Tuesday, April 03, 2007

Is Ministers' Pay Hike Reasonable? -- Benchmarking Ministers' Pay




Is Ministers' Pay Hike Reasonable? -- Benchmarking Ministers' Pay

(You could sign the online petition against Ministers' Pay hike here)


So the spin is out in full force, trying to justify the impending ministers' pay hike. Expectedly, the civil servants' pay is being used as a collateral in PAP's argument for its ministers' pay hike.

There are a lot of emotional out burst from the middle class that protested against such obscene amount of “suggested” pay hike. The more likely result would be that PAP will just say that they are not going to implement a “full pay hike according to the benchmark” that they have set for themselves, but maybe half or even less of it. Even so, we must first examine whether pay hike is justifiable. If we want to do so, we must examine carefully the logic of the benchmark that they set.

As we know, in the private sector, remunerations are determined by performance and it is never about “how much a person could earn” from other companies. i.e. It is never about “opportunity cost” of individuals' value but rather, the value or performance the individuals could contribute to the company.

Thus, the benchmark that PAP government has set for themselves have laid on the wrong fundamental premise. If they want to be like the private sector, then they should benchmark their salary according to the private sector's standard of benchmarking and not the amount of the money that they are giving.

For the record, ministers are entitled to pensions after they have served 8 years and above 55 years old. In fact, according to PM Lee in one of the parliamentary sitting, there are ministers who are drawing a pension as well as a salary at the same time. Do we have any private companies here in Singapore that give pension as well as salary at the same time to their employees?

PAP has argued that they need to “attract talents” thus need to benchmark their ministers' pay to private sectors. This logic is flawed for the following reasons:

1)When a private firm employed their talents, they have set it clear the remuneration packages. But PAP Ministers were elected without telling voters how much they will cost taxpayers! No private firm will allow their CEOs to raise their remuneration package AFTER they are employed! They can't just say, hey, the other firm is offering their CEO XXX amount of salary, you should do the same. PAP should tell voters how much their ministers will cost voters during elections so that the voters will decide whether to “employ” them by voting them in.


2)Private firms benchmark their leaders according to their performances, so PAP government should do likewise.


3)By benchmarking ministers' pay according to the top earners, then it would mean that as long as PAP government could make sure the top income earners could get more each year, their own ministers' pay will increase accordingly. This is illogical as the government should take care of the interests and welfare of MOST Singaporeans and the ministers' should be benchmarked according to the interests of the majority of Singaporeans instead of the few top income earners.


4)We will end up with a situation that when income disparity widen, ministers' pay will continue to rise even though the average workers' income is stagnant or worse, regress over time. This is totally absurd and unacceptable.


5)Great politicians are recognised and respected for their visions, leadership and sacrifices to the common good, definitely not for hefty million dollar pay. No matter how small our nation is, if we could not cultivate such public spirit of serving, I do not think our Nation will last very long in time to come.


6)PAP government always wanted to claim that they are “First World Government”, it should only be logical for them to benchmark their ministers' pay to “First World Governments” around the world. Many people have shown that other ministers around the world do not need the kind of million dollar annual salary of our government to run a country with more people and higher GDP. Some have even achieved first in economic efficiency as well as competitiveness. It would simply mean that the “productivity” of our ministers will definitely lose out to these truly “First World Governments”! PAP government has always complained about “high wage cost” of workers and that wage increase should not be more than productivity growth. Why isn't ministers' pay benchmarked against GDP growth instead? Or overall productivity growth of the nation? Double standards?


7)The list of top income earners will change from time to time. It means that those in private sectors may face risk of pay cut or will earn less in the year. But the irony is that the ministers' pay will not go downwards together with the individuals who are listed as top income earners in any one year. They will always compare to those earning more, not lesser! This is inherently counter intuitive. Which jobs in the world will guarantee you that you will always be the top income earners in your country?

So, the next question is, how should the ministers' pay benchmarked? What is a reasonable benchmark in view of the job nature of the ministers?

In order to answer this question, we should first determine what is the primary role of the government? It is to take care of the interests and welfare of the citizens. Thus, in my view, ministers' pay should be pecked closely to indicators of the majority of citizens, instead of the privileged few.

