WASHINGTON — The Trump administration is pushing for a reduction in annual salary growth at the World Bank, according to a source familiar with the United States government’s position.
The bank’s largest shareholder wants to see annual raises reduced by 20 percent relative to historic levels, said the source, who spoke about ongoing discussions on the condition of anonymity. The U.S. government and other shareholders are pushing for internal cost savings at the bank during the annual Spring Meetings this week at the same time they consider World Bank President Jim Yong Kim’s request for a $13 billion general capital increase.
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Kim has argued the bank needs more money to meet lending demand from its clients — and to respond to the global challenges its shareholders have asked it to help resolve. While recent reports suggest the bank is likely to secure its capital boost, that will likely come with some strings attached. A hard look at employee salaries is one of them.
“In our view, compensation is too generous,” the source told Devex, adding that the U.S. is not alone in that opinion.
The source said that for the World Bank to maintain the “credibility” of its mission to end extreme poverty, employees should be “less focused on raising [their own income].”
As a condition of the board’s approval of the last round of salary increases in June 2017, the bank agreed to review its methodology for annual employee salary increases. World Bank staff representatives are urging the institution’s owners not to insert politics into a process they believe should be market based.
“We are a rules-based institution full of economists, and therefore we insist on a formula that is based on the labor market and not political fancy,” Staff Association Chair Daniel Sellen told Devex. “That’s what’s going to keep us competitive.”
In a staff association update sent to World Bank employees in June, which Sellen shared with Devex, he wrote that World Bank employees already contributed to cost cutting, having had benefits eliminated and employee numbers decline during the major organizational reform Kim carried out during his first term.
“We have gone through substantial personnel cuts in the name of ‘strategic staffing,’ and have repeatedly been told to ‘do more with less,’” Sellen wrote, adding that employees are now being asked to deliver the largest-ever round of financing for the World Bank’s poorest members and to do more in fragile states.
“You’re considering telling staff that they do not merit the annual salary adjustment which the Board’s own methodology has produced,” Sellen wrote.
The staff association even created a set of cartoon flyers to drive home their message. One of them portrays an employee shouldering a heavy load of “re-org,” “budget cuts,” “deliverables,” and “staff cuts,” while an executive director reflects, “It’s high time staff made a few sacrifices.”
U.S. representatives recognize that the bank has undertaken previous cost-cutting efforts, but they hope these current discussions can spark a “new round of efficiency gains,” said the source with knowledge of their position, adding that the ultimate objective is for the institution to “live within [its] means.”
“If you’re a taxpayer in the United States, and you walk into the World Bank, you’re likely seeing personnel paid better than you are,” the source said.
Part of the Trump administration’s objection to the current methodology for determining annual salary adjustments is that it thinks the bank has drawn too much on private sector comparisons to set its benchmarks, while many employees arrive from other international financial institutions, the source said.
The staff association argues the current formula actually underrepresents the number of employees hired from the private sector. It also argues that bank salaries have remained relatively flat when adjusted for inflation, according to the staff update shared with Devex.
The bank’s management team confirmed that internal reforms will be up for discussion when the bank’s executive directors meet during the Spring Meetings on Saturday but declined to answer questions about any salary changes under consideration.
“The Development Committee on Saturday will be discussing several important topics, including possible internal reforms. We are not going to prejudge the outcome of those discussions,” a World Bank spokesperson told Devex.