How much to pay politicians? The Singapore case

Alex Au
20 Apr 07

Singapore’s Prime Minister Lee Hsien Loong, with the sanction of parliament, is to raise his annual pay by 25.5 percent to US$2 million this year, with a further increase in 2008. This is part of a general ratcheting up exercise of ministerial and civil service salaries in the city-state, the last of which came in the year 2000. Ministers in the Prime Minister’s cabinet will get a 32.5 percent increase to US$1.05 million in 2007, rising to US$1.26 million in 2008.

These proposals, which, given the ruling People’s Action Party’s (PAP’s) huge majority in Parliament, are certain to pass, have generated a howl of protest in the city-state.

The issue though, is not just relevant to Singapore. What an appropriate level of compensation for political office-holders is, is a question relevant to all countries, especially in an age when income gaps are widening with alarming speed.

Singapore’s ministerial salaries are based on a benchmark derived from private sector pay. The benchmark for a minister’s annual package is set with reference to the top 8 earners in 6 professional fields. As private-sector highfliers have seen their incomes soar in recent years, the benchmark has nearly doubled between 2000 and 2006. It was in an attempt to catch up that the government has proposed the latest round of pay rises.

Unfortunately, what is fresh in people’s minds is the fact that between 2000 and 2005, the bottom 30 percent of households in Singapore had either no income or saw their earnings shrink, a widening income gap that has been attributed to globalisation. As many low value-added industries migrated to countries with cheaper labour, their laid-off workers have typically not been able to find new employment paying the same rates.

Given such a context, when the government directs that ministerial salaries have to rise in accordance with a benchmark that is tied to top earners, it cannot but be a hot potato. Lee nonetheless defends his policy by pointing out that talent is very much in demand elsewhere, and to attract capable people to its team, an administration must offer rates commensurate with what the private sector is willing to cough up. Underpaying politicians is just a recipe for corruption, and even paying middling salaries is no solution. Good government creates value, and the worth of high-calibre people can be seen in the way a government anticipates problems and executes solutions efficiently.

Even after the 2007 pay rise, the total pay-out to political office-holders is just US$36 million a year, barely a fraction of the US$140 billion economy that the government has to manage, a fraction that would hardly merit comment in the corporate world. Minister Mentor Lee Kuan Yew thinks that those who object to the proposed salary increase, have “no sense of proportion”.

Yet it is precisely this corporatist mindset that bothers many critics. Opposition Member of Parliament Chiam See Tong said “The CEO or manager has only to think of the bottom line. But a political leader…. must maintain integrity, moral authority to inspire and to rally people.”

Many ordinary Singaporeans, like most people around the world, expect political leadership to be motivated by a dose of idealism and a willingness to bear sacrifices.

Yet, if the proposed salaries are not the right level, what would be? Some feel that while the concept of benchmarking itself is not wrong, the specific formula used is too generous, which in turn begs the question of what formula should replace it. Others have questioned the benchmarking idea altogether, suggesting that if government must be so corporatist, then like the corporate sector, ministers’ pay should depend on a series of key performance indicators (KPI).

Right now the only announced KPI that the Singapore government uses is GDP growth. Ministers get bonuses based on the GDP growth for the year, but it could be argued that this incentivises the cabinet too narrowly. Certainly, few can fault the Singapore government’s outstanding record in creating economic growth over the last 40 years, a record that the current government constantly refers to in justifying its high salaries.

But in other areas, its record is mixed. In fact, it is quite debatable in matters of social welfare. Just a month ago, Lily Neo, a parliamentarian from the ruling party criticised the paltry sum of US$190 a month that the poor and unemployed get. In education, there have arguably been as many missteps as there have been right decisions with much of the present agenda devoted to correcting the passive rote-learning style pursued over the last few decades. Even more questionable is the government’s record in matters of social justice, cultural development and civil rights. By no measure is Singapore’s record in these areas as stellar as its economic success, which is readily quantifiable.

The present policy of focusing exclusively on GDP as a measure of a cabinet’s quality is likely to perpetuate this lopsided view of the role of government. However, nobody has yet developed a set of KPIs for political office-holders anywhere in the world.

Quite possibly, the most widely-held criticism of ministers’ pay in Singapore is the fact that it is so out of line with other countries’. At US$2 million, Lee Hsien Loong’s pay will be about 5 times that of US President George Bush. Comparing it to prime ministers’ in other countries such as the UK, Japan and Australia yields multiples of similar order.

To this, the Singapore government tends to respond with the argument that Singapore is a unique case, with an unparalleled record of economic development from a poor third-world city to first-world standards within little over a generation. Then there are the usual allusions to Singapore’s small size and multi-racial make-up and the inescapable economic and security vulnerabilities that its ministers must forever battle against. By this logic, the smaller the country, the tougher the job and the harder it is to find suitably talented leaders. Not paying the “market rate” would only make things worse.

Indeed, there does seem to be a noticeable lack of Singaporeans wanting to take up politics, and given this tiny starting pool, there may consequently be a real shortage of competent people to head ministries. The high salaries that typify the Singapore political system are in this sense just a response to reality. Without them, there would be even fewer people wanting to join the government.

What is really needed is an explanation why such a shortage persists, since it seems to be the root of the problem.

In most other countries, there is no shortage of aspiring politicians jostling to get elected to realise their goals. In Singapore, people give up without even trying, something attributeable to 40 years of single-party dominance. Very few would risk money and reputation when in practical terms, there is virtually zero chance of getting anywhere in politics.

What about joining the dominant People’s Action Party and working one’s way up from inside? Except for the earliest days of the party, that has not been the route taken by most ministers. The PAP is a cadre party with no meaningful internal democracy. To fill top positions, the party head-hunts people that it wants and inducts them. After a short try-out, they are elevated above ordinary party members to stand for the polls and quickly make it to minister.

The entire system, inside or outside the ruling party, militates against people putting themselves forward. Consequently, there has developed an entire culture of holding back and not volunteering oneself for politics; there is therefore no ready pool of politically eager people, who might eventually fight and win their way to the top. In this sense, it resembles a market place where because a single corporation has a statutory monopoly, no new market entrants appear. It would thus suggest that freeing up the market, permitting a healthy dose of political competition might greatly enlarge the pool of potential talent, with moderating effects on the “clearing rate” for political talent.

No doubt, in countries where lots of people throw themselves into politics, many may have questionable integrity or competence. Singaporeans are often reminded about how other democracies end up with poor governance. But there are also democracies that manage to be both liberal-oriented and well governed.

How do those countries winnow out the charlatans and incompetents? This is where one has to look at the broader picture, namely the checks and balances built into the successful political systems. It is undeniable that a robust media, eager to scrutinise political hopefuls, an independent judiciary that will act fearlessly against misbehaving political incumbents, and an educated, middle-class citizenry are important factors.

Thus, the debate about what should be the right level of compensation for political leaders cannot be resolved without dealing with the rigidities of a political marketplace like Singapore’s. It is a closed market that operates by inviting the select into its inner circle. Discussing what should be the “market rate” for political talent in such conditions risks a circular argument, unless there is a functioning political market in the first place.

Alex Au, a Singaporean, runs his own businesses, but is also a frequent social commentator and activist

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