From the statistical point of view, the median income should be the indicator that represents the income that most workers earn. Instead of using the mean or the higher percentile of income earners as an indicator for benchmarking, the median income should be used instead. (The Gini coefficient which means income distribution/income gap is based on the difference between median and mean income. If the Mean (average) income is very much greater than the Median income (income at the 50th percentile), it means that the income gap has worsen.)

The aim of the state is also to ensure that the economy could produce enough jobs for citizens. The most undesirable situation would be citizens being trapped in prolonged structural unemployment. Thus I think it is only logical to include the rate of structural unemployment into the calculation of ministers' pay.

Of course, the last criteria should be ministers' pay rise should not be above Total Factors Productivity (TFP) growth rate. This will only be consistent to the treatment to normal workers on the ground.

My suggestion here of benchmarking of ministers to “performance” may not be exhaustive in nature but the fundamental idea is that we should benchmark their salaries to their performance as leaders of the country instead of what other people are getting in private sectors.

Goh Meng Seng

9 comments:

Anonymous said...

Why's the point of writing cock in your blog? If you are keen to help us, you should lead a protest march against the pay hike, I had enough of such wayang, I also know how to write, why do I need you for?

Pandemonium said...

As we know, in the private sector, remunerations are determined by performance and it is never about “how much a person could earn” from other companies. i.e. It is never about “opportunity cost” of individuals' value but rather, the value or performance the individuals could contribute to the company.

Thus, the benchmark that PAP government has set for themselves have laid on the wrong fundamental premise. If they want to be like the private sector, then they should benchmark their salary according to the private sector's standard of benchmarking and not the amount of the money that they are giving.


I actually disagree what your comparison. The situation now (according to the government) is that we are losing potential talent to the private sector because of the pay disparity. A more apt comparison will be this: company X found that they are losing their top executives and talented workers to company Y because the pay company Y offers is higher. Therefore, there is a need for X to pay their people higher if they want to retain their employees or even attract talents from Y.

As I see it, the government is saying that this is a situation of X the government versus Y the private sector. Whether comparing themselves with the private sector is justified or not is another matter; what I'm arguing here is that your analogy to break their argument seems flawed to me.

Anonymous said...

I'm not surprised, Goh can't even outfight a 12 year old kiddie on internet forums. He has a flawed personality thence his arguments are always flawed.

Anonymous said...

MORE good years for Singapore (ministers) again.

Singapore is on the UP trend, GDP growth is up, GST is going up, property prices are up, household incomes are up, ministers’ salaries are going up, public transportation fares are up, COE are up, price of electricity is up … well it’s up because oil prices goes up but it’s still up there even though oil prices are down… Oh, sorry, I did not know Singapore was bidding for the biggest energy acquisition in Down Under.

Even the kopitiam round the corner just raised the price of my kopi by 20 cents. The owner cited rental increase and talent retention as reasons. He said that he has been suppressing the prices for the last 5 years, but cannot tahan liow. His “tao chew” told him that there is another kopitiam thinking of hiring him because he makes good coffee and kaya toast, and that a lot of customer likes him and depends on him for their daily breakfast. So this owner has to increase his “tao chew” salary to keep him from leaving.

The two biggest hikes of the year, the 40% GST hike and (almost 100%) Minister’s pay hike – they are expected and in line with GDP growth, except that it’s just not in line with our salary growth that’s all.

Let us quit questioning and quickly agree to it and get it out of the way so that we can now concentrate on trying to pay our bills. No need to justify the hikes. It would have been too taxing on the brain to think. Just pay and pay and life will be wonderful. If you want to think, you can watch the parliament debate on TV in the comfort of your own home. And best of all, you already know who will be the winner. I always debate with my wife, who got the better hairdo – Lily Neo or George Yeo.

With the GST hike and Workfare, I am sure many older folks will not think that the government is an uncaring, elite one. Now, as long as they work, the Workfare will help them with some payout. Best of all, there is no need to worry about retirement. With the high costs of living, you simply cannot afford it. The low-income also will not need to worry because now got GST offset package Senior Citizens’ Bonus of $200/yr ($133 cash, $67 CPF) to help them with impact of GST hike.

