Expected Career Income Hypothesis
If you feel that many of the arguments about public sector pay have been reused and rehashed, this post can hopefully offer an antidote. One of the recurring themes in many posts concerns the issue of moral authority. KTM (and many others) basically argued that the increase in pay would cause office holders to lose moral authority and many readers undoubtedly would agree. It is not that I disagree that there might be a moral dimension to the issue but as an economist, I am naturally circumspect about framing a political economy problem, which the pay hike essentially is, around morality and ethics*. This is not an issue about life and death. Consider therefore an alternative perspective.
Diminishing Outside Option
Preventing the loss of senior public service talent to the private sector is one of the key arguments put forward to justify the pay increase. Actually, it is difficult to buy this logic for it is not at all clear if senior civil servants indeed have a lot of outside market value. However, allow me to turn this logic on its head and instead suggest that we should increase their pay because they have NO or few private sector alternatives!
In this current boom, my friends in the financial sector hop from one job to another, always getting another hefty pay increase in the process. Industry knowledge, networks, and experience are easily portable from one job to the next, thereby enhancing the so-called outside option of the individual - yesterday he was a UBS analyst, today he is a Morgan Stanley vice-president etc, tomorrow who knows. But you get the point.
Turning to the public sector, many jobs in the civil service are critical to the nation but in truth have very little marketable value. Furthermore, young returning scholars (loosely though not exclusively defined as talent here) do not always have the luxury of deciding the positions they get posted to. Imagine the years of experience chalked up in Mindef, MICA or Community Development etc. It is not that that the work is unimportant but how much of it would truly add to the resume for a private sector job application?
After serving 6 to 8 year bonds, many scholars in fact find that outside options are pretty much closed. If you recall, it was only recently that the media highlighted the fact that many private sector firms had a rather dim view of ex-scholars from the civil service. The likely loss of outside options weighs heavily on the minds on bonded scholars. If there is indeed a sacrifice, it is not because of present pay but the reduction in the set of realistic future career alternatives. Worse still, this foregone opportunity is the highest for the most able thereby resulting in an adverse selection problem which I will elaborate on later.
Many bloggers might well be correct to point out that many senior civil servants would not command such a high salary in the private sector. However, I suggest that this argument ignores the fact the lack of private sector alternatives may be precisely due to their earlier commitment to the civil service. For the sake of argument, let's push the logic further still: if they do not have realistic private sector alternatives, why bother to increase their pay in line with the private sector? Here, the justification becomes a little more subtle.
The Role of Expectations: Expected Career Income Hypothesis
Expectations about the future play a crucial role in affecting the decisions made today (the logic is similar to the Permanent Income Hypothesis). Why do accountants, lawyers, auditors, consultants endure years of all-work-no-play lifestyles? Can it just be attributed to the couple of hundreds or even thousands of dollars more they receive? Many people in these professions will readily show you how their pay is in fact quite low on a per hour basis.
Quite simply, it is the anticipation of the huge economic reward when they become partners that drives these people. Forward looking agents care not only about the present but also form rational expectations about the future which then affect their course of action today. How senior civil servants are remunerated when they have few alternatives (ex-post) therefore anchors the expectations of young Singaporeans who are making the career decisions (ex-ante) on whether to take up a scholarship, to join the civil service, or to go to the private sector.
A Credible Commitment to Prevent a Lemon Market
There may be specific disagreements about the benchmark - whether it is representative enough, whether it is set too high, whether it has suitably adjusted for the relative security of public sector careers. All these are valid concerns, but it would be difficult to settle on a formula that pleases every one.
Another important issue emerges here: adverse selection (or the famous Lemon problem). A big public-private sector pay gap results in a bad selection process whereby good officers self-select to exit the public sector since, as I mentioned earlier, the cost of opportunity foregone is the highest for them. The larger point about the pay benchmarking, particularly when it is carried out in face of public opposition, is that it serves as a highly credible signal that Government will not allow public sector pay to lag too far behind the private sector. It anchors the expectations of present and future civil servants.
