Mongolia is a large, sparsely populated, and extremely resource-rich country that benefited from the 2003-08 boom in global commodity prices, while remaining extremely vulnerable to volatility in the form of price shocks and subsequently facing an economic crisis when copper prices collapsed. Much of its windfall gains from natural resources in the 2000s were consumed through untargeted social transfers to the population and across-the-board public sector salary increases. Within the civil service, a number of professional cadres have their own distinct human resource management and compensation practices. In addition, the legacies of socialism have combined with contemporary electoral instability to contribute to a deepening degree of political interference in civil service management. The recent economic crisis underlined the need for simplifying civil service compensation practices—with the goal of tightening expenditure controls and improving payroll administration while reducing horizontal inequities in pay. Analytical work on the civil service proceeded as a component of technical assistance to the Mongolia Civil Service Commission, programmed in a World Bank grant.<sup>5</sup> The Lao dialogue pointed to a particularly intriguing puzzle that, in turn, illuminates how a game plan for finely-grained pay analysis can be assembled. Initial assessments in prior World Bank work<sup>6</sup> indicated that civil service pay in Lao PDR was low and compressed.<sup>7</sup> Yet anecdotal evidence from World Bank staff as well as government counterparts indicated a high level of ongoing interest in civil service job openings, particularly for teaching and healthcare positions in the provinces. Although this demand for civil service jobs might reflect limited opportunities in the private sector labor market, it also suggested the possibility that civil service employment provided additional benefits that were not being captured in the existing (and very limited) data. In particular, analyses may have failed to fully capture earnings components beyond base salary—such as allowances and benefits in cash or in kind, and associated monetary and non-monetary perquisites, such as prestige, or opportunities for secondary employment arising directly from civil service status.

The challenge on the compensation front, therefore, was to determine whether particular civil service jobs were in practice under- or overcompensated, and to get a sense of the magnitude of these phenomena. In order to draw evidence-based conclusions about the adequacy of civil service compensation and shed further light on human resource management concerns, the World Bank conducted a study comprising four complementary components:

- A detailed review of the civil service pay and compensation structure and a comprehensive assessment of the total compensation packages, including benefits and allowances that civil servants receive;

- A pay comparator analysis to examine potential compensation available to current or would-be civil

5 The Governance Assistance Project, approved in May 2006 and closing in January 2012.

> 6 Including _Lao PDR—Public Expenditure Tracking Survey in Primary Education and Primary Health: Making Services Reach Poor People_ , Report No. 39043-LA, East Asia and Pacific Region Poverty Reduction and Economic Management Sector Unit (Washington DC: The World Bank, 2008); _Teaching in Lao PDR_ (Vientiane: The World Bank East Asia and Pacific Region Human Development Sector and Ministry of Education, Lao PDR, 2008);  and “Civil Service in Lao PDR—Issues and Challenges: Approach Note,” East Asia and Pacific Region Poverty Reduction and Economic Management Sector Unit (Washington DC: The World Bank, 2008).

7 Compression refers to the relative difference in earnings at the top of the civil service versus entry-level posts. The compression ratio calculated from these data is a simple indicator of an individual’s formal financial incentives to take on more demanding positions as he or she moves up through the civil service ranks.

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