Could this be a better way to pay politicians?

Australia’s 824 politicians are paid well.

The lowest paid MPs are certain members of the ACT legislative assembly, who get $132,800.On the other side of Canberra, federal parliament is even more lucrative. The lowliest federal backbencher* makes $195,130. The highest paid is the Prime Minister, who makes $507,000.

State MPs seem to get about 70 per cent of the federal pay. The Premier of NSW gets $358,853 .

The following table is taken from a recent report in parliamentary salaries in Victoria. Since then, pay rates have been hiked for inflation once or twice.

MP pay

Politician pay is a fraught issue. The annual pay rises create a furore in the media, especially during times of budget stringency. It got me wondering if there might be a better way.

What if politician pay were anchored to something that we can all believe in? What if politician pay was somehow linked to how well the rest of us are going?

This could be an effective way to not only manage the PR aspect of politician pay rises, but to properly align their incentives with our own.

Here are some anchors we could use, for starters.

Average annual full time earnings (for the employed) is $78,821, GDP per capita is $67,218. The median wage is $60,112, and the minimum wage is $33,327.

Pay packets
Pay packets

There is a case to be made for paying politicians well, in order that they are not swayed in their duties by fat brown envelopes, or promises of lucrative employment after their retirement from public life. Generosity also prevents the other problem you get when you pay peanuts – you get the homo but not the sapiens.

So while it is tempting to say that politicians should be on the median wage, it may not be practicable.

Instead, a bundle of all of the above might make a sensible balance. If you add the four categories together, and multiply by 0.8, you get  $191,580 – a number that roughly approximates current politician pay.

You could easily argue, at this point, that this pay structure is entirely mis-focused and materialistic, and if we’re going to have performance pay for MPs it should be linked to a far broader basket of KPIs, including a rating of the health of the great barrier reef, carbon emissions per capita, spotted numbat populations, ambulance waiting times, NAPLAN testing results in western Sydney, etc, etc. I’d totally support all of that.

At this point, it’s worth mentioning that I really do not think any sort of MP pay reform is worthwhile without sorting out entitlements, which are absolutely arcane and create a culture where MPs are disproportionately focused on getting the public to pay for bookshelves and travel allowances.

Is this a good idea? What would you suggest putting in the mix to align politicians’ incentives with our own? Leave a comment below!

* Please feel free to use the comments section to nominate precisely who you believe is Australia’s lowliest federal backbencher.

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thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

One thought on “Could this be a better way to pay politicians?”

  1. Surely in the mix we can add days of sitting on bench no matter how far back it is. Let’s say you start at $191,580. Anytime you miss a session the payslip drops.

    Any new bill or amendment would give a little bonus and a large bonus if the bill is passed. This way the whole parliament including the opposition would actively contributes.
    Maybe also a report conducted to its term and bearing fruits would bump the monthly wage.

    A re-election is a proof of trust and experience, potentially of good track records. So a repeating MP would get more than a new be.

    As a comparison French MP are paid before tax $230,000 plus $120,000 to pay their staff. There are few perks like free transport and burning red lights.

    The French president is paid $270,000. His/(Hers) pay has been reduced by 30% for crisis PR matter. Perks include a spacious house at the bottom of la plus belle avenue du monde.

    Liked by 1 person

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