A Process of Self-Revelation
This goes a long way in ameliorating the adverse selection problem. One does not have to increase the pay of junior civil servants to attract or retain them. In fact, increasing junior civil servants' pay may not reduce the information asymmetry. Talent is a hard to observe attribute, the individual in question knows much better what his outside options truly are. The increase in senior civil servants' pay therefore provides strong incentives for the good officers to self-select to remain in the civil service since they know that they can (in expectation) beat their peers in the long run and reach the senior positions (jargon: self-revelation process).
If you pay a bunch of bananas, there is no guarantee you will get a 300 pound gorilla. But if you pay peanuts, you will surely get monkeys (or Akerlof's Lemons so to speak). Worse of all, paying peanuts may turn gorillas you have into monkeys (this is the non-shirking or efficiency wage argument if you care to follow further).
I am of course not qualified to say how much is enough, but it is clear that the public-private sector pay gap will almost certainly have long term consequences. The pay hike may not change the career calculus of today's senior civil servants. Through rational expectations however, it will affect the decisions of younger civil servants making career decisions today.
* PM has just stated his decision to donate the increment to charity. Has it therefore increased his moral authority?
If you feel that many of the arguments about public sector pay have been reused and rehashed, this post can hopefully offer an antidote. One of the recurring themes in many posts concerns the issue of moral authority. KTM (and many others) basically argued that the increase in pay would cause office holders to lose moral authority and many readers undoubtedly would agree. It is not that I disagree that there might be a moral dimension to the issue but as an economist, I am naturally circumspect about framing a political economy problem, which the pay hike essentially is, around morality and ethics*. This is not an issue about life and death. Consider therefore an alternative perspective.
Diminishing Outside Option
Preventing the loss of senior public service talent to the private sector is one of the key arguments put forward to justify the pay increase. Actually, it is difficult to buy this logic for it is not at all clear if senior civil servants indeed have a lot of outside market value. However, allow me to turn this logic on its head and instead suggest that we should increase their pay because they have NO or few private sector alternatives!
In this current boom, my friends in the financial sector hop from one job to another, always getting another hefty pay increase in the process. Industry knowledge, networks, and experience are easily portable from one job to the next, thereby enhancing the so-called outside option of the individual - yesterday he was a UBS analyst, today he is a Morgan Stanley vice-president etc, tomorrow who knows. But you get the point.
Turning to the public sector, many jobs in the civil service are critical to the nation but in truth have very little marketable value. Furthermore, young returning scholars (loosely though not exclusively defined as talent here) do not always have the luxury of deciding the positions they get posted to. Imagine the years of experience chalked up in Mindef, MICA or Community Development etc. It is not that that the work is unimportant but how much of it would truly add to the resume for a private sector job application?
After serving 6 to 8 year bonds, many scholars in fact find that outside options are pretty much closed. If you recall, it was only recently that the media highlighted the fact that many private sector firms had a rather dim view of ex-scholars from the civil service. The likely loss of outside options weighs heavily on the minds on bonded scholars. If there is indeed a sacrifice, it is not because of present pay but the reduction in the set of realistic future career alternatives. Worse still, this foregone opportunity is the highest for the most able thereby resulting in an adverse selection problem which I will elaborate on later.
Many bloggers might well be correct to point out that many senior civil servants would not command such a high salary in the private sector. However, I suggest that this argument ignores the fact the lack of private sector alternatives may be precisely due to their earlier commitment to the civil service. For the sake of argument, let's push the logic further still: if they do not have realistic private sector alternatives, why bother to increase their pay in line with the private sector? Here, the justification becomes a little more subtle.
The Role of Expectations: Expected Career Income Hypothesis
Expectations about the future play a crucial role in affecting the decisions made today (the logic is similar to the Permanent Income Hypothesis). Why do accountants, lawyers, auditors, consultants endure years of all-work-no-play lifestyles? Can it just be attributed to the couple of hundreds or even thousands of dollars more they receive? Many people in these professions will readily show you how their pay is in fact quite low on a per hour basis.
