Are Australian politicians overpaid?

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A nice pithy comment, I thought, in the way that a 140 character limit encourages. I didn’t expect it to be too controversial, especially given the low standing of our politicians at the moment. But, as happens on the internets, I found myself pitched as the opponent of meritocracy, attempting to lower the standards of politicians by discouraging our best and brightest from applying.

I have a lot of writing that I’m supposed to be working on at the moment, so I thought the best way to procrastinate (sorry Antoinette and Geoff) would be to explore this question in a blog post: Do we get good value from our politicians?

Admittedly I picked a very bloody small sample. I didn’t even include our Prime Minister, the most equivalent to the POTUS (Tony earns $470k by the way).

But the discussion that followed covered two points that I want to explore: the first is whether MP remuneration should be considered ‘payment for a job’ in the way that most occupations are. The second is whether increasing MP remuneration gets better outcomes.

Attempting the second will involve a subjective statement on what good value from an elected representative is, but the answer to the first question will provide good guidance.

Is being a politician a job? My interpretation of representative democracy is that no, it is not a job. Members of Parliament are not selected through an interview process on the basis of skills and experience and, important in this case, wages are not set by the market in the way that most jobs (arguably) are.

Politicians are not public servants. People offer themselves to the electorate for more than just money, and are elected for reasons other than being the most technically capable of fulfilling the job description. To argue that an MP’s performance in their job should be measured other than by representation of electors shows a questionable commitment to democracy.

Moving onto the question of how to measure whether politicians pay reflects in outcomes of the political process, I suggest that the main measure is the trust that the community has in the political class. This being a democracy, the main KPI should be representing the views and interests of the electorate within the political system.

This changes over time, but with a reasonable sample we should be able to get through the noise of retail politics.

This leaves us with the challenge of making meaningful wage comparisons across jurisdictions. Ideally I would look at MP base salary as a multiple of Average Weekly Earnings, but I don’t have those figures and to be honest I’m not that committed to this blog post to collate the figures. Fortunately there is an alternative at hand: I’m going to steal ‘Basic salary of lawmakers as a ration of GDP per person’ from The Economist.

If you’ve never heard of the ‘Edelman Trust Barometer’, well now you have and so have I. The salary data is 2013 and trust data 2012, so close enough for our purposes.

Let’s see if higher MP pay (as a ratio of GDP per person) reflects in the level of trust in Government:

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Removing the two outliers, the effect is slight. By way of note, the lawmakers of the two most trusted governments, Singapore (67%) and India at (65%) have salaries of 3 times and 7.8 times GDP per person for their nations. The least trusted politicians, of Japan (34%), earn 3.2 times the GDP per person.

On these results the link between pay and performance are weak at best.

Given that the Prime Minister of Australia earns a higher base salary than the President of the United States, with Premiers not far behind, I am confident in restating my view that our mob are overpaid, with little evidence that doing so gives us better government.

This opens the question of how pay in some countries is decoupled from levels of trust with politicians. When people set their own pay rates, or at least the frameworks by which they are decided, perhaps this is not so surprising.

As a side note, and relevant to a joint piece of writing that I am working on, in the conversation following the original tweet the staunchest defender of higher remuneration for Australian MPs came from a colleague in the community sector. I found it disappointing that given the recent attacks from both sides of politics on the people whose interests we are employed to promote, there would still be such faith in our political class. It included assertions that the high levels of pay in Australia are necessary for the good governance we get.

Hopefully, as in my original tweet, the sample is too small.

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4 responses to “Are Australian politicians overpaid?

  1. Firstly – as I’ve previously mentioned, I think POTUS is a really bad example of quality for pay – his salary is a very small amount of the actual benefit he gets (free housing, free food, free transport, free holidays etc). Trust in politicians in the US is far worse than ours as well, so lower wages over there are not solving the trust deficit.

    I was planning to rail against your diagram saying it clearly showed a trend – but then I recreated the chart myself – and yes, there’s a very little trend, but nothing more (although I think you might have missed a few of the countries in yours).

