Experts weigh in on ministers' pay
It should reflect incomes of average folk, say HR experts and economists
By Cai Haoxiang & Amresh Gunasingham
HOW much political leaders deserve to be paid should depend partly on how much the man in the street earns.
This was the consensus of most economists and human resource experts The Straits Times spoke to.
Their reasoning: Political leaders are public servants whose role is to improve the lot of the average Joe.
DBS economist Irvin Seah suggested that 65 per cent of a minister's pay should be based on a predetermined multiple of the median individual income of Singaporeans, and the remainder kept on the current formula.
As of June last year, the median individual income was $2,500.
The higher weightage is necessary to emphasise that politics is a calling that requires sacrifice, said Mr Seah.
Agreeing, former MP Ho Geok Choo said this would 'incentivise office holders to cater to the needs of the average Singaporean, and would have the additional benefit of being perceived as equitable.'
None of those interviewed was prepared to suggest what the multiple of the median individual income should be.
Pegging ministerial pay to top private sector performers has been a political hot potato since it was introduced in 1994.
Over the years there have been many calls, including from opposition parties, to change or scrap the practice.
Currently, pay for ministers is set at two-thirds the median incomes of the top eight earners in each of six professions, including banking and law.
The most current figures released by the Public Service Division show that the annual salary of an entry-grade minister was $1.57 million in 2009. The Prime Minister's salary that year was $3.04 million.
On Saturday, Prime Minister Lee Hsien Loong announced a review of political salaries to be undertaken by a committee led by retired accountant Gerard Ee.
The committee will have two reference points: salaries of comparable jobs in the private sector, and general wage levels in Singapore.
Securities Investors Association of Singapore (Sias) president David Gerald, however, suggested that the peg to private sector pay should be scrapped altogether.
He argued that there will always be some public unhappiness with such a peg, whatever the discount level.
This is because politicians are unlike private sector professionals who 'take enormous risks and are rewarded accordingly', he said.
Citigroup economist Kit Wei Zheng noted that ministerial pay will be 'inherently biased upwards' if it is pegged only to top earners in the private sector.
Analysts The Straits Times spoke to believe that a related matter which bears reviewing is that of bonuses linked to the annual gross domestic product (GDP).
The bonus was introduced in 2000 and, in 2007, was revised to form 20 per cent of the annual pay of top officials.
This bonus is three months if the economy grows by 5 per cent and can go up to eight months if growth exceeds 10 per cent. It is zero if the economy grows by 2per cent or less.
But experts believe the bonus should be reviewed.
'Many factors beyond the control of ministers affect economic growth, and it is impractical to account for how the individual actions of each minister contribute to that growth,' Madam Ho said.
Citigroup's Mr Kit noted that the figures could be buffered by external factors such as labour imports and corporate profits that may not necessarily result in higher wages for the average Singaporean.
'There is no denying that GDP growth remains a relevant indicator of economic welfare, but it is a highly incomplete one at best,' he said.
Bank of America Merrill Lynch economist Chua Hak Bin suggested a refinement - pegging to annual GDP per capita rather than GDP growth per se.
Meanwhile, human resource experts suggested pegging ministerial pay to job scope, similar to what is done in private sector companies.
Said one human resource consultant by way of example: 'Should the environment minister be paid the same as the minister of defence or finance?'
Economists, however, cast doubt on the wisdom of paying according to which ministry a minister helms.
Said Mr Kit: 'The idea will not be easy to implement in practice, because defining the proper key performance indicators (KPIs) for each ministry will be difficult. A poorly-defined set of KPIs is bound to lead to poorly designed policies.'
Sociologist and former Nominated MP Paulin Tay Straughan said the review announced by PM Lee fits within his previously stated notion of politicians being 'servant leaders', which implies that pay can never compensate for the sacrifices a leader makes in serving the country.
She added that the review committee will have to balance this principle with the need for 'fair compensation', so that capable people are not penalised too much for stepping forward.
