Answer to Question #198183 in Microeconomics for Afikile

Question

Based on your review of the experience of other nations and literature arrive at a conclusion on if the public sector wage bill can be an effective expenditure control measure

Answer 1

The public wage bill refers to benefits regarding salaries, allowances, and other benefits given to government employees. It contributes to the total government budget. The effects of the public wage bill have led to a decline in government development projects and investments. These effects are adverse if not accompanied by economic growth or better means of revenue collection for the government. Many countries with high budgets for a public wage have experienced budget deficits. To fill in the gap, the governments have resulted in national loans. The burden caused by these loans has been shifted to the citizens. That is through increased taxes on both income and consumer goods. The high cost of living is an excellent contribution to the decline in the total welfare of the citizens. If accompanied by a good strategy of creating public revenue, the wage bill will be the best way to improve the country’s welfare.