Calculating MP’s Salaries

Egan Associates Founder and Chairman John Egan spoke to Julian Morrow from Radio National’s Drive Program about changes to Queensland MP salaries. This is a transcript of the interview, courtesy of the ABC. If you would like to listen to the interview, the audio file can be downloaded from the Radio National Drive site or listened to here.

Julian Morrow: It’s time to talk about an issue which is very close to our heart here in the studio: pay for unpopular public servants.

And I suppose the question that many people are asking in Queensland at the moment is whether public service is actually a self-serving career after controversial changes that were announced a little bit ham-fistedly earlier in the week revealed that the Queensland Premier Campbell Newman’s salary has risen by $120,000 to a mere $398,000 which puts him on par apparently with Barack Obama. So how much are politicians really worth and how exactly do you measure the very fraught issue about what our politicians should be paid?

A man who knows quite a bit about that is remuneration specialist John Egan. John was involved in working out the latest pay rise for backbench Federal MPs back in 2011 and he joins us on the line now. Good evening John.

John Egan: Good evening Julian.

Julian Morrow: Is there any science to setting remuneration for public figures or is it a question of how much you can get away with?

John Egan: I think you can approach it quite systematically. One of the things that is important is to understand what’s expected of a backbencher. And I think each of the parliaments would be slightly different based upon the needs of their constituents and the scale of the business that is under the stewardship of state parliament.

Julian Morrow: So things like the size of the budget you would say is a relevant factor to what the business the Premier’s managing, if you like, compared to the Prime Minister. How do you actually settle upon the figures? Are there calculations involved or is it a kind of comparative process?

John Egan: It’s really a comparative process. What was done in relation to trying to understand the role of the federal backbencher is that members of the Commonwealth Tribunal and myself interviewed a number of backbenchers, interviewed the majority of the independents, interviewed representatives of all parties, interviewed members of remote and substantial electorates – some of which were in Queensland and Western Australia – those that represented metropolitan electorates, those that had special needs of their constituents – which might be immigration related, might be small business related, or social services related – to get a sense of while the task they had to face in their constituency was different, was it so different or was it just the focus was different?

Then we explored the role that a backbencher played in parliament itself, in the legislation, in the debate, in the sort of research they were required to undertake, the role they had in House Standing Committees or in Senate Committees, what the nature of that work was, how much time it took up, what skills they needed to fulfil that type of role. We then undertook an assessment of the work value of that task and we compared it with other positions in part representative of where these backbenchers had come from in an earlier career and formed a view.

Julian Morrow: I suppose that raises the direct question – you obviously looked into this – Do you have a sense of whether Queensland MPs generally are underpaid and whether the increases that were announced earlier this week are actually fair and reasonable?

John Egan: I think on face value I would say their prior pay of $137,000 is a bit light on in relation to what their accountabilities are. They’re sharing accountability for a state with a budget of $50 billion and with significant challenges not the least of which is a deficit, and increasing expectations from the constituency that either the Commonwealth or the State will look after the needs of the population of Queensland.

Julian Morrow: So you think there’s case for a bit of an increase there?

John Egan: I think there is.

Julian Morrow: What about the Premier? Is the Queensland Premier worth the same annual salary as Barack Obama and Kevin Rudd?

John Egan: Well certainly I can’t speak for Barack Obama because I haven’t really looked at that, but on face value you’d say no. On his previous salary of around $280,000, for someone oversighting a $50 billion dollar budget with all its complexities and the physical scale of the state, that’s a modest stipend.

I suppose in part, and this is not the sole governing influence that I would take into account, but the Prime Minister is oversighting a budget with revenues and expenditure, a lot of which is distributed by way of appropriations, of more than six times the state of Queensland. So it’s in excess of $300 billion.

Julian Morrow: I can’t resist thinking that not only looking after that amount of the economy but having to deal with the Labor backbench, you probably can’t put a price on that. I suppose the question arises though, is it actually appropriate to compare what you would earn in the private sector, when the whole purpose of entering politics is public service and presumably it’s not about the salary?

John Egan: Well the view I’ve taken in addressing these sorts of questions for not only parliamentarians but also senior public servants is that they’re not payed competitively in relation to their private counterparts. Their accountability is different in nature but still quite significant.

The view that was taken in relation to federal parliamentarians was that it would be a desirable outcome if the reward was pitched well below the market average, but somewhere in the second quartile, you know less than where 50% of people are paid, but around where 25% of people are paid, which seems reasonable in order to attract people. People aren’t going to enter a parliamentary career to maximise their personal wealth. There are a whole series of other motives, not the least of which would be to make a public contribution, to serve a party where they have absolute alignment with the ideology of that party, to potentially have the opportunity after service in the parliament to assume a role as a minister and so on. So there are many other motivations other than money. I don’t think anyone would enter parliament to maximise their earnings. Although in the federal study, there would have been some Members of Parliament, generally long serving, that were working in areas where income opportunities, particularly in government, were modest. So if you were a nurse or a school teacher, a parliamentary salary is pretty attractive.

Julian Morrow: Indeed. It’s obviously a very fraught area and you can never win the PR battle I suppose associated with increasing remuneration for parliamentarians and politicians but John Egan obviously you’re doing your best to lay a very clear and precise rule over it and you might be having a bit of work up in Queensland sometime soon as it sounds like it. Thank you for joining us on Friday Drive.

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