Quite simply, it is the anticipation of the huge economic reward when they become partners that drives these people. Forward looking agents care not only about the present but also form rational expectations about the future which then affect their course of action today. How senior civil servants are remunerated when they have few alternatives (ex-post) therefore anchors the expectations of young Singaporeans who are making the career decisions (ex-ante) on whether to take up a scholarship, to join the civil service, or to go to the private sector.
A Credible Commitment to Prevent a Lemon Market
There may be specific disagreements about the benchmark - whether it is representative enough, whether it is set too high, whether it has suitably adjusted for the relative security of public sector careers. All these are valid concerns, but it would be difficult to settle on a formula that pleases every one.
Another important issue emerges here: adverse selection (or the famous Lemon problem). A big public-private sector pay gap results in a bad selection process whereby good officers self-select to exit the public sector since, as I mentioned earlier, the cost of opportunity foregone is the highest for them. The larger point about the pay benchmarking, particularly when it is carried out in face of public opposition, is that it serves as a highly credible signal that Government will not allow public sector pay to lag too far behind the private sector. It anchors the expectations of present and future civil servants.
A Process of Self-Revelation
This goes a long way in ameliorating the adverse selection problem. One does not have to increase the pay of junior civil servants to attract or retain them. In fact, increasing junior civil servants' pay may not reduce the information asymmetry. Talent is a hard to observe attribute, the individual in question knows much better what his outside options truly are. The increase in senior civil servants' pay therefore provides strong incentives for the good officers to self-select to remain in the civil service since they know that they can (in expectation) beat their peers in the long run and reach the senior positions (jargon: self-revelation process).
If you pay a bunch of bananas, there is no guarantee you will get a 300 pound gorilla. But if you pay peanuts, you will surely get monkeys (or Akerlof's Lemons so to speak). Worse of all, paying peanuts may turn gorillas you have into monkeys (this is the non-shirking or efficiency wage argument if you care to follow further).
I am of course not qualified to say how much is enough, but it is clear that the public-private sector pay gap will almost certainly have long term consequences. The pay hike may not change the career calculus of today's senior civil servants. Through rational expectations however, it will affect the decisions of younger civil servants making career decisions today.
* PM has just stated his decision to donate the increment to charity. Has it therefore increased his moral authority?
posted by Bart JP at
1:17 pm
21 Comments:
There is a problem with seniority-based salary structure that is still largely the practice in the Singapore civil service today.
There is little incentive for a young talent to aspire to stay dynamic, relevant and sharp once he reaches a certain career goal. Let's see, the mentality seems to be, I will work hard to get absorbed in the Admin service; ah, next goal, towards SR9 grade, which promises an annual income of at least $200,000, for a long long time. Oops. It is getting quite pyrimidal. But a Director job ain't bad :) Let's see. I have my pension, a cushy job, good pay. Where's the incentive (especially the stick) to work well?
Should we be compensating them? Would they be able to enjoy such jobs in the private sector for the effort put in? More importantly, these people enjoy job stability, time with family etc into their 30s and 40s when there is no guarantee they would have been better off in the private sector. Is the civil service really lacking in talent? Is every scholar a talent? I do not know.
By
Anonymous, at 9:04 pm
Wah you are really smart to put forth this unique argument. It was long winded but I gather that you simply mean that the civil servant/ministers have to be compensated for the diminishing market value/options. We need to pay the bosses of young civil servants well so they know there is some hope of a good life and stay in the service.
You're aware that most bloggers are NOT saying our civil servants are paid too well....the main grouse is our Ministers, elected representatives who need to have empathy for ordinary Singaporeans cannot be paid millions when average income is $3000. Pegging their pay to the high income earners will (mis)align their interests to the rich and this does not help the problem of rising income gap. The rich knows how to take care of themselves and the govt has to take care of the middleclass and the poor.
Anyway, we are not just talking about HIGH pay we are talking about the HIGHEST PAY in the world for elected reps. Even if the argument you presented is applicable, it doesn't explain the large amounts we are talking about....larger than anywhere else in the world.
