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Let Them Go

Entry 1455, on 2012-10-31 at 20:56:55 (Rating 4, Politics)

Wages and conditions for most people are deteriorating in real terms because we live in a time when there just isn't enough money to allow higher pay and better conditions. Surely no one would deny this because the depressed state of the global economy is just too obvious to ignore. So surely no one should complain about their life getting harder. It's just something we all have to endure to make things better again.

Well that's the argument used by a lot of people anyway. It's used by those who are making plenty despite the poor state of the economy and it's used by those who are doing badly but have entered a state of learned helplessness and genuinely believe that austerity is the solution for everyone.

Outrageous salaries have always been common for the top executives in the private sector of course. Even gross incompetents have been paid a small fortune, often many times what people in apparently far more responsible positions like the prime minister get, for doing nothing of any real value to society. In fact it often seems that the worse you are the more you are likely to get. Shut down branches, lay off workers, reduce the quality of products and services while maintaining profits and you are virtually guaranteed a great salary.

Now the heads of government departments seem to have joined in with the corruption. Many of them get paid far more than senior political leaders and again there seems to be no relationship between a person's morality and competence and their salary. The highest paid person in the public sector is the head of foreign affairs and trade, John Allan, who got up to $630,000 this year (a mere $40,000 more than last year.)

Allan is described this way on the MFAT web site: "...John is leading the Ministry through an unprecedented period of change. He has focused on developing a strong vision and direction for the Ministry that is designed to underpin New Zealand’s security and economic prosperity. A major programme called Ministry 20/20 is underway to create a more flexible and efficient organisation that is well placed to meet future requirements..." Of course this is just management speak for the following: "John is leading structural change to implement the government's ideology, having senior staff in open revolt, creating a dysfunctional organisation, shedding jobs, and cutting costs." Yeah that's worth $630K!

The argument often heard is that we need to offer high pay to get good people. I disagree. We have to offer higher pay to get greedy people, and that certainly seems to have worked well. I'm not saying that CEOs should be paid the same as cleaners (I have nothing against cleaners, I'm just saying that they're not paid very well) but I am saying that the right person will still want the job even if the salary isn't 20 times more than what the cleaner gets.

Another argument I hear is that top people are worth the money they get because if they weren't then the people paying them (the minister, board, shareholders, etc) wouldn't be prepared to give them that much. But that's really a circular argument: they get paid a lot because they're worth it and they're worth it because they get paid a lot. There's never any real performance evaluation in place, at least nothing that has any real validity.

The Green Party has called for a review of salaries of public sector CEOs, but obviously the National government will have nothing to do with it. Firstly it is against their ideology to interfere in that way, and secondly these are the people they count on to do their dirty work. How often has a government minister refused to be held accountable for the latest disaster in their ministry and referred the matter to the CEO instead?

Tim Hazledine, a professor of economics at the University of Auckland, says the knows of no evidence supporting the claim that these salaries have created superior performance in the organisations involved. He said "I can't yet prove that it hasn't, but I can tell you there is no convincing scientific evidence at all that the relatively weak economic performance of New Zealand and other English-speaking countries over the past quarter century would have been even worse without the bloat in management bureaucracies and explosion in rates of top pay."

New Zealand's dairy industry has been a notable success in the last year or two, but more recently we have heard the news that returns are likely to be reduced in the next year or two and many farmers could be forced off the land. When things were going well the CEO of Fonterra (which is often credited with the success of dairy) Andrew Ferrier was paid $100,000 a week. In one year he got a pay increase of $1.5 million and he was paid over $8 million when he left!

But how much did he really contribute to the success of our dairy industry? Not much I suspect because I don't see many people saying Fonterra is to blame for the approaching decrease in income. Oh no, that's the world economy that caused that problem. Well just maybe it was the world economy which caused the good times too? Would it really have mattered if Ferrier was there or not? I suspect not. He's really no better than a thief.

It's time to reduce income disparity. I don't mind certain people being paid more if they work long hours, have great responsibility, or work in a dangerous environment. But there needs to be some control over how high those salaries can get. And we shouldn't use high salaries to attract people to an important position. People should be prepared to do the job for a fair salary and if they don't like it we should just let them go.

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