Comment permalink

The latest manoeuvring in the saga of members of Parliament pay is again going to conclude in pay rises above those of most other New Zealanders. Once more, MPs will be criticised, and the efforts of the Greens to rein in salaries will be thwarted.

The last apparently bright idea, in 2015, was to tie MP percentage increases to that of the public sector. This took the decision out of the hands of the Remuneration Authority, which had been generous over the years. It seemed on the surface a reasonable answer.

But the public sector has been receiving hefty increases, well ahead - on average - of those in private industries. It would seem the Government and those acting on its behalf can be more generous with taxpayers' money than companies can be with shareholder profits.

Public servants in an earlier era might have work-swapped security for lower pay. It has not been that way for a long time and state pay and benefits increased. That is part of the reason Wellington residents have the highest average incomes for New Zealand cities, including the major business centre, Auckland.

Linking ministerial and MP increases to public service rises hardly gave politicians an incentive to be tight with the purse strings, although the effect of this self-interest might be minor.

Prime Minister John Key has been displeased by what was awarded by the ''independent'' Remuneration Authority, and his 2015 alternative also failed.

Current leader Jacinda Ardern, embarrassed by the size of the latest increase, is returning decision-making power to the Remuneration Authority. Her present freeze will not work because it will, almost inevitably, be followed by a huge ''catch-up''.

An issue here is that the Remuneration Authority itself is part of our governing and executive elite. This class, inevitably, comes from the same type of background, and it will have a high opinion of its own importance and value.

It would not, in fact, be in the personal interests of Remuneration Authority members, themselves paid by the taxpayer, to screw down the salaries of the likes of judges, local politicians and MPs.

More significantly, the way the justification lens operates encourages leapfrogging. The authority, like other organisations and companies which compare salaries, will focus on particular industries, individuals or groups.

The emphasis, inevitably, will be on the demands they face. Every position or occupation has its challenges, and these are highlighted whenever wage and salary increases are reviewed or sought. It might be the long or unsocial hours, the risks, the qualifications required, the impact on others, the shortage in the profession, the responsibilities, the isolated nature of the work, the safety of the public, the need for gender equity or whatever. Arguments can, and are, always be mounted on why pay needs to be higher.

Benchmarking soon becomes leapfrogging, even if the jumps are small. This has been notable among executives, in the professions and for directors. Surely, for example, the directors of XYZ company should be paid at least that of another company. Take your pick on criteria: turnover, staff numbers, exposure to competition.

This is a worldwide issue which has led to executive pay, including for MPs who are compared with them, leapfrogging ahead of the earnings of most workers.

Other options have their own issues. If a percentage rise is tied to the median wage, MPs get much more in dollar terms because they start from a much higher base. Match inflation rates and MPs would have missed out on what others receive.

Economic conditions were introduced by Mr Key as an element to be considered by the Remuneration Authority. But they have been strong since the Global Financial Crisis.

MPs are politicians who should be answerable to the public. They need to take responsibility for their increases, and they need to find a way to do that.