Ministerial salaries: A bottom-up approach?

Many Singaporeans are happy that the government will review ministerial salaries, partly because they finally feel that their voices are being heard and their votes making a difference.

Sadly Mr Gerrard Ee and his review committee will still be using old methodologies, such as benchmarking salaries to the private sector. That is a shame—this is a wonderful opportunity for a fresh, novel look at the issue, and a chance to set a good precedent for the government’s approach to other thorny challenges in the coming years.

For instance, Mr Ee’s team could consider a bottom-up approach. Instead of trying to figure out what discount from the private sector ministers should stomach, how about thinking about how much money a minister actually needs to live very comfortably?

Let me take an unscientific stab at it. I believe that in order for Singapore’s president to live very comfortably in Singapore today, every month we should pay him/her:

$20,000 housing
$20,000 family (including children’s education)
$10,000 food and beverage
$5,000 household miscellaneous
$5,000 IT miscellaneous
$5,000 entertainment miscellaneous
$5,000 car

That comes up to S$70,000. Since there are many more things, unbeknownst to us, that a president might need, let’s add an extra 20%, bringing it to S$84,000. That equates to around $1m a year. At the moment, our president earns more than four times that.

By any measure, our president can enjoy a luxurious life in Singapore on that salary. Our president will also be able to provide the very best education and upbringing for his or her children.

What are the merits of this approach? First, it actually ensures that every minister will be well taken care of, regardless of the vagaries of the free market. In the wake of the global financial crisis, there has been much soul-searching in the private sector—mostly in the developed world, but also elsewhere—about levels of senior executive compensation. Imagine that within five years time, the private sector has decided to lower senior executive compensation across the board. Does that mean our politicians should take a pay cut? I hope not.

Our politicians should be shielded from these free-market fluctuations. On the other hand, if house prices climb rapidly, I hope that our politicians are not affected. I would rather they spend their time thinking about policies for Singapore rather than watching the housing market (unless, of course, they are formulating housing policies).

With a bottom-up approach, they do not have to worry. If housing costs climb 10% in a year, we will adjust their incomes appropriately—using a crude calculation on the above figures, the president would get an extra S$2,000 per month.

Second, this methodology has a symbolic benefit—the electorate is basically telling the people we elect to lead us, “Hey. Don’t worry. You’ll be taken care of. You will enjoy the same wonderful standard of living today, tomorrow, and in four years time.”

Third, it ensures that the gap between ministerial salaries and median salaries is not determined by external events—the going rate for, say, an accountant in developed Asia—but by local, internal cost-of-living measures. Unlike accountants and lawyers, a minister cannot suddenly pack his bags and say, “You don’t want me? I’ll go be a minister in Hong Kong.” Why should we benchmark their salaries to people who are mobile and whose salaries are generally determined by regional trends?

What are the downsides of this approach? Well, ministerial salaries will probably not keep pace with top private sector ones. But so what? Do we really want as our president somebody who’s only willing to serve the country for S$4m, rather than S$1m?

I dare say that by encouraging this sort of thinking, we have unwittingly inculcated a certain degree of selfish money-mindedness in society. We are all prone to this—at the extreme, it produces cases like that involving Susan Lim, a surgeon under investigation for overcharging.

In any case, this is but one of many approaches. There are people much wiser than I who have suggested alternatives. The salient point is that Mr Ee and team should be generating fresh, novel ideas about ministerial salaries. If that is not the brief they have been given by the prime minister, well then, they should ask him for it. I believe he’s in the mood to listen.

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One response

  1. Why don't benchmark each ministerial salary entry point level based on their mean last drawn salaries before they join politics. Does it matter if a minister of state is paid more than a full minister when after all what they call public service.

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