21 In many countries, such as Zambia wage compression has resulted from explicitly redistributive policies; in other countries, it has been more implicit, for example through wage increases of equal absolute amounts across all twelve categories examined. The effect has been widespread and severe compression. For example, in Pakistan the ratio of the highest- to lowest- paid workers fell by two-thirds -- from 30:1 to 10:1 -- in 19170-84 (Irfan and Ahmed 1985:427). In Ghana before civil service reforms, the ratio was 2.5:1 (Nunberg and Nelis 1990:18). Lindauer and others (1988:12) found increasing compression over time across a selection of African countries. In Nigeria, the ratio of the highest-paid to lowest-paid worker fell in real terms to less than 40 percent of its 1975 level .y 1983.

A study of the breakdown of public sector salaries by educational qualifications reaches the same conclusion about wage compression (Colclough 1991:214-19). In five African countries, the real starting salary for a university graduate fell between 1970 and the mid-to-late 1980s, and by a greater percentage than the real starting salary of any other skill group.<sup>21</sup> In all of the countries but Zambia, the real salary loss was greater than the drop in per capita GNP. When salary scales are used instead of starting salaries, as well as when real wage trends recalculated by occupational -- rather than educational -- levels are taken into account, the same wage compression is evident. If one assumes that the skill composition of the civil service did not change fundamentally, and Robinson (1990) concludes that structural effects in Africa in the early 1980s were small in most countries, real wage cuts -- although not necessarily declines in real income -- have been consistently borne disproportionately by educated public sector labor force entrants.

# **ERternal effects**

Riveros (1992:19-20) estimates the effect of a variable representing labor market distortions - - the ratio of nonwage labor costs to per capita income on the level of manufactured exports.<sup>22</sup> The hypothesis tested is the common notion that high non-wage costs of labor in the formal sector--either government-mandated or union-negotiated--in developing countries are a distortion in the labor market that keeps the cost of labor above market-clearing levels, thereby affecting international competitiveness. A group of countries is divided into "regulated" ones, where non-wage costs and regulations both exist and are enforced, and "liberal' ones, where such regulations are quantitatively less important or not enforced.' Riveros finds that the existence/ enforcement of labor market distortions has a statistically significant negative effect on non-traditional (manufactured) exports, and concludes that the removal of distortions, whether they be government-mandated or spillovers from the public sector, may have a positive effect on exports.

Another Riveros study (1990:37) concluded on the basis of an empirical study of Chile that the expenditure-reducing and expenditure-switching policies of macroeconomic adjustment should be accompanied by labor market deregulation (i.e., measures aimed at lessening segmentation) in order to minimize the adverse effects and inequitable impacts of macroeconomic reforms designed to bring about external adjustment. Thus,