[email protected]
[email protected]
It should reflect incomes of average folk, say HR experts and economists
By Cai Haoxiang & Amresh Gunasingham
HOW much political leaders deserve to be paid should depend partly on how much the man in the street earns.
This was the consensus of most economists and human resource experts The Straits Times spoke to.
Their reasoning: Political leaders are public servants whose role is to improve the lot of the average Joe.
DBS economist Irvin Seah suggested that 65 per cent of a minister's pay should be based on a predetermined multiple of the median individual income of Singaporeans, and the remainder kept on the current formula.
As of June last year, the median individual income was $2,500.
The higher weightage is necessary to emphasise that politics is a calling that requires sacrifice, said Mr Seah.
Agreeing, former MP Ho Geok Choo said this would 'incentivise office holders to cater to the needs of the average Singaporean, and would have the additional benefit of being perceived as equitable.'
None of those interviewed was prepared to suggest what the multiple of the median individual income should be.
Pegging ministerial pay to top private sector performers has been a political hot potato since it was introduced in 1994.
Over the years there have been many calls, including from opposition parties, to change or scrap the practice.
Currently, pay for ministers is set at two-thirds the median incomes of the top eight earners in each of six professions, including banking and law.
The most current figures released by the Public Service Division show that the annual salary of an entry-grade minister was $1.57 million in 2009. The Prime Minister's salary that year was $3.04 million.
On Saturday, Prime Minister Lee Hsien Loong announced a review of political salaries to be undertaken by a committee led by retired accountant Gerard Ee.
The committee will have two reference points: salaries of comparable jobs in the private sector, and general wage levels in Singapore.
Securities Investors Association of Singapore (Sias) president David Gerald, however, suggested that the peg to private sector pay should be scrapped altogether.
He argued that there will always be some public unhappiness with such a peg, whatever the discount level.
This is because politicians are unlike private sector professionals who 'take enormous risks and are rewarded accordingly', he said.
Citigroup economist Kit Wei Zheng noted that ministerial pay will be 'inherently biased upwards' if it is pegged only to top earners in the private sector.
Analysts The Straits Times spoke to believe that a related matter which bears reviewing is that of bonuses linked to the annual gross domestic product (GDP).
The bonus was introduced in 2000 and, in 2007, was revised to form 20 per cent of the annual pay of top officials.
This bonus is three months if the economy grows by 5 per cent and can go up to eight months if growth exceeds 10 per cent. It is zero if the economy grows by 2per cent or less.
But experts believe the bonus should be reviewed.
'Many factors beyond the control of ministers affect economic growth, and it is impractical to account for how the individual actions of each minister contribute to that growth,' Madam Ho said.
Citigroup's Mr Kit noted that the figures could be buffered by external factors such as labour imports and corporate profits that may not necessarily result in higher wages for the average Singaporean.
'There is no denying that GDP growth remains a relevant indicator of economic welfare, but it is a highly incomplete one at best,' he said.
Bank of America Merrill Lynch economist Chua Hak Bin suggested a refinement - pegging to annual GDP per capita rather than GDP growth per se.
Meanwhile, human resource experts suggested pegging ministerial pay to job scope, similar to what is done in private sector companies.
Said one human resource consultant by way of example: 'Should the environment minister be paid the same as the minister of defence or finance?'
Economists, however, cast doubt on the wisdom of paying according to which ministry a minister helms.
Said Mr Kit: 'The idea will not be easy to implement in practice, because defining the proper key performance indicators (KPIs) for each ministry will be difficult. A poorly-defined set of KPIs is bound to lead to poorly designed policies.'
Sociologist and former Nominated MP Paulin Tay Straughan said the review announced by PM Lee fits within his previously stated notion of politicians being 'servant leaders', which implies that pay can never compensate for the sacrifices a leader makes in serving the country.
She added that the review committee will have to balance this principle with the need for 'fair compensation', so that capable people are not penalised too much for stepping forward.
[email protected]
[email protected]
