The Great “Pay Drop”

The Ee Commission has finally released its report on Ministers’ Salaries, with “substantial pay cuts” of up to 33-37% for the Prime Minister and his cabinet promised (see here: http://reviewcommittee2011.files.wordpress.com/2011/12/salaries-for-a-capable-and-committed-govt.pdf). The President is the heaviest hit, with a recommended cut of 51% to his S$3 million dollar salary. Unsurprisingly, Lee Hsien Loong has stated that his government will accept the recommendations of the commissions. Cool? All in all, salaries remain higher than those in the rest of the developed world. We have had the record for 17 years and we’re still keeping it.

 

A couple of points worth noting from the commission’s findings:

 

1. With skillful manipulation, the commission has sold the recommended pay cuts as “substantial” and “the biggest cut since 1994″. According to the recomendationst the PM’s pay will fall from S$3.3 million to $2.2 million. Ministers will take home 37% less – a cool S$1.1 million on average when the rate is applied. Nevertheless, the media and the commission has failed to point out that despite the drop, cabinet salaries remain higher than those set between 1995 -2007. Ministers are paid around the same as pre-2007 levels, while the PM will still earn more than what he received pre-2007. The language used to sell the cut sounds just like a supermarket’s advertised “Price Drop” (ie. you raise the price of an item – say $0.90 to $1.50 for a period of a year or so, and bring it back down to $1.10 during Christmas and advertise that as a price drop). In order to put things into perspective, here’s a NYT article on the salary rise in 2007 (http://www.nytimes.com/2007/04/09/world/asia/09iht-sing.3.5200498.html). Sneaky, no? But to the untrained eye, it does seem “substantial”.

 

2. The commission maintains the PAP’s oft said idiom that Singapore lacks competent and credible leaders – the fundamental reason as to why there is a “clean wage structure”. Therefore a wage drop has to be mindful of these factors. Borrowing examples from foreign countries had been rejected outright with the excuse that Singapore’s environment is “special” and the circumstances are “different”. The commission “gave considerable attention” to pegging salaries to the median income of Singaporeans, but ultimately it was not considered because of the “complexity of setting the right multiplier”. Argubly, the influence of the current elites on the commission’s report remains strong and salaries are still elite driven. The driving force behind retaining the current million dollar pay levels after the GE is probably the fear that the PAP cannot attract, in their narrrow lenses, the “best and the brightest” to come forward in the next general election if the pay cut was heavily substantial. This is probably expected at a time when the PAP’s dominance is slowly eroding. The commission bills the recommendation as “appropiate and relevant”, but it is hardly so as regime survivial trumps reason.

 

3. The formula to determine pay has changed, but the fundamentals remain. Pay will most likely be pegged to 60% of the median income of the top 1000 income earners in Singapore. Big change? Hardly. The previous formula pegged the base salaries to the top income earners anyway. In this case, the commission has just recommended buying a slightly larger basket to judge final income – but not by much. Office holders can still, in practice, ignore the various indicators for bonuses, so long as they keep growing the economy in a trickle-down fashion in order to receive their base salary. The commission could have made a more substantial change to the fundamentals by forcing the various socio-economic indicators into the base salary wage model (though this would not by any means reduce salaries by much), in order to make the ministers respond better to the actual realities on the ground. Nevertheless, the formula is still left wanting as it hardly moves away from supposed interests of our leaders and the economic elite here – it is still in many ways crafted for the eventual benefit of the few, rather than of the many.

 

4. Notice that the commission has rejected the recommendations of the SDP and the NSP in their report without naming them. The SDP’s recommendation (which i had helped to craft some time back) point to an independent commission for wage setting, setting of pay to the median income as well as to that of an MP, pushing for allowances, and moving the CPIB away from the PM as recommendations for ethical public salaries (see http://yoursdp.org/files/ethical-salaries.pdf). The NSP’s Ong Wee Min had called for salaries to be based on performance components rather than linking it to GDP (see http://theonlinecitizen.com/2011/12/if-you-pay-peanuts-monkeys-ministers-really/). Pegging the salaries to performance indicators can be considered while pay is set at the median income – they are not mutually exclusive and can be worked on by interested parties to produce stronger recommendations. The role of an independent CPIB will be to keep an eye on corruption and expenses of officials in the public service, even the ones at the very top. This would have instituted a proper check and balance mechanism but was sadly not mentioned in the Ee report. Nevertheless, what the Ee report has correctly done is to remove the pension scheme – millions won’t be drained from the budget in order to reward retired ministers.

 

5. The biggest takeaway from the report is that salaries are not and probably will not be set independently for some time. While Lee Hsien Loong and Gerard Ee may be right to say that the commission’s report was done in a professional way, there was certainly a problem with independence when the latter has to consult with the former in order to have the report done on time. Furthermore, as Alex Au had pointed out back in May, the commission consisted of major figures in the public and private sectors but lacked the input of political scientists. Major commissions of this kind not only have to be independent in order to take all views seriously, but should be composed of a variety of experts in more areas. Sadly, this is the biggest drawbacks of the Ee commission – a hastily assembled PR exercise that has hardly produced anything substantial. The worse formula has been assessed, tweaked a little and kept, in order to favour the people who were seeking a palatable answer. Would the current government acceed to a permanent commission (or body) to set the salaries, rather than hastily assembled crew of the country’s top talent, when times are said to be worse in the near future? Your guess is as good as mine.

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