I see rightie Australian newspaper columnist Janet Albrechtsen reckons politicians are tricky and greedy for continuing to award themselves what she sees as over-generous (and unfunded) superannuation benefits. Leftie blogger Stewart Kelly agrees. We have a rare cross-ideological consensus: politicians are greedy, duplicitous bastards.
However, for some centrists (like this armadillo) things aren’t that simple. I can certainly understand why most people hold this opinion as a self-evident fact. Politicians on all sides seldom stop accusing their opponents of just about any misdeed they think some voters might be persuaded to believe, and most voters are more than happy to oblige. The reality, in my experience, is that the vast majority of politicians on all sides are well-motivated people who work very hard and have high personal ethics. The political system ends up distorting those values to an extent, in that a certain amount of lying, obfuscation and “spinning” the truth is unavoidable. It’s a matter of where the line should be drawn beyond which the system’s integrity is undermined.
However, I digress. Leaving aside politicians’ integrity, are they overpaid? And is a very generous unfunded superannuation scheme the best way of remunerating them? Those questions strike me as distinctly arguable.
According to this Commonwealth Parliamentary Library E-Brief, a federal backbencher’s salary at present is $98,800. It was until recently fixed as equal to a very low level Senior Executive Service public servant, but is now fixed as equal to a special category at the bottom of the Principal Executive Officers’ pay scale (Reference Salary A under the PEO Band A Classification in Determination 1999/15 Principal Executive Office (PEO) Classification Structure and Terms and Conditions). Most even moderately experienced and capable executives in both the public and private sector earn substantially more than $98,800 per year. Of course, there are various other perks (e.g. vehicle or Comcar useage; free home telephone etc) that push the total value of the salary package up higher. I haven’t seen any figures for MPs’ total salary package value, but I’m sure they exist somewhere. My rough estimate is that these fringe benefits probably push the package value (excluding superannuation) up to around $120-130,000. I suppose that’s not too bad for an ordinary backbench local member, but it’s hardly a king’s ransom.
Most States and Territories fix their MPs’ salaries by reference to federal politicans’ salaries. In the NT, for example, backbench salaries are fixed at $3000 less than the federal benchmark. Some have suggested that this is overly generous because federal MHRs service an electorate of about 60,000 whereas NT politicians’ electorates are typically a mere 5-6,000 voters. In my experience, however, the smaller number of constituents doesn’t translate into less work. It just means that NT voters expect to have a far closer personal relationship with their local MLA than at federal level. MLAs are expected to be ultra-accessible and ultra-responsive to the most minor local dog or drainage problem.
Ministers, both at federal and state level, are also not spectacularly well remunerated by comparison with either the public or private sector. Typically a Minister is paid some $50,000 extra on top of his or her notional backbench salary. Thus they earn around $150,000, with fringe benefits again taking that to somewhere around $170-180,000 per year. For that salary, they fulfil resonsibilities at least as great as the average major corporate CEO, being responsible for a budget that will usually be sigificantly larger than the average public company, often involving significantly greater complexity, and certainly requiring working hours at least as long as any corporate CEO.
Yet compare Ministerial salaries with the typical remuneration package for a corporate CEO. According to this article about a recent NSW Labor Council study by several economists including Dr John Shields:
executive pay levels had exploded in the past decade from 22 times average weekly earnings in 1992 to 74 times average weekly earnings today. And in the finance sector the figures are more perverse, CEOs earning 188 times the salary of customer-service staff.
According to the most recent ABS figures, average weekly earnings are now around $900 (or $46,000 per year). Thus the average corporate CEO pulls in around $3.4 million per year. Not surprisingly, Shields et al suggest this is excessive:
Applying this analysis, the authors identified a performance-optimal range for executive remuneration of between 17 and 24 times average wage and salary earnings, beyond which the performance of a company begins to deteriorate. This means that any company paying its CEO more than $800,000 begins to be a bad bet.
However, compare that with political salaries. Even with fringe benefits (except super) included, Ministers receive around 4 times average earnings and backbenchers only about 2.5 times. Now, I would have to concede that a Minister’s role is not identical to that of a corporate CEO. Apart from anything else, there is a public service departmental CEO who fulfils most of the day-to-day executive functions performed in the private sector by a CEO. A Minister’s role is more like that of an executive chairman.