By
Lucky Tan, at 10:53 am
Lucky,
Thanks for the compliment. Coming from you, it means something. You are very smart too, to be able to summarise my long winded post so succintly.
But you see my point. Lots of civil jobs have NO/few outside options. The longer you do the jobs, the more you are likely to be BEHOLDEN to 1 employer - the Civil Service! This can be a career compromise, particularly if one is talented.
Given globalisation and the vast opportunities elsewhere, be it in Singapore, London, New York, it is difficult to attract young talent to tie down the civil service jobs (with diminishing options) unless you give them some expectation about FUTURE payoffs.
Like I mentioned in my post, I don't really know much much is enough to attract these people - for them to be willing to sacrifice privacy and outside option to become an elected representative.
But can I just say that you seem to imply that one needs to be poor to be able to empathise with the poor. Is this really true?
Peel away the emotions of your argument and try to push the logic. In a democracy - one man one vote, rich or poor. If elected representatives overly aligned themselves to the rich, they do so at their own peril, isn't it? Doesn't mean that a low pay for elected representative means that they are aligned to the poor or vice versa.
By
Bart JP, at 11:21 am
Bart,
The KTM agrees with Lucky that your argument is pretty ingenuous and you are actually right.
However, it turns out that the KTM belongs to the camp who thinks that "good civil servants are those who are not beholden to their jobs".
By
kwayteowman, at 4:10 pm
Something does not sit right with bart's notions of government and the expected income hypothesis.
"Peel away the emotions of your argument and try to push the logic. In a democracy - one man one vote, rich or poor. If elected representatives overly aligned themselves to the rich, they do so at their own peril, isn't it? Doesn't mean that a low pay for elected representative means that they are aligned to the poor or vice versa"
The recent dissent over the pay hike in minister pay (there was not really an outcry on civil service pay) was certainly affected by the negative public sentiments of a widening wealth gap.
In that case, assuming we do have a democracy as theoretically simple as one man and one vote, there was definitely a certain level of "peril" for the office holders of the current administration. or at least an inkling of how such dissent may translate to insecurity for thsoe office holders.
If such a 'peril' does exist because of a democratic society's proclivity to administer change to the administration from time to time, than your theory does leave a lacuna as it avoids the nature of the office of an elected representative.
"Like I mentioned in my post, I don't really know much much is enough to attract these people - for them to be willing to sacrifice privacy and outside option to become an elected representative."
Assuming we are talking about elected representatives in such a theoretical democracy and not the civil service as such. It does not follow that a career in the civil service despite its critical and manifestly difficult role, translates in its final iteration to that of an elected representative, regardless of capacity.
Afterall lawyers and doctors who are capable are eventually promoted to senior partners but a senior civil servant despite manifest qualities may not be elected because of whatever irrational emotional quirks that the "demotic mob" may possess.
In a sense by raising ministers pay, the "motivational" aspect of future earnings to younger civil servants should not be as influential as a civil servant would and should know that the final hurdle to such an office is to be elected by an electorate. Such an outcome is far more facilitated by a political career and an entry in a political organization than a career in the crucial but unfortunately anonymous civil service.
Thats if Bart's idea of the future expected income theory and how it attracts young civil servants by giving them the expectation of large minister pay packages works well with the idea of a "one man, one vote" argument where the ministers are elected representatives in such a system.
By
Anonymous, at 6:44 pm
KTM,
Thanks for seeing my point, it also means something to me.
Back to the first Anon. Of course, in reality, some talent get overlooked. Some less talented people may reach the top. There is idiosyncracies (or luck) in any career trajectory. No system gets every thing 100 per cent correct all the time. Which is why I said in my post that talented officers know they can succeed in expectation (doesn't mean all will, precisely because of the idosyncracies). So long as the system gets more right than wrong for the price it is paying.
To Kira, you are of course right to say that my logic does not sit well when it comes to elected representatives. However, consider the reality. Many senior civil servants are hardly anonymous figures, they have quite high public profiles. Quite a few have gone on to hold elected offices. The truth is that there is a big talent overlap between the talent pool in senior civil service levels and elected office holders. I don't make a claim that my views are the correct one, it is just an economic perspective I am sharing.
