Deciding your own pay rise (and other

I had the decidedly unpleasant experience a couple of weeks ago of having to vote on how much of a pay increase I should receive, when a motion was brought on in the Senate to disallow the latest decision from the Remuneration Tribunal giving a 7 per cent increase to federal parliamentarians.

I was about to vote against this increase until I discovered during the course of the debate in the Senate that it would also have meant voting against pay rises for a number of Public Service positions. I am comfortable with voting against my own pay rise, but believe it would be very unfair to knock off other peoples’, even though I know I would look way better in the populist press for doing so (particularly given that there was no way a majority of the Senate was ever going to oppose it). I have some ability, however subjective, to assess appropriate pay for the work that I and my Senate colleagues do, but neither I nor any other Senator has the experience to assess the merits of pay rates for the range of other public service positions that were affected. You can read my speech on the MP’s pay debate by clicking on this link.

I have stated a number of times before that I believe politicians are already paid well enough. The notion that there has to be significantly better pay or entitlements to attract better people into politics is ludicrous. I very much agree we need high quality politicians, and people of quality shouldn’t be deterred for financial reasons, but frankly there is already an over-representation of people in Parliament who come from high earning backgrounds and I have to say the quality of some of them is less than desirable.

One of the growing problems in federal parliament is the narrowing range of people and professions that MPs are drawn from. This problem is most certainly not due to insufficient pay.

The basic salary of federal Parliamentarians is linked to a specific level of public service office (Reference Salary A under the Public Executive Office Classification Structure, if you really want to know). This pay level is determined by a separate body – the Remuneration Tribunal. This latest pay rise for federal MPs brings the base salary up to around $119 000, a rise of 7 per cent, which is well above the inflation rate and the current average annual level of wage increases. More detail is available in this research note from the Parliamentary Library.

Despite the salary rates being determined by the Remuneration Tribunal, the government can choose not to accept the Tribunal’s advice, and either House of Parliament has the ability to disallow the determination flowing from the Tribunal’s recommendation.

The Remuneration Tribunal has been in place since 1973, and from a politician’s viewpoint there’s a lot to be said for just blindly accepting whatever they come up with, but the fact is that Tribunal determinations have been voted against more than once in the last 30 years. However, as far as I know, there has been no disallowance of the Tribunal’s determination since it was coupled to the salaries of non-politicians.

There were valid reasons to leave the pay determination in place, not least that it is decided by the Remuneration Tribunal, rather than politicians, and if you’re going to adopt the very sensible approach of having a separate body determine these things, it makes sense not to then intervene too often. However, I think there are some special circumstances which did merit the 7 per cent increase being declined, (if it had been able to be separated from the pay rises for other people).

A strong reason to take the alternative approach and reject the pay increase is the growing wealth gap in Australia and a serious lack of recognition of just how low the pay of most Australians is. If you were to go on what is often written in the mainstream media, you could be forgiven for assuming that an annual income of around $75 000 is a fairly middle of the road amount. This is exacerbated by the figures most often used in conjunction with the term ‘average weekly earning’, which does not mean what many people often assume it to mean – that is, an amount that around half of Australians earn.

The mean average weekly earnings for people in full-time jobs is about $55,000 a year on recent statistics. If you take into account all workers, full-time and part-time, that average drops to $42,000. But the median average, which is the midpoint for all people in full-time work is only $900 per week, or less than $47,000 per year. If you take that to include all people in all paid jobs, full or part-time, it drops to $36,500.

So half of all Australians in paid work earn less than $36,500 a year. Federal parliamentarians earn about 3¼ times that amount and Bureau of Statistics figures show that only 3 percent of people earn more than $104 000 per year. So it is pretty clear that parliamentarians already earn more than all but a tiny minority of Australians.

Of course, statistics can be misleading, and there are factors such as dual-income households, people consciously choosing to be in part-time work and all sorts of other things. But the bottom line is that the majority of Australians earn a lot less than is generally assumed, given the way average earnings figures are often portrayed.

