The document summarizes an IMF report on reforming Portugal's public sector. It focuses on inefficiencies in the education system identified in the report. Specifically, it notes that the system lacks process innovation, has overstaffing issues where teacher hiring is based solely on seniority rather than competence, and fails to help many students reach higher education due to failing to grasp basic concepts in earlier grades. The document advocates for reforms like making teacher hiring and funding dependent on competence rather than seniority to address these issues.

1. Innovation, nonconsumption and the Portuguese education system
The recently published IMF report on Portuguese public sector reform (“Portugal: Rethinking
the State—Selected Expenditure Reform Options”) lists several reform options and advice based
on country data and comparisons to international standards. The comparison is drawn mainly
with EU15 countries, which is a sub-group of countries in the EU comparable to Portugal.
While innovation is not directly mentioned in the report, some of the measures suggested are
really about process innovation. In the private sector, process innovation is constantly used to
gain a competitive advantage in the marketplace and to create wealth. In the public sector,
process innovation should be used as a tool for creating efficiencies in government
organisations, which lead to better services for the public.
In his article “Why Innovation Matters In Politics And The Public Sector”, Faisal Hoque
approaches innovation in the public sector with business and financial concerns that are basic
and widespread in the private sector. Return on investment, risk management, technological
innovations and efficiency are essential for the success of any company and should also be a
concern of Government officials and managers when investing public funds in critical sectors
such as health and education.
In the education sector, the IMF identifies a serious inefficiency in the management of schools.
The IMF’s analysis reveals that there is over staffing and that career progress for teachers is
based solely on seniority. Schools have very limited management leeway and in fact cannot
choose whom to hire. Can you imagine a company being managed without the ability to choose
its own staff? This is what happens in this case: every year, a number of teacher positions
become vacant nationwide. Teachers apply and the choice is made based on seniority.
Taking a step back, a useful concept to describe the failures of the Portuguese education system
is nonconsumption, which describes an area which appears unattractive to the companies or
institutions that offer a service and where at the same time, some people would like to do
something but are unable to get access to the available offering. At first sight, there are no
obvious areas of nonconsumption in education: everyone is required to attend school up to a
certain age. However, if you look deeper, you will probably find that a large proportion of
Portuguese students simply do not manage to reach higher education, although they would like
to, because they failed to grasp the more basic concepts between ages 12-18. This is the crucial
problem that needs to be addressed. The first step towards solving this problem is to place
motivated and capable teachers in front of those students that aspire to attend university but do
not have the means or the background to do so. This is simply not achievable if the schools
cannot differentiate between teachers based on their competences.
These problems have plagued the education system and seem to have flown under the radar
screen of previous (and numerous) reforms of the education system in the past. The IMF
suggests a better appointment system for teachers (not only based on seniority but on
competence) and a framework whereby money would “follow the student”, which would allow
better teacher hiring practices and a more efficient provision of education services.

2. While some other measures proposed by the IMF in the report are painful, involving loss of jobs
or the reduction of income for civil servants, this type of reform is really about the
implementation of important and sometimes long overdue structural reforms.