By
Bart JP, at 8:24 pm
Bart JP,
I think you will find it quite clear that I referred exclusively in my own post to what I felt was a rather simplistic notion of democracy, an ideal type posited in your retort to the post by Lucky and as such slightly incommensurable to your income hypothesis.
"However, consider the reality. Many senior civil servants are hardly anonymous figures, they have quite high public profiles. Quite a few have gone on to hold elected offices."
I am not sure whether we are referring to Singapore in particular or to the civil service worldwide in general?
Frankly I find the claim of a substantial overlap with senior civil service roles with that of high ranking ministerial positions is still a step away from suggesting that the civil service is an integral step in ultimately pursuing a career in a public office as an elected representative.
Just a glance of modern political personages will show that a political career is just as ably pursued (and perhaps more so)from the ranks of lawyers, doctors, entrepenuers, activists, army officers, career politicians and unfortunately even actors and adult movie stars. That somewhat suggests that the case for an easy "transmission" from the civil service to an elected representative is not as simple as a promotion up the ranks of a company. The operative mechanism I still believe is the election process itself. Even from an economic perspective, the expected career income theory needs the "transmission effect" to work from ministers to the low level young civil servants.
However given the whims of a democratic system, a young ambitious talent with eyes fixed on the highest office in the land will still have an open and free choice to pursue a legal or a medical career or become a grassroots activist or a political activist and still be able to strive for his goals in the executive branch of government. All that is required to obtain the minister pay scale is not fundamentally a long and deserving career in the civil service but a victory in the polls come election day.
That is of course if we are still speaking of elected representatives. I still have reservations on the accuracy of the description of the expected income hypothesis you have set out without some added qualifications.
By
Anonymous, at 6:11 am
Kira,
You point is well taken, qualification is needed. The first is social hierarchy. Although you correctly pointed out that the two tracks (civil service and political) are not exactly the same, the idea is that if you pay senior civil servants $x, you need to pay his political master more to reflect the hierarchy of command or degree of responsibility. Second, political office also result in a loss of outside option. It is actually difficult for political office holders to step back to their previous professions.
My overall point is that young people look at the pay at the top, form expectations, and decide what careers to pursue. The gap (private-public) at the top will greatly influence this decision. This I think you can agree with me.
By
Bart JP, at 8:24 am
Bart JP,
"Forward looking agents care not only about the present but also form rational expectations about the future which then affect their course of action today. How senior civil servants are remunerated when they have few alternatives (ex-post) therefore anchors the expectations of young Singaporeans who are making the career decisions (ex-ante) on whether to take up a scholarship, to join the civil service, or to go to the private sector."
I think the overall point you make is definitely quite clear in your original post.
However my contention is that a forward looking agent (rational that is) in the civil service cannot and would not assume that political office (are we still talking about elected representatives here and civil service in general?) is the natural position which they would attain in a long serving civil service career. A political position is attained through a political career. Regardless of the fact that the politicians might be their masters, the way to become such a "master" is in the political and not the civil service field.
As a rational forward looking agent, privy to the workings of a government, I am sure most educated scholars would understand that the political office (as an elected representative) and the civil service are separate. Hence you can understand why I think that the "transmission effect" of minister pay to "young returning scholars" as you put it requires extra clarification.
Of the first qualification is of social hierarchy. I think the social hierarchy argument is not a purely economic justification.
"the idea is that if you pay senior civil servants $x, you need to pay his political master more to reflect the hierarchy of command or degree of responsibility."
I am not certain if the argument which seems to imply that civil servants will somehow disrespect the executive if their pay diffentials are large enough is an economic one? Afterall your initial argument focused on future expected earnings when these civil servnats (rightly or wrongly) believe they will attain political office. Why would they undermine the political offices they are so focused in attaining?
The second qualification also confuses me.
"After serving 6 to 8 year bonds, many scholars in fact find that outside options are pretty much closed. If you recall, it was only recently that the media highlighted the fact that many private sector firms had a rather dim view of ex-scholars from the civil service. The likely loss of outside options weighs heavily on the minds on bonded scholars. If there is indeed a sacrifice, it is not because of present pay but the reduction in the set of realistic future career alternatives."