The politicians’ pay debate has now shifted to proposals to increase the superannuation entitlements for ‘new’ MPs – that is those who were first elected in 2004 or later. Contrary to some media reports, what is being proposed is not to return superannuation entitlements back to the exorbitant and unjustified levels that existed prior to 2004, but a much more modest proposal to increase the employer contribution from the current 9% to the 15.4% level which currently applies to federal public servants and politicians’ staff. Whether this is justified is another matter, for similar reasons to what I have already mentioned in regard to salary levels.

(I should note that as I am an ‘old’ MP, entering the Senate in 1997, I am still under the old superannuation arrangements and won’t be affected by the proposed change).

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28 Comments

  1. While my form would indicate a general cynical approach to politics and politicians I dont belive the bashing of pollies pay and benefits is anything other than populist hype. That soem aren’t worth it, is the same for all industries, for many the life, family dislocation and effort does deserve recognition.

    no matter how appealing and fair it might seem, we can’t and history shows it simply does not work to try to put forward some argument that let’s pay everyone the same.

  2. Some have suggested that politicians need to be paid more so as to attract competent proffessionals without sacrificing their pay. This is a rubbish arguement. The primary motivation of any proffessional, either in the public service or in private and corporate enterprise is to get as much out of it for themselves as they can. The important considerstions for these people is purely self interest, increasing their own and their family’s prosperity. These are hardly the attributes of a good political representative.

    I’ve known a few politicians in my time and for all of them there was a need for sacrafice, putting their own interests after the public interest. Money doesn’t have much to do with it, it is the sacrifice of family, hobbies and personal interests. There is simply no time, so all must suffer. For someone to decided to live this way they must surely be committed. I think politicians work too hard, they are caught up in a buzz of transient issues that they must paddle through giving no continuity to any of the issues, only to the paddling.

    politicians need to slow down to consider if they are paddelling in the right direction, to follow through beyond media grabs and number crunching, to have a direct engagement in the crucial issues of our time.

    The thing I like about the private enterprise model is the emphasis on real outcomes. If a manager is not managing, either they are replaced or the system is restructured. Simply occupying an office and filling a diary, no matter how long the hours worked, would not be tolerated in private enterprise unless there were identifiable outcomes – managing a dysfunctional system does not count, yet it is the essence of being a politician.

  3. I’m yet to read this in full as I’m off for some Z’s but Andrew Leigh’s median wage work of aussies being $26K might be of interest.

  4. If you’re feeling guilty about all this extra money, I can email you my bank account details; to assauge your conscience of course. We wouldn’t want you complicating your life with all this unnecessary angst.

  5. I’m one of those who thinks that the work that members of parliament do and the importance of their roles for the country probably merits a higher rate of pay than they currently receive.

    But I’m not convinced by the argument that lifting the pay scale will result in an magical interest of political and administrative talent within the parliament. In fact, there’s probably a fairly good argument that increasing the pay of parliamentarians could exacerbate the problem.

    Whither performance-based pay for parliamentarians, anyone?

  6. Lets see if my employer will be offering 7% to its staff – unlikely – under our EA you can receive about 4% maximum with no CPI payment – most people in the business I work in will be worse off next year than they were this!!!

  7. A politicians job is on the line every couple of years because of elections. Why anyone would agree to that sort of tenure eludes me, except for the power grab or an altruistic motive. So pay them really well. Pilots lurch from medical exam to medical exam, so they are worse off than our politicians. Of course pilots are also tested and reviewed on an on-going basis for competence, which accounts largley for Australia impressive safety record. Maybe there should be an educational pre-requisite for honourable members, and an on-going training scheme to keep them attuned to the needs of the Australian people. Maybe even renew their parlimentry Pledge periodically to remind them that they serve the people…

  8. The thing that grates with the public is the hypocrisy of the peanuts & monkeys argument.

    Whilst we taxpayers are meant to pay for experts and not monkeys, they want us to be on wages at levels of 3rd world countries, apparently, to be globally competitive. Why then do the rest of us have to be monkeys and paid peanuts?

