a well-designed pay-for-performance scheme. An analysis in the service of reforming the public administration can also initiate decision-making for the general reduction of the civil service. In other words, a pay-for-performance scheme can help get the same amount of services from fewer employees, even more so in conditions where the digitalization of public services is at advanced levels like no other country in the Balkan region.

Faced with a perception that the government is too costly for taxpayers to continue funding with the same approach, this moment in 2024 is a major motivation for the implementation of performance-based pay for administration.