Acknowledging the contribution of public sector in the well-being of every country, this project focuses on the potential effects of a growing public wage bill for private sector in Kosovo. The public sector is the main employer in the country, where the increase in the staff size is also followed by wage increases which are mainly election induced. While government spending and employment can be considered as complements to private sector as they provide the infrastructure for private sector activity, they can also induce adverse effects. As such, the goal of this project was to provide an analysis of private sector given the raise of the public wage bill in Kosovo. Additionally, this project was to evaluate the effectiveness of the wage increases in public sector, with a special focus on the education sector. Based on the outcomes of such analysis, I provide recommendations as to how to provide assistance to private sector as the sector that has the capacity to trigger growth and development. The recommendations were made as to suggest that policy makers in Kosovo need to employ mechanisms that will create a favorable environment for an effective public and private sector, and as such avoid wage increases as instruments to win elections and silent the labor unions.
The project followed a combination of qualitative and quantitative analysis approach. The focus of this project was the analysis of existing data regarding the size and wages of public and private sector. One public high school, two private companies and the Union of Independent Trade Unions of Kosovo were subject to analysis. One limitation to this project was the lack of data especially for private sector, as many companies hesitate to provide data regarding the compensation they offer. Therefore, 5 interviews and a survey were conducted to collect data that could not be obtained otherwise, and in so doing get a better understanding of the outcomes of the public wage increases for private sector.
The outcomes of analysis show that the public sector has increased its size in the economy with no significant improvements in performance or service delivery. The evaluation of the interactions between the growing public sector wage bill and private sector appears to suggest that the latter suffers from insufficient skilled labor supply, pressure to increase wages, higher employee turnover and direct difficulties to compete with public sector.
Berisha, Drenusha, "Public Sector Wages: The Implications for the Private Sector" (2017). Thesis. Rochester Institute of Technology. Accessed from