I doubt that this is going to be that controversial, as I suspect Govloopers are on average high achievers. This approach is already being pursued in education by the DC Public Schools.
In general I think monetary incentives for public servants are somewhat overblown. Cultural, intrinsic incentives, such as getting rid of poor performers and misfits could potentially provide government with a perpetual comparative advantage. If government were just a categorically better place to work than the private sector due to strong missions and its insulation from market forces, we’d see greater engagement and productivity. This could be achieved even without more radical reductions in tenure, or 5 year renewable contracts; hell, I’d settle for the Greek solution.
On an unrelated note, I take issue with the premise that government can’t fail; USPS is doing a pretty good job of it right now (for a number of reasons, few of which are in their direct control), and elected officials still lose their jobs over it. It’s pretty clear that government employees are just as vulnerable to recessions as others in some cases.
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