    So – moving on. I don’t think this has anything to do with trust in current politicians, although it require trust in the political system (of which I have plenty).

    As someone who believes strongly in the value of ‘good policy’, I truly think that having politicians who understand how the system works and can get good outcomes outside of a narrow pre-election commitment or an ideological stance is important. By way of example, I think ministries should be allocated, where possible, based on proven capacity or experience (or at least proven interest!) in an area. This leads to politicians who can work outside of their ideological mind-frame to get good outcomes. An example would be Greg Smith, who as AG implemented progressive bail laws, despite being a ‘hard right conservative’ because his experience in the criminal justice system allowed him step back, and to gauge that this was important. Similarly Kevin Rudd, for all his failings, was undoubtably a good foreign minister – in no small part based on his experience in DFAT and passion for foreign affairs. Yes – ideology and vision are important, but when judging a good politician they are only required, not sufficient, qualities.

    So from that perspective, I think we should be encouraging high-level experts in policy areas to get involved in politics. I would love to see better politicans, because they have lots of power and I want the best people wielding that power. I think this will increase trust in politicians and result in better outcomes, as you end up with politicians with cover to implement reform because ‘well, they’re the expert – they would know, I’ll trust them’ – and the knowledge on what are the smallest changes they can make that will make the largest impact on people’s lives.

    So that’s the reason I support high wages for pollies – or even support increasing wages for pollies. Here’s why I think reducing Australian politician’s pay would be a bad thing:

    First, I need to deviate a bit to talk about economic reactions to change. By changing a good’s price, consumers adjust their perspective of the value of that good. This is often detached from the underlying ‘value’ of the product. For example, a product priced at $20 with a ‘50% off’ sticker is seen as a cheaper by the consumer than the same product priced just at $10. By reducing pays of politicians, regardless of their relative value to other countries, we tell potential politicians that we value them less. Similarly, by increasing pays, we tell people that they are more valued. I don’t think this plays through to the average voter, but I think it works for the small sub-set of the population that are considering running for parliament.

    So what I’m getting at is that it doesn’t actually matter whether our politicians are better or worse paid than other countries – what matters is the price signal of changing their pays. If we reduce pays, even if only to bring them into line with international levels, we will see a reduction in the number of high-quality people considering entering the political sphere. That, to me, is a bad thing. You’ll still have the ‘hacks’ who have no other option but to go into politics (because they’ve spent 10 years of their life aiming at it), but those slightly more on the margins, who could go either way, will be more likely to walk away.

    Its for this reason that I support better paid politicians. Not because I think our current batch are amazing and don’t care about the plight of the poor. For the exact opposite reason. I think our current batch are by-and-large, with a couple of notable exceptions, hacks who ideologically implement policy with no understanding of its impact on the poorest in our communities. So I want to see more experts, more policy wonks, more negotiators, more collaborators and more conciliators in parliament. And I think reducing pay would be a step away from this.

  2. The Australian Prime Minister also gets free housing (two houses!), food, transport, etc. but I take you’re point on the non-remuneration benefits of being President. Though I would argue that the non-pecuniary benefits are even greater. If you click on the graph or follow the links, you’ll see that trust in the US is not ‘far worse than ours’ at all. You’ll also see that on this measure US politicians are generally paid more highly than Australian politicians. It’s our leaders that stand out.

  3. I’m quite amazed that you think only people who dismissive of anything but excessively high salaries are capable of legislating, especially given the size of the bureaucracy and professionalisation of political staffers. To me this shows a misunderstanding of the role of elected representatives, and of Parliament. Governing is more than just passing laws. The Rudd and Gillard Governments passed bucket loads of laws, and yet they were replaced by our most unpopular incoming Prime Minister on record. And Rudd’s record as Foreign Minister is questionable, and frequently questioned.

  4. I was going to respond to your comments on price signals, but it’s such psuedo-econobabble that I won’t bother except to say that you’re still assuming MP wages are some kind of market wage. They are not. They set their own incomes. And the evidence above suggests the rate of pay doesn’t really affect the quality of representation.

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