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.
How does one ‘muddle’ effectively?
I’m happy to concede no contest on salaries, Ken. Of course politicians need to receive a level of payment commensurate with task expectation and accountability. To argue otherwise is specious and ultimately counter-productive. Peanuts, monkeys etc.
My problem is with super. To be guaranteed a munificent lifetime return on 9 years service looks, I think, to be a bit provocative. Particularly when you factor in the rapidly changing nature of the Australian workplace vis a vis uncertainty, career change etc. I think the art here is to strike an arrangement that only leads to cynical shoulder-shrugging rather than to red-faced explosions of rage. Having said that, I agree entirely that the specific risk of political
life needs to be addressed in the quantum.
A signal indication of the honeypot attractant qualities of the current deal was Pauline Hanson’s recent ill-advised attempt at obtaining a sinecure in the NSW Upper House, despite lifetime residence in another state and the incontrovertible evidence that she is bereft of any motivation other than her own self-glorification – and/or financial security. I don’t suggest for one moment that she’s emblematic of the political class in general, but the connection will inevitably be made. Indeed, enough stand-out cases present on a continuing basis to ensure that this well be the case for the remainder of the century.
I was surprised to hear of your MLA-based expertise in dog control matters given the very public disclosures you’ve made about your continuing inability to manage Munshie Parish, the priapic poodle. Is Munshie a CLP supporter?
It’s my patchy libertarian instincts (and a certain ability to empathise with doggy carnal desires).
Ken,
While I applaud your desire to be even-handed concerning pollies perks it’s worth remembering a few things;
The schemes are generous whichever way you slice it. And pollies, despite their sly legislative efforts to shield themselves from the process by making payrises automatically indexed, control their own purse strings. They are able to directly and indirectly renumerate themselves in a variety of ways.
Also…
No-one forced them into the role. They begged (literally in some cases) for the position with full knowledge.
Ken,
$250,000 for a backbencher? You must be joking. What do they do to earn their money? Sit on a couple of committees, sign letters to their constituents that haved been written by their staffers, go a couple of Rotary type functions each month and …what?
Give mev a break. If backbenchers were paid something close to their value, they would get, at most, their current salary + 9% super. And don’t give me any crap about them having given up better incomes to go into Parliament. That applies to a small minority only. The vast majority proceed from being student activists to political staffers to politicians in their own right.
Ministers are different, but it depends on the job. I’d pay Cabinet ministers $300,000 to $500,000 plus 9% super. They actually have important jobs with real responsibility.
Junior ministers would be worth maybe $170,000 plus 9%.
A curiousity of our system is how much more the PM gets paid than, say, the Treasurer. How much is the salary equivalent of free board and lodging at the Lodge and Kirribilli House worth? $1 million per year at least. The Treasurer, meanwhile, rents his own flat.
But, without question, the current super politician’s super scheme is a giant rort. The lovely Natasha becomes eligible for a life time pension later this year. She could retire at 35 on $100k+ per year, paid for by Mr and Mrs Taxpayer.
If that’s not a rort, then the word has no meaning.
Bargarz,
The same of course is true of corporate CEOs. Not that I’m suggesting that’s a universally valid comparison, because most people think they’re greedy bastards as well. Moreover, your typical “neo-liberal”/libertarian would point out now that the corporate CEO is privately paid whereas pollies are paid by us taxpayers and we don’t have any choice. In theory I suppose that’s right. However, given that the vast majority of public companies remunerate their CEOs at absurd levels, and that shareholders’ ability to influence that is almost non-existent (because of institutional cross-shareholdings etc), the argument is spurious.
It still comes back, ironically enough, to market forces. As I said, for a high proportion of quality potential candidates, current salary levels minus the existing generous super scheme would simply make politics an unattractive option. So I simply don’t accept your premise that it’s “generous whichever way you slice it”. Pay peanuts get monkeys is a bit trite, but nevertheless largely true. Similarly, saying “No-one forced them into the role” is also missing the point. They chose it under existing conditions, including the generous super. If that was removed and not replaced with significantly more generous base salary, then a lot of the good candidates WOULDN’T choose it at all.
Dave,
I agree that it’s difficult at first blush to justify a backbencher’s salary of $250,000. However, if you agree that $500,000 is not unreasonable for a Minister (as you have just conceded), there is a major systemic problem with having too large a gap between backbench and Ministerial salaries. Unlike just about any other occupation, the pollies themselves select which of them will be Ministers. In the ALP it’s nominally a democratic Caucus decision but really a factional decision. In the Liberal Party, the parliamentary party picks the leader, and the leader picks the ministry. Either way, having such a large differential between backbench and Ministerial salaries would in my view place intolerable pressures on the system and lead to all sorts of malpractices and undesirable consequences. Thus, I think we’re forced to put up with paying backbenchers a bit more than maybe they deserve in the interest of a reasonably smoothly working democracy. I don’t feel especially comfortable with that, however, because I agree that lot of federal backbenchers don’t do a hell of a lot.
Very good posting, Ken… good to see you back on deck.
I tend to agree with Ken, and this seems to me to be more of a problem with State legislatures more then Federal.
Dave, I’d be prepared to pay considerably more to ensure the Spott-Destroja’s permanent departure from her taxpayer-funded career of celeb photo ops.
Geoff,
the way the Dems are tracking, the voters of SA will ensure Natasha’s departure ta the first opportunity, anyway.