Here diminishing outside option is a fatal problem the theory claims is faced by senior public servants.
"Second, political office also result in a loss of outside option. It is actually difficult for political office holders to step back to their previous professions."
here diminishing options are faced by the elected representatives (I assume thats what you mean by political office holders) and no longer by the civil service. Is this a separate justification for the minister pay raise or one connected to the initial argument of the expected career income hypothesis? For one justification for elected representative can be exclusive to the other justification for the civil service.
Sorry if i am taking too much time
By
Anonymous, at 9:09 am
This comment has been removed by the author.
By
kwayteowman, at 5:43 pm
Kira,
In a sense by raising ministers pay, the "motivational" aspect of future earnings to younger civil servants should not be as influential as a civil servant would and should know that the final hurdle to such an office is to be elected by an electorate.
Are you aware that the Ministers and senior civil servants share the same benchmark? In other words, what Bart is saying is that young civil servants could conceivably earn as much as the ministers WITHOUT having to stand for election --- and he's right.
By
kwayteowman, at 5:43 pm
"But you see my point. Lots of civil jobs have NO/few outside options. The longer you do the jobs, the more you are likely to be BEHOLDEN to 1 employer - the Civil Service! This can be a career compromise, particularly if one is talented."
Actually that is not true. A civil servant who outshine others would probably be appointed to a GLC when the right time comes. There is career advancement.
The original idea of this benchmark is probably because those 'retired' minister serving in GLC are earning bigger bucks then their current ministers. Now given the choice between retiring and moving to a GLC VS staying under the scrutiny of the public which is better?
'Given globalisation and the vast opportunities elsewhere, be it in Singapore, London, New York, it is difficult to attract young talent to tie down the civil service jobs (with diminishing options) unless you give them some expectation about FUTURE payoffs.'
In that case serving the country is a mere monetary transaction. People would be asking what is in it for me vs what can I do for my nation. We need people with a vision and passion for the country. Not someone who trys to push the GDP up without solving the problem of new poor. If they can make sure everyone is taken care of we would be more than happy to dish out the millions to them.
The FUTURE payoffs and aspiriation should ideally be to have the power to build singapore into a great society. Not how much we can reap from the system.
'Peel away the emotions of your argument and try to push the logic. In a democracy - one man one vote, rich or poor. If elected representatives overly aligned themselves to the rich, they do so at their own peril, isn't it? Doesn't mean that a low pay for elected representative means that they are aligned to the poor or vice versa. '
But in singapore 1 man might not have 1 vote.
What peril would they be putting themselves in but only peasent whine? There is error in your statement about low pay for elected representative. They are not paid lowly. They are paid lower than top earners. Their pay is hardly low if you compare to the mean wages in singapore.
By
palmist, at 4:37 am
The ability to write in plain english is a grossly underappreciated skill.
By
Anonymous, at 10:25 am
KTM,
You must understand KTM that Bart Jp's theory very little distinction is made between senior civil servants and elected representatives in general, hence the need for clarification.
Furtehrmore KTM, you can see in my various posts that I kept trying to ask whether we were talking about the Singapore civil service of civil service in general. I am sure your arguemnt is based particularly on the assumption that we are talking purely about Singapore.
Even allowing for the fact that ministers and senior civil servants get paid the same. It is a stretch to say that young civil servants are motivated by a transmission effect because of a pay raise to ministers. I have no problems with such a theory if it is confined to that of the civil service.
If you read my posts carefully, you will find my difficulty with the theory is how it justifies the minister pay raise by saying it has a direct transmission effect to young returning scholars. All you have brought up is the fact that senior civil service pay raises have a transmission effect to younger civil servants. I had never any issue with that claim (if it was even made in this particular post.)
Furthermore I dont see that Bart JP has used the line of argument you have put forth. he himself says:
". Although you correctly pointed out that the two tracks (civil service and political) are not exactly the same, the idea is that if you pay senior civil servants $x, you need to pay his political master more to reflect the hierarchy of command or degree of responsibility."
he definitely says that (theoretically) a senior civil servant should be paid less than his political masters.
