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Are They Worth It?

Entry 894, on 2008-11-20 at 22:10:55 (Rating 2, Politics)

Today it was announced that our politicians will all receive substantial salary increases of around 5%. This would take the salary of our new prime minister, John Key, to around NZ$400,000. We seem to be heading into a difficult period of recession so is it justifiable to spend more on people who are already well paid? Many people might say no, but the consensus at the Herald web site was that the salaries are reasonable and 12% thought they should be paid more!

If you just look at the numbers and the responsibility involved you could make a case that our government are worth a lot more. The prime minister is responsible for the total population of the country and its total budget. This is a much greater responsibility that than most private company directors but how do the respective salaries compare?

I will give my favourite CEO as an example. Actually this person is an ex-CEO and a gross incompetent but she was in change of New Zealand's biggest company. I'm talking about the previous CEO of Telecom, Theresa Gattung, of course, who was paid $3 million dollars a year. So she was paid almost 10 times what the prime minister was, she was in charge of a far less critical organisation with far less people involved and a smaller budget, plus she made a total hash of the job! Of course two wrongs don't make a right. Just because corporate leaders get huge salaries doesn't mean politicians should too.

What about other world leaders? George Bush, the US president was paid a salary of NZ$728,000. He was in charge of a country of 100 times the population and with a far greater budget and military responsibility than New Zealand. So being only paid twice as much doesn't seem equitable.

Kevin Rudd, the Australian prime minister is paid NZ$388,000 - about the same as Key - but he's in charge of a significantly bigger country. Again it looks like our PM is being paid a bit on the high side.

What about entertainers and sports people? Baseball player, Alex Rodriguez, seems to have contracts totalling well over half a billion dollars. Can this be justified on his responsibility, number of dependent staff, or anything else that makes any sense at all? Of course not. No doubt he's a brilliant player but being paid that sort of money is obscene.

Many people will say we need to offer good pay or we won't get good people wanting to do the job. This idea has some merit but I think if the only reason someone does a job is for the money then there's something fundamentally wrong and that person might be tempted to other jobs with even better money.

Its important that the prime minister is paid reasonably well because everyone should be able to do the job, not just those who are already rich. On the other hand it only seems to be rich people who ever get to be leaders anyway so perhaps that is more a theoretical than a real factor.

On balance, I don't think the salaries New Zealand politicians are paid is really too much. They do have some accountability - just look at the attrition rate of leaders! And they do have a lot of responsibility, so fair enough give them the money. Now is there any way we can get a refund from Gattung?

Comment 1 (1809) by SBFL on 2008-11-23 at 07:45:56:

Useful background info from NZ Herald (20-11-08): "The annual pay increase awarded to members of Parliament was made public this afternoon after being decided by the independent and low-profile Remuneration Authority.

MPs do not decide their own pay, but the issue has often been controversial - particularly in 2005, when the authority decided to correct "slippage" in the rates and gave Helen Clark a 9.4 per cent rise.

In deciding how much the politicians will be paid, the authority takes into account pay rises in the public service and the judiciary, and also looks at private sector rates."

and

"Mr Key is a multimillionaire after a career in the financial world and gives most of his political salary to charities. He has said he intends to continue doing that with the bigger pay packet."

Some other points:
- "New Zealand's biggest company [Telecom]" - I thought it was Fonterra..?
- "Theresa Gattung, of course, who was paid $3 million dollars a year."...$2.8m I believe...I might appear pedantic here but I am sure you see that $200K difference as a big salary in itself!
- "He was in charge of a country of 100 times the population and with a far greater budget and military responsibility than New Zealand. So being only paid twice as much doesn't seem equitable." Why do you use these parameters to scale the income? They both spend that same amount of time in the job. We get paid for our time don't we, not the size of our kingdom? Unions wouldn't be too impressed with your approach here.

Comment 2 (1810) by OJB on 2008-11-23 at 20:00:29:

The article you quote was the source for most of what I said, but thanks for listing those highlights. I should have mentioned Key was going to give away his salary (definite points to him there) but it doesn't really make any difference to the bigger topic.

At the time Telecom was New Zealand's biggest company. It still is by some measures. Either way it doesn't matter, I could have made a similar argument based on the Fonterra CEO's pay.

Gattung's pay was complicated by bonuses (for what?) and various other perks. The $3 million was a reasonable approximation, I thought.

No, we don't get paid for our time, we get paid for what we do. Making decisions affecting the lives of the whole world (like George Bush did) is worth more than making decisions which affect a much smaller number of people, surely?

Why would I care what unions thought? I definitely don't think everyone should be paid the same. The problem is that many systems which decide pay based on other factors are unfair or biased, so what really is a fair system?

Comment 3 (1812) by SBFL on 2008-12-06 at 18:22:51:

"No, we don't get paid for our time, we get paid for what we do. Making decisions affecting the lives of the whole world (like George Bush did) is worth more than making decisions which affect a much smaller number of people, surely?

Actually it based on both plus many others parameters. Yes size of responsibility is much different but you know that remuneration is never based on that alone. That would be insane and unfair. Other parameters include time, which for all intents and purposes is equal among all jobs (as there is a limit to the number of hours in a week). There is also skills and abilities, competence attained, qualifications needed, and market rates, amongst others. So in summary I feel it is unfair to compare leaders salaries on the population size only.

Comment 4 (1814) by OJB on 2008-12-06 at 22:28:18:

Yeah sure, I agree. Pay rates are based on many factors, many of which are completely arbitrary and unfair. I don't think I reached any firm conclusion on whether the NZ PM is paid too much or too little (actually I think I said it was OK). The only thing I would say is that most top CEOs in the private sector aren't worth what they are paid!

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