Elected Officials Get Paid Too Little To Do Too Much

Commentary, Public Sector, Frontier Centre

The cachet of holding elected office has been fading for years.

In years past, electoral success used to confer prestige on the winner. No more. The recent firestorm around Human Resources Minister Jane Stewart has diminished the stature of political life further. On top of the risk of being crucified like Stewart, low pay, long hours, uncertain tenure and a hopelessly convoluted job description within our Byzantine governance model guarantee that the talent pool in Canadian politics will continue to shrink. We live in an increasingly complex world that demands new public policy ideas. Where will we find the independent thinkers, leaders and visionaries to provide them? How do we get the best people in public life?

Answer: Pay them more, let them work smarter and let them work less. The challenge requires that we redefine both the role of the state and the role of ministers within it. Should governments be in the business of job creation? Should ministers be involved in the administrative minutiae of behemoths like the $60 billion Human Resources Department? Should we pay them paltry salaries for long hours of tedious, meaningless work?

Not if you want to attract top talent.

Governments in Canada operate very differently from businesses. In the private sector, when millions of dollars are poured into a project that does not meet its stated goals, the project is usually dropped and the judgement of those who pushed it is reassessed. Without unlimited resources, businesses are obliged to pay attention to outcomes. Failure signals a return to the drawing board. But in public sector programs, overseen by administrators with little or no business acumen, results are less important than intentions. Over time, this leads to a massive build-up of well-intentioned spending programs where little is measured, traditions of in-house delivery take precedence over more efficient alternatives and politicians are immersed in irrelevant operational details, like who gets which grants.

A result of our desire to have our governments lend absolutely everyone a helping hand is that Canadian governments have filled nooks and crannies of life that would best have been left to the individual and the community. The welfare state, composed of public sector monopolies in health care, education, pensions and social services, has not yielded the results originally expected. The same dynamic of failure is evident in political efforts to boost economic growth and employment through handouts. Instead of developing an attractive investment environment through competitive taxation and high-quality public services, governments have unintentionally ended up destroying real jobs by draining purchasing power and investment capital from the economy through unnecessary taxation.

To restore the attractiveness of political life, the roles of the politicians and bureaucrats must be clarified and separated. An appropriate analogy is the large modern corporation. Its directors never get involved in administration; it’s simply not their job. Their role is to define the organization’s mission and vision and to articulate the outcomes they expect managers to deliver. In the business world, the goal is to maximize profits by creating the most desired product at the lowest possible cost.

Other countries have reformed their public institutions to provide the best outcomes at the least possible cost. Unsurprisingly, these systems attract the best people. What draws them in is freedom from the kind of administrative torpor and politicization that drag down the quality and quantity of public services in Canada.

Many view Singapore as a highly restrictive city-state obsessed with regulating individual behaviour, as reflected in amusing bans on chewing gum and fines for failing to flush toilets in public washrooms. This silliness, however, should not blind us to the benefits Singapore has derived from adopting cutting-edge thinking in government management of the economy and social programs. The results show. A few decades ago, Singapore was an impoverished, swampy backwater. Today it is an ultra-modern technopolis that combines the world’s highest living standards with superior education and health care.

Two things stand out. First, as in any highly effective corporation, the role of Singapore’s cabinet ministers has been limited to formulating overall policy direction. Personally managing or delivering services is understood to be outside their bailiwick. The main thrust of health-care policy, for example, ensures that citizens have the means to buy prompt, high-quality treatment. Singaporean politicians would never dream of trying to run a “free” hospital monopoly like their Canadian counterparts.

They have, instead, constructed a system that minimizes direct government involvement while maximizing outcomes. Depending on their age, all citizens are required to put 6-8% of their incomes into a Medisave account from which they can withdraw only to pay healthcare expenses. A low-cost catastrophic illness insurance plan called MediShield is paid with premiums drawn from Medisave. The third element in the mix is Medifund, an endowment fund set up by the government to help low-income Singaporeans with their medical bills. Eighty percent of the health-care system is privately owned and operated. There are no line-ups. Only 2.7% of GDP is spent on health care, yet average life expectancy is 77 years.

Taxes are low. After sizeable deductions, residents pay only 5.25% on the first $S 90,000 of income ($Cdn 76,000). The size of the government sector is roughly a third of Canada’s. Singapore’s per capita incomes, having surpassed ours several years ago, are among the highest in the world. Low taxes, superior public services and high levels of personal savings generated by the island-state’s consumer-controlled pension system have supercharged economic growth.

The second twist from Singapore is that the country pays market rates to attract top-quality people into public life. A cabinet minister is paid about the equivalent of $536,000 a year, compared with the $140,000 his counterpart earns here. Provincial Cabinet Ministers earn between Ontario’s $111,000 per year and Manitoba’s embarrassing $88,000 per year for trying to involve themselves in the soup-to-nuts of department policy-making and operations. Low performance outcomes, in this context, should surprise no one.

Jurisdiction Average cabinet salary* As a % of Singapore’s
Singapore $536,410 N/A
Canada (federal) $140,000 26.1%
Newfoundland $98,000 18.3%
Nova Scotia $83,606 15.6%
New Brunswick $101,319 18.9%
PEI $89,790 16.7%
Québec $106,505 19.9%
Ontario $111,004 20.7%
Manitoba $88,212 16.4%
Saskatchewan $98,484 18.4%
Alberta $107,118 20.0%
BC $108,900 20.3%

*includes base salary, minister salary and expense allowances. Source: Singapore Government, various legislative assemblies.

We can learn from places like Singapore. We need to separate our elected leaders from the delivery of complex public services and pay them much more. This would eliminate the drudgework that produces so little for the expenditure of so much. It would mean a full-scale overhaul of our public sector: a much smaller direct delivery role for government plus the end of the central agencies that micro-manage all aspects of operations. But the advantage of this high-performance model, besides room for generous tax cuts and better, more cost-effective services, would be a truly challenging and enriching work environment that would attract more talented people into political life.

The Canadian public is not willing to pay politicians half a million dollars a year. As a compromise, we could dramatically reduce the workload of cabinet ministers by letting them function like members of a board of directors in a successful corporation. Relieved of the burden of being involved in operations, they would be able to reduce their direct workload 80%. This reform, even at present salary levels, would make politics a more competitive option for our best and brightest.