But don't worry. Most of you (especially the 66% of you) don't have a problem with these two hikes. The millionaire-dollar ministers you voted in will ensure that they can always justify why they need us to be paying for higher priced but smaller area HDB flats, higher ERP charges, higher healthcare costs, and higher costs of living. In fact, why limit their pay at only $2.2 mil? With a population of $4.5 million, the ministers should be paid $4.5 mil, after all, the policies affect everyone.

Like I said, more good years for Singapore.

I am happy for our Ministers’ wage increase, of course. But I would be happy just to make ends meet and see that when in my sixties I don’t have to compete with another sixty-old for a place as a cashier in NTUC Fairprice.

Anonymous said...

Aiyah never mind la, they need more money for GST hike, transport hike, utility hike, gas hike.

So much to pay you know. Their maths very good one, cannot be wrong sure... comfirm confirm.

If GST go up 2%, surely they must have formula to derive how much their pay needs to increase.

Some more we must be competitive mah, got so many foreign talent around, they will help create more jobs, more prosperity for everyone.

My main concern is my HDB and my upglade upglade of my area. As long I got toto, 4D & Big sweep, aiyah no big deal la.

Big man need more nourishment. We this kind worker class cannot compare. Leader is leader one.

They got deglee, doctorate, company sharegolder, etc. All important, I stupid like sheep. Pleaaasseee.... help lead me.

Baaaaaaaa.... Baaaa...

Anonymous said...

1. A protest would simply lead to the good man getting arrested. Also, a critical minimum mass of constructive dissent from the population has not been generated to make the protest successful (if the first anonymous sender is anything to go by.) Most importantly, the nation isn't sure (an understatement)that protests are the form of political action or dialogue it wants.

2. To the second sender:I believe Mr. Goh wasn't trying to "break" the government's argument on the grounds that it is unfair to compare the public sector to the private sector. He was merely bringing up the other side of the argument--the demand side of the ministerial job market. The government, in raising ministerial salary, aims to keep ministers in the job. This is simply the other side of the story, the importance of which doesn't negate the other side's.

I think the suggestion to tie minister wages to performance forms a sensible part of the solution--if they perform well, they get their pay rise. The only issue now is that the connection between performance and pay rise is entirely unclear.

Anonymous said...

nowadays, people are governed by money, not passion. There are so many private sectors out there that offers better salaries than working in the cabinet.

Those ministers are at risk of pulling over to the private sector by higher salaries which will cause the governmental structure to collaspe.

You can say they are greedy for money but ask yourself, honestly, do you prefer to work without salary to help the poor people or working as a director in a company that earns you 1 million salary per month?

Don't blame anyone, just ask yourself.

I can't believe such a simple logic yet the opposition people fails to understand.

Lance said...

To last anonymous,

Leaders are elected, not hired. Leaders serve the people; they do not run a business. The more the leaders take from the people, the less the people have from themselves.

Your logic is flawed because you are assuming that leaders work as ministers in the government primarily (do not take me out of context) for money. I suggest that you run for election and say that you are running for government because you want to be well-paid. No one will vote for you (although they salute your honesty).

Just because you love money more than anything does not mean that people with altruistic ideals do not exist. The former are like beasts who can even swallow their own kind; the latter are saints who sacrifice for the good of men.

[Those ministers are at risk of pulling over to the private sector by higher salaries which will cause the governmental structure to collaspe. ]

You assume that these ministers are indispensible. No one is indispensible. Get your concept clear. The sun will continue to shine and the wave will continue its course. Life moves on. If these so called minsters are so easily swayed by money, they ought to leave; our country has no need of them. In fact, our government and country will collapse beause these self-serving minsters exist: they serve not the people primarily but themselves.

Don't blame anyone for your idiocy; just ask yourself. Its a simple logic fools fail to understand.

Lance

行IVY行 said...

Unbelievable. No need to be overly frilly and price oneself out of all the politicking with your split personality. Authentic being is the best price to win hearts. Saying only the good things is just too perfect to be true. If you don't play politicks, politicks will play you. Except it.