Prime Minister Lee Hsien Loong agreed to a Ministerial pay cut this week. Singapore’s political leaders, who are the highest paid in the world, are facing pay reductions of 37% – 53%. A big move, considering the government’s long time argument of matching corporate sector salaries. But while those percentages look hefty, our Ministers still make over a million a year. In light of that, are the pay cuts sufficient? Based on their performance, are our Ministers still overpaid? Here’s a frank opinion:
The expected pay cuts are as follows:
The Pay Cuts
- Entry Level Ministers – 37% pay cut, falling to $1.1 million a year
- President – 51% pay cut, falling to $1.54 million a year
- Speaker of Parliament – 53%, falling to $550,000 a year, and probably predicting a decline in the fancy wig industry
In addition, the Ministers’ AVC (Annual Variable Component) is capped at 13.5 months. That’s a huge drop from the 23.5 months that’s the current standard.
While Singapore isn’t Dystopian Sci-Fi material yet, the cracks are beginning to show. It’s obvious that the PAP today is not the PAP of the 1960’s, which had the strength and intelligence to make detractors (and occasionally the laws of reality) sit down and shut up. Current problems include:
- 5.7% inflation rate
- Rising transport costs (thanks Comfort Del Gro!) and transport breakdowns (thanks SMRT!)
- Growing resentment at the influx of foreign workers
- High property prices
- Growing Income Inequality (.48 on the Gini Index)
- Infrastructure issues, like the floods at Orchard
And quite possibly, it’s an admission we’ve been overpaying our Ministers for some time (though we’d have a better chance of bending a crowbar between our bum cheeks than actually hearing that).
Justifications for Ministerial Pay
Even with the pay cuts, $1.1 million a year isn’t chump change. Singapore is tiny compared to countries like the United States, and faces far fewer difficulties. Our Ministers aren’t dealing with wars on foreign soil, or a few thousand kilometres of roads. Nor are we dealing with centuries of tribal warfare, or lack of education. And yet, our Ministers remain the highest paid in the world.
Let’s look at the justifications:
Ministerial Pay Needs to Match the Private Sector
I agree, but not for the same reasons the government posits. The real reason Ministers, like Generals and Judges, need to be well paid is that they’re harder to bribe.
Not impossible, but much harder. If someone is making a healthy amount of money, they’re more likely to stick to their principles. If Ministers are making significantly less than private sector executives, I’d bet our corruption rate will start to climb. With their current income, our Ministers can hate bankers and ignore their money.
For this reason, and not some flighty argument about attracting talent, I’d say Ministers should be high on the pay scale. But lots of first world countries (e.g. Canada, Switzerland, Germany) have low corruption rates, and their Ministers aren’t paid as much as ours. Clearly, we can still drop the pay by a bit.
Ministers Have a Difficult Job (With Side Rant on the Speaker of Parliament)
Some Ministers have jobs that are much harder than others.
It’s beyond me, for instance, why the Speaker of the Parliament has taken the biggest pay cut. What did the poor man do, kick a puppy? Considering he’s the one keeping order in Parliament, he does more work each session than a backbencher. Seriously, who would actually want to be appointed as the Speaker right now? Would you take a job appointment if it meant a 53% pay cut?
What, aren’t we worried he’ll leave and go work in the private sector?
Anyway, Ministerial pay should be based on:
- The magnitude (consequences) of failure in decision making
- The frequency of decision making
- The breadth and depth of knowledge required for the post
And clearly, these factors differ between one Ministerial post and another. But there’s no transparency in our Ministers’ pay packages. We don’t know actual total pay of the Ministers, including bonuses.
Major decision makers may be justified in their pay. But should other Ministers average $1.1 million to do their job? Until the job scope and exact pay of each position is clear, it’s impossible to justify each Minister’s pay.
Pay is Benchmarked Against Singapore’s Top 1000 Earners
The theory being that, if this figure goes down, so too will the Ministers’ salaries. There is also supposed to be a further 40% discount, after benchmarking the salary.
As The Online Citizen has pointed out, this isn’t wildly accurate. Using this as a benchmark doesn’t take into account the Ministers’ bonuses, which may propel their average pay way beyond the top 1000. Likewise, it’s meaningless if the annual growth of the Ministers’ pay don’t match the top 1000; it’s not hard to set a low salary now, and then implement growth that makes up for it in a few years.
Two Questions that Must Be Asked
Where is the Money Going?
It’s great that they’ve taken a pay cut. But where is that money going to? If I find out its going toward private holdings and businesses, then I will do something ugly (i.e. pop a blood vessel).
Simply put: If their full pay is not given up, but merely circulated (it comes back eventually, in the form of bonds or investments), then their salaries are definitely not justified. They wouldn’t have taken a real pay cut at all.
What are the New Performance Bonuses?
As most office workers can tell you, dropping the AVC is not as important as changing the Key Performance Indicators (KPI) for the bonus.
For example: Your boss can halve your AVC, but then set the condition to earn it as being “Don’t run out of paper clips”. That would be even better than doubling your AVC.
Likewise, it’s possible for the government to lower the AVC, but set very low performance requirements. This might actually mean more bonuses than before. It remains to be seen if such changes will take place.
Our Ministers taking a pay cut is a step in the right direction. Right now, however, it’s like Panadol for a broken leg. Lacking information on who’s being paid what, I can only make a conclusion based on what I’m seeing:
Rising cost of living, stagnating income, and higher risk of unemployment. I’d be lying if I said our taxpayer dollars are worth all that.
Do you think our Ministers are still overpaid? Comment and let us know!
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