Putting a price on tenure

TL;DR

This paper estimates the monetary value of government employee tenure in Brazil by comparing actual salaries to risk-adjusted salaries, revealing significant differences across federal, state, and municipal levels.

Contribution

It introduces a novel method using a modified Sharpe ratio to quantify the worth of tenure for government workers in Brazil.

Findings

Median federal employee tenure worth 3980 reais monthly

Median state employee tenure worth 1971 reais monthly

Municipal employee tenure worth 500 reais monthly

Abstract

Government employees in Brazil are granted tenure after three years on the job. Firing a tenured government employee is all but impossible, so tenure is a big employee benefit. But exactly how big is it? In other words: how much money is tenure worth to a government employee in Brazil? No one has ever attempted to answer that question. I do that in this paper. I use a modified version of the Sharpe ratio to estimate what the risk-adjusted salaries of government workers should be. The difference between actual salary and risk-adjusted salary gives us an estimate of how much tenure is worth to each employee. I find that in the 2005-2019 period the monthly value of tenure was 3980 reais to the median federal government employee, 1971 reais to the median state government employee, and 500 reais to the median municipal government employee.