_What are the main limitations that should be addressed to increase the sustainability of the Ghanaian single spine pay reform?_ The first limitation of the reform, as discussed above, is that a large component of public sector pay for some categories will remain outside of the base pay (e.g., market premia paid to workers over and above the common ‘base’ pay, and commissions and other allowances specific to each staff classification). This is especially true for certain categories, such as health sector workers. The concern is therefore that the public sector pay disparities that the single spine pay reform seeks to reduce are likely to either never disappear or to reemerge after the first round of pay negotiations under the single spine. The second, and related, limitation of the reform is that the values in the single spine pay reform have not been calibrated by reference to actual rates of pay found in the relevant Ghanaian local and international labor markets. There is no way to judge whether the values currently assigned to the single spine reflect competitive and sustainable levels.

# **3.  Modeling the Costs of Pay Reform**

This policy note develops a simple framework used to estimate the fiscal costs of introducing the single spine pay reform. This framework follows one of two modeling approaches considered in our work, namely a top‐down approach that derives its results from aggregate assumptions about numbers of staff in different grades and their proposed wages at these grades,<sup>6</sup> and bottom up approach in which the current payroll is placed into a database and then manipulated to create alternative scenarios of pay and grading. The results of this paper are derived from the first approach, although the framework developed in this policy note still attempts to bridge between these two approaches by developing a sensitivity analysis that presents the results derived from the chosen framework under different scenarios (the results of the sensitivity analysis are reported in Table 3).

The results derived from either of these approaches are contingent on the quality of the data inputted into the frameworks and the realism of the assumptions. The data requirement for these models include: (i) the total number of public sector employees and their distribution across public sector services and institutions; and (ii) a complete and updated payroll database from which one can estimate the minimum public sector wage and calculate the weight of public sector allowances in the overall wage bill. Since the payroll database available for the estimates presented in this policy note is still being fully developed, the note bridges the gaps with reasonable assumptions, as spelled out in Section 4.

The framework begins by defining an individual’s wage with respect to the minimum wage and its relativity with respect to all other public sector wages. With these parameters, an individual’s wage can be summarized in the following identity: which equates the wage of employee at pay point y (Wy) to the product of the public sector minimum wage (MW) and the coefficient of relativity (CR) raised to the power of the y pay‐point on the single ‐6‐