Higher pay for MPs

Well, technically speaking it’s an increase in their electorate allowance, but anything left over at the end of the year is treated as personal income, so it’s not surprising that MPs consider it “a de facto part of their salary”. The justification used by the Remuneration Tribunal is that it hasn’t changed since 2000, and partially compensates MPs for Rudd’s pay freeze last year (which implies that it is considered part of their income).

It’s not a small allowance either – $32,000. This is on top of a backbencher’s base salary of $127,060, a travel allowance of ~$10,000 to ~$80,000 (depending on the size of the electorate), a private vehicle allowance, a small provision for spousal and dependant travel arrangements, a resettlement allowance for “a senator or member who retires involuntarily from the Parliament” (LOL), first-class overseas junkets study trips, a communications allowance of $27,500,  and the Life Gold Pass for long-term members.

Then there is the ‘additional’ salary, which determines how much more than the base you get, depending on your status within the party. So the Second Deputy Speaker in the House of Representatives, for example, gets an extra 13% (not the lowest), while the Leader of the Opposition gets 85% and the Prime Minister 160%. They also get upgrades to their pay of 3%-16% for chairing parliamentary committees.

So they’re not struggling. However, for equivalent work in the private sector, they could expect to make much more. Depending on their qualifications, it could be two or ten or a hundred times as much.

So how much should MPs be paid? It’s a knotty question that has been argued over since antiquity. I’m ambivalent. I never thought the old adage about Arachis hypogaea and primates really stood up to logic. Yes, higher pay is, ceteris paribus, going to attract more candidates, but it’s not certain it will attract better ones. I read in the newspaper today about a study purporting to show that higher pay does lead to better politicians by analysing trends in Brazil before and after a major shake-up of pay arrangements. But this sentence leapt out at me:

higher pay rates improved their performance as measured by numbers of bills and public works programs sponsored by better-rewarded legislators.

This is the measure of better performance?! The sheer quantity of legislation and ‘public works’? Extraordinary! By that metric, Japanese politicans and their wasteful, frenetic building of roads to nowhere are among the best in the world, and suggests parliamentarians should be paid on commission for every bill they pass. Ludicrous.

Perhaps it is time for a re-evaluation of pollies’ pay structure. Maybe a salary and perks is the wrong way to go. Why not have a structure that tries to align their incentives with better outcomes for society? We could have a range of key performance indicators, and they get paid in relation to how well they meet them. For example, pay them a minimum amount equivalent to Newstart, and for every basis point the Australian economy grows above the OECD average, there will be a 1% bonus – beat it by a whole percentage point and double your money! Base pay rises could be tied to the growth of the income of the lowest quintile instead of inflation. Speaking of which, for every basis point Australian inflation is above the OECD average (or some other indicator), we could have a 1% demerit. We definitely would need a bonus for reducing unemployment, maybe ones for reducing waiting lists for hospitals, and homelessness.

Obviously people would disagree on exactly what KPIs to implement, but I think the idea is sound. Currently the only methods of extracting the best out of our government are elections and opinion polls. These are crude and clumsy methods. Much better to have a continuous feedback loop making sure politicans are doing what is best for the people they represent.

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