2 arguments against increases in civil servants’ wages in Portugal

The Portuguese Government is about to announce increases in civil servants’ wages between 2015 and 2020.

The IMF, European Commission and European Central Bank are about to complete the adjustment programme and meanwhile, the President has declared that he would welcome an increase in the civil servants’ wages in the coming years.

Government appears to be leaning towards an increase in wages, in line with the President’s opinion. This demonstrates concern over the upcoming European elections in May 2014 and Parliamentary elections in 2015.

Increasing civil servants’ pay could potentially result in lower corruption levels, as motivated and relatively well-paid civil servants would have a lower tendency to accept bribes. However, a number of arguments can be made against any increases in civil servants’ wages at this stage:

1. A number of cuts in the wages of civil servants were proposed from 2008 onwards but the Constitutional Court blocked their implementation. As a result, unit labour costs are back at 2008 levels in the public sector, while there has been a decrease unit labour costs in the private sector. From this perspective, nothing has changed since the beginning of the crisis, for civil servants.
2. Any increase in wages would have to be justified with improvements in services provided by the State. However, there is evidence that the public is not satisfied with the level and quality of services provided. In its 2013 report (Third European Quality of Life Survey – Quality of society and public services), the European Foundation for the Improvement of Living and Working Conditions finds that the perceived quality of public services in Portugal is well below European average.

Source: Eurofound (2013), Third European Quality of Life Survey – Quality of society and public services, Publications Office
of the European Union, Luxembourg

I do not mind paying civil servants well, as long as I receive a good service in return. The main problem is the low perceived quality of public services in Portugal and from this perspective, increasing wages does not make any sense at this stage.

5 lessons I learned from Américo Amorim

Some lessons I learned by working with Américo Amorim:

1. Never rely on anyone. You should not depend on a single supplier, bank, or person. If you offer someone the chance to influence your actions, you are effectively exposing yourself and this will become a source of weakness sooner or later. We live and work in a market economy, you should only depend on the system. Use the system to your own advantage;
2. Walk the talk. Working in a company (or a bank) is a choice and a lifestyle. Some chose to become an artist, a politician or a civil servant – you made your own choice. You will meet people from all walks of life: understand what they expect from you and walk the talk;
3. It is often physical. No-one ever seriously developed a business just by sitting in an office. If you work in an industrial company, you need to talk with people on the shop floor. If you sell a service, you need to meet your clients. Travel if you need to. Spreadsheets are good, being on the ground is absolutely fundamental;
4. Keep your promises, and ask others to keep their own. While some people are good at delivering on what they promised, most are not. Remember what you were promised and demand it. Conversely, you should make a real effort to honour your promises;
5. Talk with everyone – including politicians. While you may have your own political views, you cannot afford to alienate a group of people based on their political views, as you may need their support further down the road. This is more tricky to carry out than you might think, since you should make yourself scarce at the same time. Find that balance.

The situation in Kiev

Russia depends on its natural gas exports to Europe. In fact, 50% of Russia’s Federal budget stems from duties on natural gas exports.  European countries, on the other hand, could easily find alternative natural gas supplies – albeit at a higher cost.

From this strictly economic perspective, Russia has much more to lose from cutting off natural gas supplies to Europe. While European countries would probably see a significant reduction in their economic growth if natural gas supplies face disruption, Russia would face a major budgetary crisis. From this perspective we are in the clear, for now.

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To complicate matters, while the aspirations of the Ukrainian people are legitimate, some supporters of the new Government seem to be political extremists. One suspects that this matter is no longer in the hands of the Ukrainian Government, in any case.

As usual, the US is playing its role as international arbitrator. The fact that Ukraine is actually in Europe does not seem to bother the Obama Administration.