Ken,
How would having a large salary differential between backbenchers and ministers create more bad behaviour than exists currently? They already fight to the death to get onto the front bench. The only thing a large salary difference is might do is persuade a minister not to resign and go to the back bench when he has a serious policy difference with the PM.
But this doesn’t happen now anyway. It should happen under the Westminister system quite often (as per Robin Cook in the UK) but it doesn’t happen here.
It’s a minor point Ken – and probably a separate post – but I notice you described Janet A as a ‘rightie.’ For some reason ‘rightie’ doesn’t work the same way that ‘leftie’ does. It just doesn’t seem…..well….right.
I have a conscientious objection to “neocon”. Any other suggestions? Come to think of it, Gianna’s Right Wing Death Beasts or RWDB has potential. Except that I’m probably one of them on the issue of those jerks who spray-painted the Opera House. I’d take up Bunyip’s idea and send an unsigned cheque for 2 cents if I could be bothered.
Ken, what incidentally is your conscientious objection to ‘neocon’?
They’re actually not conservative in any sense, but very radical in a right-leaning way, so I think “con” with a neo-prefix or otherwise is quite misleading. “Neo-imperialist” would be more accurate.
OK, but more generally, do you admit that the term (which the neocons themselves claim) has any legitimate currency?
I only ask because I have done a fair bit of research in the area, and this could be the germ of a fruitful post. I think at the very least it is very important to distinguish the ‘neocon’ movement from neo-liberalism: is that the role for which you suggest ‘neo-imperialist’ should be pressed into service?
Dave,
You ask what an MP does … the essential thing they do which cannot be otherwise achieved is to make law. OK, that’s hedged around with a whole bunch of problems … control of the backbench by the executive, party discipline, Whips, etc etc. But there are no practical alternatives, and on those rare occasions when the Parliament operates as it should (eg, WA when Abortion Law reform went through and members had a conscience vote), the Parliament is an astonishingly quick and accurate creator of public policy and appropriate legislation.
As to remuneration, again what are the alternatives to paying very good salaries? If we cut the salary too far, the only sorts of people who could contemplate entering Parliament would be those who are financially independent, or those who are potentially corruptible. There’s not much room in there to attract the ordinary decent person who (as Ken says) has a desire to serve and believes they can make a difference. The public can’t have it both ways – on the one hand constantly bemoaning the poor standard of parliamentarians (and again, I’m with Ken on this, they are almost universally bloody hard working and idealistic and smart) and on the other hand trying to hold down their remuneration. Monkeys and peanuts.
And that gives rise to another point … what’s the problem with ordinary people being in Parliament and being paid a good salary? That’s the good thing about it, it’s representative.
Finally, the super. I’ve found that ex-pollies find it very hard to find employment after politics. Don’t be sympathetic, they don’t need it, they are used to getting on. But they’re not crooks, they’re not stupid, often they’re not rich – but they’re often treated as if they’ve got leprosy. Unless they have a profession or a farm to go back to, no-one is prepared to give them a job, because they’re frightened to employ someone who might be better than they are, they think they’re filthy rich and don’t need the work, or they think they’re dishonest. As Ken says, a decent super scheme is the only bait that makes it half worthwhile for an ordinary person to go into Parliament in the first place.
“I’ve found that ex-pollies find it very hard to find employment after politics.”
Hmmm … let’s examine that statement closely
Nick Greiner – on about 47 boards
John Hewson – ditto, plus professor at Macquarie university
Graham Richardson – highly paid fixer for Kerry Packer
Ken Parish – lecturer at UNT
Ros Kelly – senior executive at some multinational environmental engineering company
Alan Stockdale – senior executive at Macquarie Bank
Many, many others: diplomatic and government board appointments (Peter Reith, Kerry Sibraa, Neil Blewett, that dickhead ex Liberal senator from NSW – great mate of little Johnny – who now writes for the Financial Review on Mondays etc )
Ah, but what about the humble backbencher who can’t get this type of job, I hear you ask?
Well, they are unemployable not because they are ex pollies, but they have no bloody employable skills in the first place.
For them, $100K + 9% super is heaps, much more than they could get outside politics.
The problem isn’t that if you pay peanuts you get monkeys. The problem is that our political system gives us monkeys in the first place. In which case, nothing more than peanut pay is needed.
Given that Australia is so stupid as to pay politicians peanuts for the job they do I do not reject their highly attractive super scheme.
I would merely only let them take it when they turn 55-60 like the rest of us. I also wouldn’t let them take a lump sum either.
“I think “con” … is quite misleading”
Hee hee! Nice pun, Ken.
In Albrechtson’s case, we don’t need to worry about “rightie” or “neocon” or whatever. “Liar” would suffice. Mind you, that wouldn’t apply to most right-wing columnists (I hope) who fit in your category of not being neo let alone con. “Libertarian” is a possibility, but the word has such connotations with goodness that it just sticks in the throat when used to describe a great many of those columnists (erm, is my bias showing through?).
One problem with not paying politicians highly is that they may well look to other sources to supplement their income. And given the power they have (as opposed to your average dentist, who individually has great power (such is inherent in The Drill) but can’t exactly change foreign policy), there’s little doubt that certain interest groups would oblige.
(Anyone remember The Simpsons episode “Mr Lisa Goes to Washington”, where she discovers a logging lobbyist bribing a Senator? “Come quick… a little girl has lost her faith in democracy!” “Good lord!”)
I didn’t know Ken was once a politician. What seat was it and what party?
How much is too much?
FORMER GREEDY LYING BASTARD (aka elected representative) Ken Parish reflects on the renumeration of our MP’s….