Commentary: To discuss ministerial salary increases, we need to start by being clear about opportunity costs
When too few capable leaders come forward, what Singapore loses in the long run cannot be easily remedied after the fact, says Christopher Gee from the Institute of Policy Studies.
File photo of the Parliament House, Singapore (Photo: CNA/Jeremy Long)
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SINGAPORE: Economists measure the true cost of a decision not by the price attached to it, but by the next best alternative given up to make it.
That idea, opportunity cost, is the term Prime Minister Lawrence Wong and Coordinating Minister for Public Services Chan Chun Sing both reached for in Parliament on Tuesday (Sep 8), explaining why ministerial salaries needed updating after 15 years without an adjustment.
Both used it to describe what a capable person gives up by choosing political office over whatever else they might have done with their working life.
The numbers show how much larger that forgone alternative has grown since 2011. A minister at the lowest MR4 grade with the current reference salary of S$1.1 million will receive about S$1.2 million, after the one-off adjustment of up to 9 per cent. But by my calculation, that adjusted salary is worth 14.5 per cent less than the original S$1.1 million once deflated back to 2011 prices using the Consumer Price Index.
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Over the same period, median Singaporean wage from employment grew by roughly 39 per cent in real terms, based on Ministry of Manpower data. Whatever a capable Singaporean weighed against political office in 2011, they are weighing something considerably heavier now.
THE INDIVIDUAL’S OPPORTUNITY COST
Mr Wong gave this side of the calculation an unusually concrete airing. Three of his most senior ministers, holding the trade and industry, home affairs and foreign affairs portfolios, will all be past age 70 by the next term of government.
He described approaching several senior civil servants and private sector chief executives to join his team, none of whom accepted. He was careful to add that none of them told him pay was the reason, and that he would not want a candidate whose decision turned mainly on money.
Mr Chan put the going rate for chief executives of major companies at S$6 million to S$7 million a year, several times more than the revised MR4 benchmark of S$1.8 million.
The framework has always tried to manage this gap through a benchmark referenced against the median annual income of the top 1,000 Singaporean earners. There is then a discount of 40 per cent for what the government calls the ethos of political service or of commitment, one of the three principles of calibre, commitment and clean, that the 2012 and 2017 review committees affirmed and that the most recent committee has affirmed once more.
Mr Chan’s figures show that it is the freeze, not the discount, that has opened the gap. Spread across the 15 years it took to arrive, the move to the S$1.8 million benchmark works out to about 3.6 per cent a year, below the 4.3 per cent that median wages grew over the same period.
The adjustment narrows that gap without closing it. Yet, a seven-figure salary is hard to sympathise with under any circumstances.
It is harder still against a backdrop of job and wage uncertainty that has left many feeling less secure in their own jobs than they did a decade or two ago.
That discomfort is not unreasonable, even when the underlying numbers hold up, and no part of the arguments here depends on anyone feeling sorry for a minister’s pay packet.
THE COUNTRY’S OPPORTUNITY COST
Both ministerial statements made the country’s case at length. Mr Wong argued that weak political leadership eventually erodes civil service beneath it, and that Singapore needs depth in the pipeline because not everyone brought in will grow into the top roles.
What neither did was put a number on it. Opportunity cost appeared three times across the two speeches, and described what an individual forgoes – not what the country forgoes when it cannot persuade enough of them to come forward.
That second calculation is harder to state because it will show up as an absence rather than a number: If capable people declined and could not be replaced by anyone of comparable profile. Or if a Cabinet is ageing out of its most demanding portfolios without a deep enough bench to hand them to.
The prime minister’s own account of the looming succession challenges at the three key ministries is evidence for this side of the calculation too, even though he did not describe it in those terms. Fifteen years of foregone recruitment into political office accumulate into an unseen cost.
A WELL-BEING TARGET FOR POLITICAL SALARIES
So if such salary adjustments are crucial to address these opportunity costs but are hard to swallow for the public, perhaps what is also needed is to tie the salary framework even more directly to Singaporeans’ well-being.
One recommendation from the review committee’s report deserves more attention. The committee suggested, and the government has agreed to explore, adding a quality-of-life measure, its term for what amounts to a measure of national well-being, to the National Bonus.
The National Bonus is a variable component of political salaries that is dependent on meeting four socioeconomic indicators. It is tied to unemployment, real income growth of the lowest 20th percentile and average Singaporean, and GDP growth rather than to any market benchmark.
Adding a quality-of-life measure, once a robust one can be developed, would tie a minister’s own financial outcome to a broader account of how the country is actually doing. It would be closer to the spirit of the pledge recited in Singapore classrooms every school day, that a democratic society built on justice and equality exists to achieve happiness, prosperity and progress for the nation, than to any figure drawn from a purely commercial perspective.
That is a different kind of accountability from the one built into the fixed component of the salary, and it is the part of the report worth more of Parliament’s time on than the headline adjustment.
Mr Wong’s own framing anticipates part of this argument. “Restraint cannot become neglect,” he said, though he applied the line only to the individual side of the calculation. The fix to that side has now been announced: The one-off adjustment and the widened salary range reduce what a capable person has to give up in order to serve.
Whether that is enough depends on the calculation nobody put a number to. Singapore’s harder problem is not filling one Cabinet at a time but building, over years and across several election cycles, a bench deep enough that capable and committed successors are ready for every demanding portfolio well before a transition becomes necessary.
Depth of that kind cannot be assembled after the fact once it turns out to be missing, and guarding against it is now the actual purpose of the five-year review cycle to which the government has now committed. That undertaking is worth little if restraint is allowed to lapse into neglect again before the next review falls due.
Christopher Gee is deputy director (research) and senior research fellow at the Institute of Policy Studies, National University of Singapore.
Source: CNA/ch
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