    So, with that in mind, I’ve heard a few people say that the top earners in the country should also get 3rd world pay and conditions including our executives and politicians etc.Then we’d at least all be equal.

  9. While I don’t believe a decrease in pay across Australia for our top earners is a smart decision, Australia in general certainly needs to take a good look around at the current wage levels world wide for certain industries and start catching up. I work abroad with 13 young, smart, ambitious and intellectual ex-pat Aussies, all of who have decided to leave home and pursue a career internationally to benefit foreign firms from their great education and upbringing they received back home. While the prospect of international travel and experience is a major draw card for many young MBA and post-grads leaving oz, the overtly increase in the size of their salaries compared to the remuneration they would receive back home in oz for similar positions is incomparable. Like we have seen with the advent of the Australian Football A-League (that’s soccer to some), wouldn’t it be great if we could keep the much needed intellectual talent within our shores? Perhaps then will the jobs of politicians and executives become more competitive and pay rises won’t be the only incentive for aspiring achievers.

  10. Deborah’s comment is about right. Over here in Adelaide, we have a firm called Radio Rentals. The workers for this company no longer have to waste production time or energy deciding their own wages, the company now does that for them.
    In their best interests, of course, as civilised people do!
    This includes a unilateral process of hacking into pay and conditions somewhat akin to the sequestration of Palestinian lands off of Palestinians, by the armed Israeli state.
    Yet when the workers seek to question the one- way nature of the employer’s idea of “give and take” ( we take, you give), they are locked out with the collusion of a bigoted government.
    We talk of debates about “Australian Values” and “fair go”, now gallingly from the Liberals themselves, yet we are expected to applaud their income increases when they can’t even tell the difference between what’s fair and what’s not?

  11. Just following on from Josh’s comments – at present their are approximately 900,000 Australians working overseas. Of those about 100,000 earn in excess of $100k (even a couple of ex pollies in their on sinecuer). As he rightly notes the lifestyleis a strong attractro, but the realirty is we do not have markete size or capital backing to ever match those salaries.

    Australia’s current workforce is about 10 million people. In ten years 30% of them will be tax suckers not tax payers – that means 3 million workers need to be replaced. We don’t have the people to do that trained untraoined or not, so much of the current futile poltical argunment is sowmehat irreleevant to the futre we have to face. This is one of the main reasons why immigration is hummng along, guest worklers are being encourgaed, and dreaded as it sounds Paul people are being squeezed and asked to produce more babaies and stay at work longer. Just the poor old refugees stay under the pump.

    For those who want to stay cocconed in some deluded belief that life and wealth and consumption and services will just continue on forever, eitehr get used to these sort of chnages or get used to third world life people.

  12. If you think you are being overpaid, you might consider donating your pay increase to charity.

    I live on a low income, but I always make sure I have something left over to help others.

    BTW, thanks for sending me, “A Guide to Australian Government Payments”.
    Centrelink never bothers.

    I have a high income earning son who has been offered significantly more money by a computer games company in the USA. If he was a single man instead of a family man, I don’t think we’d see him for dust.

  13. Andrew – rather than just voting against the pay rise or declining the payrise, wouldn’t it be better to look into why the renumeration tribunal made such a decision and perhaps change the grounds on which those decisions are made (if you believe they are excessive)

    Also, regarding average pay – wouldn’t a more reasonable way of comparing salaries be to look at the hourly rate (taking into account the actual number of hours worked rather than theoretical 38 hour week). That way you can compare those in part time work directly against those in full time work.

  14. Why can’t all civil service jobs including politicians just be linked to CPI and the tax brackets adjusted accordingly every year? That is the official change in cost of living calculated in an objective way. Considerable millions could be saved by avoiding needless committees/sub committees/tribunals/strikes/parliamentary sitting time/journalist writing and expressing opinion time/public reading and whinging time. The money saved would be easily worth an extra snag each for the nation at Christmas.

