Monitoring and Evaluation of Labor Programs
This module provides guidance on why and how to evaluate the costs and benefits of labor restructuring programs and how to set up effective monitoring systems to track progress and learn from experience.
OVERVIEW
The specific objectives for monitoring and evaluation of labor programs are to:
- Assess financial and economic returns. Labor programs involve spending considerable resources in the short run to reap some gain in the longer term. Consequently the decision to undertake a labor restructuring program should consider the financial and economic returns involved, much the same as would an investment decision.
- Learn from past experiences. Monitoring and evaluating a program's effectiveness can help assess what works and what doesn't, and the lessons from past experiences can inform future labor programs.
- Reduce costs to government. Most labor programs can be very costly. Cost-benefit analyses help avoid the experience in one country where a policy of generous levels of severance pay (the highest in the region) had been set, but where the key decisionmaker later admitted, "We didn't actually work out how much it was going to cost us. We just made our decision after looking at other [voluntary departure] schemes elsewhere, but felt we should increase it somewhat."
The capability to undertake effective monitoring, analysis, and evaluation will enhance the credibility and reputation of the implementing agency.
- Help make the case for work force restructuring. There will always be opponents of work force restructuring. Cost-benefit analyses can help provide key information for communication and negotiation (see module 6).
- Assess financial sustainability and identify required financial resources. Cost-benefit analyses can help provide insight into the financial sustainability of the overall program by taking into account the overall costs of the redundancy program and estimating the impact of possible future additional redundancies. These costs should take into account all associated costs: compensation, redeployment, and the costs for the pension system where there are early retirement programs.
Early analysis can be critical in helping governments assess severance options and the size and scope of the resource envelope for which funding is required. Consider the following example: An economic reform-implementing agency had embarked with some success on a pilot program of privatization. In most cases work force restructuring took place prior to privatization (and in some cases, closure). The agency developed a five-year plan for accelerated privatization that would include major infrastructure enterprises. Empirical estimates of likely levels of downsizing were made, based on experience in the pilot state-owned enterprises (SOEs) and from similar enterprises elsewhere in the region. Those estimates revealed that unexpectedly high levels of expenditure on voluntary departure might be required in 2005 and 2006 (about US$200 million annually) when restructuring of large mining and infrastructure enterprises was planned. This analysis helped to inform planning by government (the ministry of finance, in particular) on (a) the sequencing of privatization and (b) discussions with donors on a new lending facility in support of privatization and state enterprise reform.
The audience for analyses will extend beyond the implementing agency. Although analysis is an essential input for decisionmaking on labor programs, work force restructuring is both a technical issue and a political issue. The logic and rigor of technical analysis may not always be the decisive factor, and the quality of presentation is important too. In practical terms this means that:
Complement financial analysis with stakeholder analysis, and present the results in ways that reveal social costs and benefits.
- The findings are presented in a way that will be accessible to policymakers and to a wider audience (for example, an overly academic presentation may not communicate conclusions effectively).
- The presentation of financial and economic analysis will reveal political costs and benefits. Simple examples are:
- Comparing the number of workers who may lose their jobs with the number of beneficiaries of private participation in infrastructure (PPI) and infrastructure sector reforms (for example, projected number of households expected to receive new water or power connections).
- Presenting estimates of likely employment outcomes for the sector as a whole, not just the state enterprise. For example, in telecommunications immediate shortterm job reductions in the state enterprise may be quickly made up by new jobs in new entrants in mobile and data communications.
- Expressing the financial cost savings to government from work force restructuring in terms of the alternative social benefits that could be provided from those savings (that is, number of new rural schools or health clinics built a year, annual maintenance of rural roads, annual salaries of school teachers).
- Financial and economic analysis of the labor program needs to be complemented by stakeholder analysis (which includes political concerns), as discussed in module 6, and cost-benefit analysis of the wider case for PPI, in situations where opponents of labor adjustment are likely to challenge PPI itself (see the negotiations section in module 6).
The usefulness of analysis is constrained by two further factors: time and the availability of the data. Governments often must make their decisions based on limited and incomplete information-they rarely have the luxury of the time needed to conduct a full analysis and to receive robust conclusions. Even when analysis is done, the quality of available data may restrict the usefulness of analysis.
