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If You Pay Politicians Peanuts, You Will End Up With Monkeys

11/06/2013 05:35 EST | Updated 11/06/2013 05:36 EST

There's nothing that excites political pundits quite as much as a good old fashioned scandal. From the Pacific Scandal that lead to the resignation of Prime Minister John A. MacDonald, to Bev Oda's $16 orange juice, and Justin Trudeau's $20,000 speaking fees, journalists have never been short of political gossip. Minor scandals make for good water cooler discussions, but they distract from important policy discussions.

I'd venture to say that most politically informed citizens can name more recent scandals than pieces of legislation. After all, that's all anyone from the Ottawa bubble has been talking about for months. Perhaps the only thing that stirs more outrage is pay increases for politicians. Unlike political scandals, the blow-back against raises for politicians isn't merely a distraction, but it is counterproductive. If we want good public policy, we need to lure high quality candidates into politics. In order to do so, we need to pay politicians competitive salaries. It's a small price to pay for governing a nearly $300 billion organization that touches every aspect of our lives.

It's easy to understand why people get upset when politicians get raises, especially during bad economic times. After all, federal MPs earn more than twice the median household income, and frequently behave only slightly less poorly than adolescent chimpanzees. However, one might argue that we're getting exactly what we pay for. After all, most people with the skill sets required to be effective federal cabinet ministers earn much more money in the private sector, and don't have to worry about intense public scrutiny, let alone winning elections. Hence, we get more career political operatives than CEOs of large corporations or non-profit organizations seeking public office.

Worse still, we get gaggles of lawyers, whose economic prospects are likely better after -- but not during -- serving a term or two in office. As much as we'd like to expect Canada's best and brightest policy minds to dedicate their careers to public service, it is a stretch to expect young professionals to risk their families personal finances in order to spend months or years auditioning for jobs that are quite difficult and expensive to obtain, and which lead to intense scrutiny of their public lives. The risk premium will have to be high if we're going to attract the type of people who can effectively manage multi-billion dollar departments.

A newly released Frontier Centre backgrounder raked through the literature on the effects of compensation levels on various outcomes. It turns out that there is research that suggests paying more leads to better candidates. Studies from Italy, Finland, and Brazil found that higher salaries for municipal politicians lead to more educated candidates. The evidence from Italy also found that higher pay lead to lower taxes and tariffs. A study of U.S. state governors found that governors tend to earn a salary premium of 4.5 per cent for every 10 per cent increase in the state's per capita income. At the extreme, Singapore's Prime Minister earns $1.7 million (US), and cabinet ministers earn $1.1 million annually. Though the author has not located studies on the effects, it is hard to ignore the miraculous performance of the small city state, which went from third world country to one of the most dynamic urban economies on earth in a matter of decades.

While the evidence is not air tight, it is very encouraging. It also meshes with common sense. If you want to lure candidates who could be effective cabinet ministers, you have to entice them with large salaries. As former Singapore Prime Minister Lee Kwan Yew says about politicians salaries, "If you pay peanuts, you will end up with monkeys." Watching Question Period nowadays, it's not hard to agree.

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