  15. Rob – haven’t wages risen quite a bit more than CPI over the long term? I think this would leave public service salaries behind private sector ones.

  16. It comes around to whose wages Chris. The discrepancy between wage earners has increased to where I read that Australia (which was the epitomy of equality) is now ranked down in the 40s world-wide in terms of egalitarianism. As Andrew pointed out there is a big difference between median and mean wages which indicates that a few very high wage earners are sckewing the average up. The private sector may need to compete with the US/UK etc. for top executives and highly skilled individuals. The same is not the case for politicians.

  17. The private sector may need to compete with the US/UK etc. for top executives and highly skilled individuals. The same is not the case for politicians.

    To a certain extent this may be true for politicians (or you may want to argue that politican salaries should be much closer to the average wage), but the public service is definitely in direct competition with the private sector, both here and overseas. And these days you don’t need to actually move overseas to work for an overseas company.

  18. This is a bit more lighthearted than the previous comments, but I wonder if you have seen the episode of ‘Yes, Prime Minister’ where senior public servants’ and parliamentarian’s salaries are linked in just the way you describe? As with all of the Yes, Minister / Prime Minister series, this episode manages to be both halarious and informative about our parliamentary arrangements.

  19. I have seen them. They are good satire. Despite lofty spin, we are all self-serving deep down….

    Civil servants represent an important voting block. It pays for governments to be seen to be looking after them. It would probably represent political suicide to suggest that the job security, benefits and lower stress environment they enjoy means they should be paid less than the private sector.

    A sector that does after all drive the economy and generate the tax revenue in the first place. A private sector that has to have flexibility to survive in the ‘real world’ of global competition and continuous innovation. Personally I would prefer to see more tax breaks etc. given to successful private innovators and service providers (eg: cutting ridiculous payroll taxes) to enable them to mentor and train more innovators.

    The very culture of government institutions and employment goes against ‘out the box thinking’, risk taking and the need to continuously re-invent oneself which are so necessary in the global market.

  20. Civil servants represent an important voting block. It pays for governments to be seen to be looking after them. It would probably represent political suicide to suggest that the job security, benefits and lower stress environment they enjoy means they should be paid less than the private sector

    I live in Canberra and probably get to know more public servants than most (though I don’t work for the public service myself). I think its a bit of a furphy that that a public service job necessarily has better benefits and a lower stress environment that a private sector one.

    Whilst some do seem to have pretty good conditions (there are areas where there could be quite big productivity gains), in other areas I’ve seen cutbacks have led to stressfull conditions at least on par with the private sector if not worse. This seems to be more true with the higher level jobs where some people decide not to go for promotions because the extra pay is simply not worth the extra work.

    In some areas like IT I think they’re losing quite a few people to private industry/contracting.

  21. I recommend ‘Parkinsons Law’ written in the 1950s for a satirical view of the civil service – wonderful stuff.

    don’t get me wrong, we need a civil service, it just doesn’t need to be big. Economically a modestly paid civil service does no harm as it contributes to the multiplier (ie. their spending creates income for others). When too well paid, civil servants, like anyone, have a huge propensity towards consumer good which are invariably imported. This leaks money, contributed by tax payers, out of the economy! The current account on the balance of payments goes into deficit and interest rates go up.

    The loss of staff goes 2 ways. Small companies lose generation Yers to comfortable government jobs with easy hours, flexi-time, paid training and guaranteed increments (promotional – on top of inflation/productivity adjustment). Nothing wrong with those conditions BUT THEY ARE PAID FOR FROM THE TAXES OF COMPANIES THAT DON’T GET GOVERNMENT HAND-OUTS TO TRAIN STAFF! They aslo have to payroll tax which is the most ridiculous disincentive to employ staff I have ever heard of. Why isn’t it an election issue? Tax complying administration probably shaves 5% off companies earning every year (especiually small ones). Less money consumed by the civil service the better with huge incentives towards innovation and capital investments for the betterment of tomorrows Australia.

