Productivity is commonly defined as the ratio of output in relation to the input required.  The inputs are labor, equipment, space and energy used, while the outputs are measured by counting the goods and services produced in terms of monetary value.  To raise productivity, the private sector either increases its outputs or decreases its inputs.  However, productivity in the public sector is more complex since its outputs are provided to citizens for free or at subsidized prices, and they are difficult to quantify because of economic and social dimensions.

Public sector productivity is defined as optimizing the delivery of services through the efficient use of public funds, resulting in increased citizen satisfaction, public trust, accountability, cost effectiveness, competitiveness, and quality of life.  It also means enhancing the effectiveness of the public sector in creating a conducive environment to increase the total factor productivity in private sector production.

In the face of constant financial and economic concerns around the globe, the need to increase awareness and interest in public sector productivity has gained some traction. Raising productivity in the public sector is actually crucial due to the following reasons:

  1. Governments are major employers.

The public sector has a significant share in the total employment figures of any country.  “Public sector” covers all employees working in all branches of the government at the national, regional and local levels, as well as those working in government-owned and controlled corporations.  Data from the World Bank shows that the Organisation for Economic Cooperation and Development has the highest ratio of government employment relative to employment population, in contrast with South Asia that has the lowest ratio in this regard.

Source: World Bank’s 2015 Size of The Public Sector Government Wage Bill and Employment
  1. The public sector is the provider of primary services.

One of the roles of a government is to deliver services in education, health care, infrastructure and social welfare to its citizens, particularly to those who are unable to access them through other means.  It also provides services that are otherwise not available such as justice, diplomacy and defense.

Currently, developed countries are expanding their health care and retirement security to accommodate the demand of the rapidly aging population.  This pushes governments to find innovative and better ways of delivering these services.

  1. The public sector consumes tax resources.

A large proportion of government budget, which is derived primarily from tax revenues, is spent on government expenses.  It is channeled towards the procurement of goods and services intended for government use, investments, and transfer payments.

In most APO member countries, government expenditures even exceed the revenues.

Source: ADB Key Indicators in Asia and Pacific, 2014 and 2015

Given the share for which the public sector accounts, any changes in the public sector can have significant implications.  Low productivity means wastage and misallocation of resources, while high productivity means efficient use of public funds.

High productivity in the public sector benefits a wide spectrum of stakeholders – the government agencies themselves, the private sector, the economy, and, most importantly, the general public.

There are huge potential savings and quality improvement that could come from increasing public sector productivity.  More productive public services would also boost the economy’s productivity growth and this will have a positive impact on the national basket of services that are delivered to every citizen.  Ultimately, these will all lead to increased citizen satisfaction and quality of life, and to a restoration of trust in public-sector institutions as well as in the processes of governance, participation, and accountability.