Politicians Pay: A fair salary determining mechanism
Politicians are some of the only employees who can set their own terms and conditions of employment at will without having to bargain with their employers.
Recently, due to the recent federal politician pay-freeze ruling last month, the issue of politicians pay has arisen once again. This has lead to various internet comments and proposals on the subject. What I outline in this article is an alternative mechanism for fairly determining the salary of a politician. This simple mechanism is based on the price determining principles found throughout society. This idea it is not new…I first heard from a work colleague over ten years ago and I guess it has been proposed elsewhere before then as well.
At election time, politicians offer to supply their skills to perform the job of representing the constituents of an electorate in parliament and we the public accept or reject their offers by voting. This process of offer and acceptance means that the relation between the voters and the winning politicians should be viewed as a contract between the public as an employer and the politicians as employees. However, as in stands at the moment, the crucial difference between a politician’s employment contract and what we, the rest of society, have is that for them the amount paid for the work is completely determined by they themselves (the employee) whereas for a normal employment contract it is negotiated between the parties involved (the employee and employer). Normally this negotiation is either performed directly between employer and employee or between an employee’s appointed representative such as a union and the employer. Politicians are some of the only employees who can set their own terms and conditions of employment at will without having to bargain with their employers – their employers being us, the voting public.
A simple solution to remedy this discrepancy is to have printed on the ballot-paper at election time, right next to their name, the total salary figure that they offer to do the job. Each politician sets their own individual bid. This binding bid is the TOTAL remuneration they receive- it includes their salary, super and any other monetary entitlements. The bids tendered by the politicians are to be subjected to the same anti-competitive laws regarding price-fixing and collusion as like any dealing. In this way the politicians within an electorate are now competitively bidding against each other. This solution determines a politician’s salary according to a pricing mechanism common to almost all transactions where goods and services are exchanged in our economy. Politicians would now be paid according to a fair market pricing system. A voter is now given the power to choose their preferred offer according to the type, quality and cost of the skills provided. This is the simplest, cheapest and easiest system to implement that provides a mechanism of negotiation between the politicians and the public.
Since as a society we support the principal of a minimum wage to maintain living standards the above proposal should be just slightly modified to embrace this. Therefore the above mechanism should have an additional constraint that the bids provided should be above a set minimum. We could, for example, make the minimum the equivalent to a multiple of the minimum wage over a year. Or perhaps, to provide extra incentive for politicians to increase the financial well being of the majority, base it on the median individual Australian income. (This last suggested minimum specifically uses median and not average income since it is meant to be an incentive to increase the income of the majority. ie, it uses the half way mark- 50% of the population earn less and 50% earn more).
It should be pointed out that under this system it is possible for politicians to be paid a more than what they are getting paid now. This is expected to happen, because if an individual politician is worth it in the eyes of their constituents, then their constituents will be willing pay good money for them. It is also possible for some to be paid less. However, since in this case all the politician’s salaries have been determined by the same mechanism and this mechanism is similar in overall function to how almost all other wages and salaries in society are calculated they have no grounds to complain.
It is possible for this mechanism to be applied more generally in society. For example, it can be applied to the private sector to determine a stock-exchange listed company’s CEO pay. In this case the company provides two or more CEO candidates who then bid against each other in an election where the shareholders vote for their preferred CEO. Perhaps we could also apply it to other positions in government, such as the salary of the Governor-General (However, I suspect that in this particular case it may in fact be unconstitutional so cannot be easily implemented).
In conclusion, due to the fact that this proposal encapsulates the most common price determining mechanism prevalent in our society any salary determined by it can only be viewed as a fair.
Douglascomms
June 16, 2009 at 5:44 am
a tender system for pollies
There are some interesting ideas here Quagga – it looks to me as though you are suggesting introducing a tender mechanism into the voting process.
There are a couple of issues I'd like to raise however – price and value are two very different factors – how would you go about determining the difference between the price offered by a particular candidate and the value of the job they are likely to perform. I suspect there would be a tendancy for incumbent politicians to gradually reduce rather than increase their wages in order to maintain power – and this may result in an increase risk of corruption as they attempt to gain that income from other sources.
I would like to take your idea and turn it around slightly – to introduce an external researcher into the process who hands out assessments of the individual politicians based on background/experience and policy. This rating could then be expressed in five marks out of ten covering areas like investment, governance, infrastructure, welfare etc and providing a suggested salary.
Like a "Choice" magazine guide to the candidates – that would come in very handy!
JV Douglas –
ndibs
June 19, 2009 at 3:33 am
Tendering Polies
Last week we saw a Senator in Parliament who obviously couldn't even afford childcare and whose activities continue to waste parliamentary time! I know – I know, waste and wasting time is what we primarily pay them to do, anyway!
Given all that, if the polies did find themselves a bit short, there's always a lobbyist or two who can top them up with the odd free ute or overseas holiday (fact finding tour), etc.
The tender bit would also need to be electorate focussed and therefore the guys in the bush who were a bit cash strapped may have difficulty funding anyone at all.
What about a minimum salary and a performance bonus voted on by the shareholders at the end of term election. This way if they represented us well, it would be appropriate to reward them. On the other hand if they just filled in or wasted time……. zilch.