From my blog singaporealternatives.blogspot.com
Is Ministers' Pay Hike Reasonable? -- Benchmarking Ministers'
Pay
So the spin is out in full force, trying to justify the impending
ministers' pay hike. Expectedly, the civil servants' pay is being
used as a collateral in PAP's argument for its ministers' pay
hike.
There are a lot of emotional out burst from the middle class that
protested against such obscene among of suggested pay hike. The
more likely result would be that PAP will just say that they are
not going to implement a full pay hike according to the benchmark
that they have set for themselves, but maybe half or even less of
it. Even so, we must first examine whether pay hike is justifiable.
If we want to do so, we must examine carefully the logic of the
benchmark that they set.
As we know, in the private sector, remunerations are determined by
performance and it is never about how much a person could earn
from other companies. i.e. It is never about opportunity cost of
individuals' value but rather, the value or performance the
individuals could contribute to the company.
Thus, the benchmark that PAP government has set for themselves have
laid on the wrong fundamental premise. If they want to be like the
private sector, then they should benchmark their salary according
to the private sector's standard of benchmarking and not the amount
of the money that they are giving.
For the record, ministers are entitled to pensions after they have
served 8 years and above 55 years old. In fact, according to PM Lee
in one of the parliamentary sitting, there are ministers who are
drawing a pension as well as a salary at the same time. Do we have
any private companies here in Singapore that give pension as well
as salary at the same time to their employees?
PAP has argued that they need to attract talents thus need to
benchmark their ministers' pay to private sectors. This logic is
flawed for the following reasons:
1) When a private firm employed their talents, they have set it
clear the remuneration packages. But PAP Ministers were elected
without telling voters how much they will cost taxpayers! No
private firm will allow their COEs to raise their remuneration
package AFTER they are employed! They can't just say, hey, the
other firm is offering their COE XXX amount of salary, you should
do the same. PAP should tell voters how much their ministers will
cost voters during elections so that the voters will decide whether
to employ them by voting them in.
2) Private firms benchmark their leaders according to their
performances, so PAP government should do likewise.
3) By benchmarking ministers' pay according to the top earners,
then it would mean that as long as PAP government could make sure
the top income earners could get more each year, their own
ministers' pay will increase accordingly. This is illogical as the
government should take care of the interests and welfare of MOST
Singaporeans and the ministers' should be benchmarked according to
the interests of the majority of Singaporeans instead of the few
top income earners.
4) We will end up with a situation that when income disparity
widen, ministers' pay will continue to rise even though the average
workers' income is stagnant or worse, regress over time. This is
totally absurd and unacceptable.
5) Great politicians are recognised and respected for their
visions, leadership and sacrifices to the common good, definitely
not for hefty million dollar pay. No matter how small our nation
is, if we could not cultivate such public spirit of serving, I do
not think our Nation will last very long in time to come.
6) PAP government always wanted to claim that they are First World
Government, it should only be logical for them to benchmark their
ministers' pay to First World Governments around the world. Many
people have shown that other ministers around the world do not need
the kind of million dollar annual salary of our government to run a
country with more people and higher GDP. Some have even achieved
first in economic efficiency as well as competitiveness. It would
simply mean that the productivity of our ministers will
definitely lose out to these truly First World Governments! PAP
government has always complained about high wage cost of workers
and that wage increase should not be more than productivity growth.
Why isn't ministers' pay benchmarked against GDP growth instead? Or
overall productivity growth of the nation? Double standards?
7) The list of top income earners will change from time to time. It
means that those in private sectors may face risk of pay cut or
will earn less in the year. But the irony is that the ministers'
pay will not go downwards together with the individuals who are
listed as top income earners in any one year. They will always
compare to those earning more, not lesser! This is inherently
counter intuitive. Which jobs in the world will guarantee you that
you will always be the top income earners in your country?
So, the next question is, how should the ministers' pay
benchmarked? What is a reasonable benchmark in view of the job
nature of the ministers?
In order to answer this question, we should first determine what is
the primary role of the government? It is to take care of the
interests and welfare of the citizens. Thus, in my view, ministers'
pay should be pecked closely to indicators of the majority of
citizens, instead of the privileged few.
From the statistical point of view, the median income should be the
indicator that represents the income that most workers earn.
Instead of using the mean or the higher percentile of income
earners as an indicator for benchmarking, the median income should
be used instead. (The Gini coefficient which means income
distribution/income gap is based on the difference between median
and mean income. If the Mean (average) income is very much greater
than the Median income (income at the 50th percentile), it means
that the income gap has worsen.)
The aim of the state is also to ensure that the economy could
produce enough jobs for citizens. The most undesirable situation
would be citizens being trapped in prolonged structural
unemployment. Thus I think it is only logical to include the rate
of structural unemployment into the calculation of ministers'
pay.
Of course, the last criteria should be ministers' pay rise should
not be above Total Factors Productivity (TFP) growth rate. This
will only be consistent to the treatment to normal workers on the
ground.
My suggestion here of benchmarking of ministers to performance
may not be exhaustive in nature but the fundamental idea is that we
should benchmark their salaries to their performance as leaders of
the country instead of what other people are getting in private
sectors.
Goh Meng Seng