calculation method—using only base salary data (usually the most easily available figure) as opposed to base salary plus allowances and bonuses (a much better picture of an individual’s total compensation) can yield different pictures of the extent of compression. In-kind allowances are likely to be excluded, even though in some countries they are a regular component of compensation and serve, _de facto_ , as an important element of decompression. The choice of top and bottom positions is a determining factor, and makes international comparison even more tenuous given that countries often define their civil service differently.<sup>13</sup> The following example from Armenia’s civil service demonstrates the varied results even when using only base salaries to calculate a compression ratio (Table 1).

**Table 1: Civil service bay pay compression ratios in Armenia (2010)**

|**_Calculation Method_**|**_Ratio_**|
|---|---|
|Highest coefficient to lowest coefficient (5.89: 1.0)|5.9|
|Average coefficient, senior vs. junior groups (5.1: 1.16)<br>(or senior 1<sup>st</sup>grade: junior 1<sup>st</sup>grade, etc.)|4.4|
|Actual average base salary, top vs. bottom grades (6 ministries<sup>14</sup>)<br>197,486 AMD: 45,733 AMD|4.3|
|Actual average base salary, top 10% of staff vs. bottom 10% (6 ministries)<br>157,120 AMD: 52,175 AMD|3.0|

_Source: World Bank analysis of the National Institute for Labor & Social Research’s 2010 earnings survey, and official base pay scale._ Varying civil service grading regimes across countries lead to additional difficulties. In career-based systems such as Lao PDR, for example, the most senior civil servants (deputy director generals or director generals) may not necessarily hold the highest possible educational credentials and thus may not be in the highest grade. This renders a top grade to bottom grade compression ratio an inadequate measurement of the true financial incentives associated with moving up the ranks. In Mongolia, civil servants are classified in a number of functional regimes that have each, over time, added additional allowances to compensation, making it very difficult to come to a single compression ratio across these overlapping categories.

Compression ratios are also used to compare countries with each other or to assess a country’s performance against an indicative, and usually unsubstantiated, good practice ratio. A glance at selected OECD civil services shows that ratios can vary substantially even among advanced economies with wellfunctioning administrations (Table 2)—indicating that the notion of a good practice ratio is not particularly well-founded when devoid of context.

**Table 2: Compression ratios in selected OECD member states**<sup>15</sup>

|**_Country_**<br>**_Civil Service_**|**_Compression Ratio_**|
|---|---|

13 The OECD defines the compression ratio as the mean of ninth decile salaries divided by the mean of first decile salaries, which ensures that a handful of salaries do not dramatically skew the result. Nevertheless, the variation that results from different manner in which countries delimit their civil service remains an issue.

14 Includes positions in ministry, dedicated units, and territorial or regional units.

> 15 Data are from _Ready for Europe: Public Administration Reform and EU Accession in Central and Eastern Europe_ , World Bank Technical Paper 466 (Washington DC: The World Bank, May 2000). The underlying point is clear even with dated figures.

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