However, in some respects a Minister’s position is significantly more onerous and demanding than any corporate CEO. Unless you’ve actually experienced it, you can’t begin to imagine the extent of the complete loss of privacy that comes with senior political office. You’re in the public spotlight the second you step out your front door, and a significant minority of the public is politically committed, hates your guts and will instantly report and exaggerate even your slightest personal pecadillo to your political opponents. The rest of the population are not actively malevolent, but conclusively assume you’re a lazy, lying, sleazy bastard (unless they actually know you personally, which in my case meant they knew I was a lazy, lying, sleazy bastard *self-deprecating joke*). This utter lack of privacy and high level of ambient hostility is not generally experienced by the average corporate CEO, but it’s a prominent politician’s unrelenting daily reality, and it’s anything but pleasant.
I’m not suggesting there aren’t countervailing attractions and compensations, but there need to be if we’re to have any chance of attracting candidates of high quality and integrity to seek political office. That’s where a generous superannuation scheme comes in. If you take the annuity option (and you’d be mad to do anything else), parliamentary superannuation is worth about $1.2 million for a long-serving backbencher and about twice that for a long-serving Minister (in total over an average lifetime’s retirement lifespan, not per annum). Certainly a very attractive benefit, but still nowhere near enough to equate in aggregate even to the remuneration levels Shields et al reckon are “optimal” for corporate CEOs, let alone what they actually earn.
Speaking personally, I would never have even contemplated standing for Parliament had it not been for the Parliamentary super scheme. Like many political candidates (certainly anyone from an even moderately senior business or professional background), I voluntarily submitted to a significant drop in earnings by becoming a politician. I didn’t begrudge doing that, because it was something I’d always wanted to have a go at and I’m not especially materialistic anyway. However, there are limits. I regarded the prospect of generous superannuation if I survived three parliamentary terms as at least some compensation for the earnings foregone through choosing a political career over continuing as a senior partner in a medium size law firm. As it turned out, I didn’t survive three terms so I only ever received back my own super contributions and interest. Them’s the breaks. Nevertheless I would certainly never have run for political office had there not been at least the reasonable contingent prospect of much more generous than average superannuation. Although I (like many and probably most other political aspirants) was primarily motivated by an ethic of public service, only a complete fool would make such a dramatic career change without calculating the financial consequences. I suggest that very few appropriately-qualified and experienced candidates would choose a political career if the salary package remained at present levels and superannuation was cut back to the same basis as ordinary occupational superannuation. I can tell you I certainly wouldn’t have contemplated it even for a moment.
Of course, there’s a reasonable argument that politicians should simply take the lion’s share of their remuneration as salary, and receive just 9% on top as employer superannuation contribution like everyone else. To keep political remuneration sufficiently competitive in that situation to continue attracting well-qualified, experienced candidates, I reckon you’d need to boost the Ministerial salary package to at least $500,000 per year and backbench salary to at least half that. Imagine the confected, ill-considered outrage from pundits, radio shockjocks and bloggers alike if any such proposal was ever seriously floated. Better IMO to leave things as they are and accept the inevitability of most people continuing to see the genus politicus as a bunch of greedy, duplicitous, overpaid bastards.
Update – I see the blog-geist is functioning well as usual. Tim Dunlop blogs on a parallel thought, but running in the opposite direction:
Of course you can have a depressed patriot. The natural condition of the patriot is depressed because the country you love is either actually in the hands of idiots who are doing everything in their power to fuck up everything about it that made you a patriot in the first place, or it is about to fall into the hands of idiots who will do everything in their power to fuck up everything about the country that made you a patriot in the first place.
That’s why blogging is the way it is: no-one, neither left nor right, is actually happy. And it must be the most exquisite torture to be a centrist who is also a patriot. For the centrist, the country is permanently in the hands of idiots who are doing everything in their power to fuck up everything about the country that made you a patriot in the first place.
I guess I’m just a natural optimistic while Tim’s congenitally gloomy. I actually think we’re as well governed as can reasonably be expected, given that humans are flawed creatures and that politicians are operating with seriously incomplete knowledge in areas of major complexity and uncertainty. It’s certainly true that governments typically muddle through rather than being masterfully on top of things, as Chris Sheil recently observed. However, in Australia at least, they generally muddle through fairly effectively IMO. Things are pretty good for most people, which is why we mostly choose to view Donald Horne’s “luck country” appellation as an apt label rather than a barbed slur.