  22. “BUT THEY ARE PAID FOR FROM THE TAXES OF COMPANIES THAT DON’T GET GOVERNMENT HAND-OUTS TO TRAIN STAFF!”

    Companies get plenty of corporate tax welfare, and the generation Y’s are probably going on to careers and workplaces that allow them some decent conditions, and bosses that don’t want to screw them over at every turn.

  23. Deborah, I know nothing about big corporates. Some of them I guess are just semi-parastatals bloated on exclusive rights/subsidies and/or government contracts. I am talking about the biggest employers of Australians: small business.

    I agree that people go where the conditions are better and good on them. The problem is when government is the one taking them! Holistically they should consider whether they really need all these people in jobs or whether they should take less tax in the first place.

  24. Teachers are paid crap wherever you go in the world for the work we do. I am not sure about the generalisations made on here about only working to get something material out of it. If that was the case, i would have left my profession years ago.

    Good on people for staying in their vocation (including politics) if that is their passion. Too many unhappy people in this country doing things for capitalistic reasons and less about what essentially makes them happy and aesthetically rewarded. Perhaps this could be a reason too why people go and work overseas?

    My hat goes off to politicians – pay them more – I don’t care how much they get – I am expecting though no more talk about pay rises to occur close to the next election but the next budget??? hmmmmm how about more tax cuts!!! Will the electorate be so easily seduced this time?

    Sean

  25. What I am saying is that the books have to balance. It is great for people to be well-paid and fulfilled. The hassle is that when those jobs are funded from the public purse, someone has to pay. The better the economy is doing, the more this cost can be spread out. Civil servants and governments have only a partial facilitating role in creating a better overall standard of living for the nation. The real action is the flair, entrepeneurship ability, competitiveness and hard work of private enterprise. maybe I’m wrong but my form of idealism points towards millions of small dynamic businesses co-operating and innovating in a low-tax, high incentive and reward structure with high degrees of specialisation as opposed to bloated civil services and mega corporations.

    Teaching is a noble profession – no doubt. They are not badly paid considering the job security and the huge overall bill. There is a nice incremental pay scale and a management progression path. If some choose not to take in then they like anyone in any work place obviously limits their earning. Responsibility and greater accountability (head of departments and school heads) deserves more rewards.

    To throw a real curve ball: With technology could some of the senior classes be greater expanded with liveo links etc. It seems a strangely abrupt age boundary to me that uni and TAFE students can attend classes with 100-200 students in them, yet schools are confined to 20-25. There must be soime savings and efficiency possible. Also students can act as teaching tutors and demonstrators in these places but the situation is more rigourous for schools. Is progress being hampered by old paradigms and an over strong union protecting the status quo at all costs?

  26. To a large degree your right Rob – althouhg I’d argue fro more money for teacehrs for the principal reason that the gene pool is to low, as some recent reports hvae shown and it needs to be more attractvei to brighter students. However the millstone in your last sentence is the holding back issue.

    Ironically, despite all the noise the Work Choices legislation does not apply to the most heavily unionised workfroces in the country, ie State Public Sectors, so they’ll be eevn further protected as the rest of the economy and the country will be forced to seek the efficiency and productivity needed to keep funding the life we have grwon used to as the workforce ages and shrinkks.

  27. I come from a family loaded with teachers across 3 generations. None of them are/were in it for the money. A solid respectable wage is enough. What could possibly also help is a looser teacher employment structure allowing people to move from the private sector into teaching and back again through their work life. It would also re-vitalise a profession that has its own share of bored but scared to break out individuals. It is ironical that successful business leaders and scientists can move straight into university teaching jobs but would have to complete an entire year of university (plus prac teaching at no pay) to teach at a much lower level at a school. Unions again protecting members and not necessarily the profession.

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