civil servants would necessarily receive higher compensation in the private sector. Private sector earnings may also reflect a higher number of hours worked per week, since firms commonly operate on Saturdays.

Furthermore, as discussed above, civil servants in Lao PDR receive significant compensation in the form of savings from per diem payments, which serve as a _de facto_ earnings supplement. Figure 10 also shows the estimated maximum levels of duty-related compensation that each position in the civil service could receive per month. With this fuller picture of compensation potential—base salary and allowances plus maximum per diem savings—the private sector compensation premium disappears for all but the director general rank.

Finally, analyzing and comparing monetary compensation in isolation would be misleading. Senior civil servants—particularly those at the director general level—most likely receive significant non-monetary benefits such as subsidized or free housing, and possibly even land allotments. Factoring in these aspects of non-monetary compensation could erase the private sector premium even at the director general level. Cross-country research has estimated that households spend 25 to 35 percent of income on housing; hence, those senior officials receiving housing are in effect receiving additional compensation of this magnitude (and, incidentally, are also thus partially protected in the event of eroding real salaries).<sup>26</sup> Perhaps in an attempt to match such benefits, large employers in Lao PDR, as well as small private firms, provide a range of non-monetary benefits that can significantly enhance the appeal of a job. In general, however, it appears that the public sector offers more systematic and comprehensive non-monetary benefits than the private sector enterprises surveyed.

A meaningful understanding of compensation in the government sphere and other sectors can help the GOL in its efforts to ensure that public sector pay policy is fair, appropriate, effective and fiscally responsible. This analysis emphasizes that such an understanding requires careful consideration of monetary earnings as well as in-kind benefits and non-pecuniary factors such as predictability and stability of employment. On balance, considering this constellation of factors, our findings do not indicate that Lao civil servants are under-compensated to the extent that it threatens their recruitment or motivation.

The civil service is not currently experiencing a ‘brain drain’ of workers—which would be a troublesome sign that employees are not being adequately compensated and motivated. There is little cross-over between the civil service and other employers such as private firms, and interest in civil service positions remains high. To be sure, our analysis suggests that at the lower levels of the civil service an individual’s official regular compensation may not, on its own, be sufficient to finance household consumption. Additional benefits and earnings opportunities are clearly important supplements to monetary earnings, however, and increase the appeal of civil service jobs. While the structure of regular monetary earnings is relatively transparent, other monetary and in-kind supplements such as savings from per diems and access to vehicles or real estate can be considerable and the transparency of their structure and availability is low. The non-transparent nature of total compensation makes it difficult to systematically evaluate the adequacy and appropriateness of compensation for specific jobs and individuals.

At first glance, looking at regular monthly compensation in the form of salary plus allowances, the pay comparator analysis indicates that civil service employees earn less than their private sector counterparts, based on both individual worker characteristics and a comparison of similar jobs. The findings from the country-wide worker approach broadly echo the findings from the Vientiane-centric jobs approach: the approximately 1.5 pay ratio that the statistical analysis of the worker approach found in comparing private 26 See David L. Lindauer, “Government Pay and Employment Policies and Economic Performance” in Lindauer and Nunberg, eds., _Rehabilitating Government_ , pp. 17-32.

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