You can clearly see that I amde no claim that that was the case. Only that such an argument still does not answer teh direct transmissio effect issue.
By
Anonymous, at 1:40 pm
Simple Folk - Plain English or not, one needs to be clear about the meaning of the post or comment! Can't tell whether you mean my writing is plain enough (in which case your comment would be a compliment) or not plain enough (which then becomes a critique).
Kira - You are right. If you read my post, I only mentioned senior civil servants and not elected representatives, precisely because I understand there is a distinction, at least in theory, between the two. The discussion about elected representatives came only in the comments.
I did not say that senior civil servants should be paid less. I was offering an explanation, from a social hierachy standpoint, why this would be so. The reality that since there is a large overlap between different pools of public sector talent (elected and non-elected), makes it easier to explain why this should be the case. Thanks for the comments, you are sharp.
By
Bart JP, at 1:59 pm
Bart JP,
Thank you for your patience.
Once again I would like to reiterate that i am also of the opinion that such a theory for the civil service is perfectly sound in an ideal situation.
The expected career income theory in your post was meant to set out a 'political economy' alternative to the argument of 'moral authority' set out by KTM (and many others) in order to explain the recent pay hike.
I think the difficulty for me arose is when LuckyTan made a distinction between the fact that the "resued and rehashed" arguments in the blogosphere, were primarily directed at ministers and hence elected representatives and not at the civil service.
The subsequent reply was that,
" Given globalisation .... it is difficult to attract young talent to tie down the civil service jobs ....
Like I mentioned in my post, I don't really know much much is enough to attract these people - for them to be willing to sacrifice privacy and outside option to become an elected representative."
which seemed to widen the ambit of the argument to elected representatives and hence minister pay rises. And seemed to imply that minister pay rises had a direct influence on young scholars expectations. This was in reply to Luckytan's initial point that the arguments were directed against ministers and not civil servants.
Apologies if I misrepresented the claim that civil service should be paid less than ministers because of a social hierarchy argument. KTM held that you were saying that civil servants did not need to be elected in order to earn the same amount as ministers.
Yet I felt this seemed contrary to what was being written as you were in the previous post trying to justify (in this particular case using a social hierarchy argument) why they should be paid differently (in a theoretical context of course and not in a particular government's case).
I accept that argument may not be a qualification to the theory you have set out in context of minister pay but as separate arguments that could be used to justify an elected representative's pay rise exclusive of the expected career income hypothesis.
Once again, I thank you for your patience
By
Anonymous, at 3:40 pm
Bart,
Yeah, Kira is pretty sharp and he also has a lot of stamina, so be warned. :-P
In any case, perhaps the KTM can try to summarize what he thinks are the key arguments that you seem to be suggesting FOR the increase in pay. We need to break this into two parts:
(i) Senior civil servants. This is where your expected career income hypothesis comes in. Furthermore, it makes the civil servants beholden to their jobs and less likely to break ranks. Brilliant, but the KTM is not convinced that the general population will buy this.
(ii) As for the politicians, the main reason is that the PM needs to be able to pay good money to assemble his dream team. Given that all the Ministers are supposed to be relatively successful people who are humming along in their careers (not withstanding that they may not be able to make that $2 million a year), it's going to be good to have the flexibility to offer more cash. The KTM thinks that this is completely reasonable, but again, not sure whether the general population will buy. The other minor issue is that lots of retired chaps who are Chairman of this and Chairman of that are apparently making their millions, so it's a little weird that serving ministers are paid less than the retired fellas.
Finally, the KTM would suggest that the approach of ignoring the "moral dimension to the issue as an economist, (because you are) naturally circumspect about framing a political economy problem" may not be a very good one. When you return to the Service, do remember that you are no longer solving a textbook problem like you are in school. In the Government, there is politics and your job is to figure out how to factor the political element into your economic models. The KTM believes that it will save your Minister a lot of grief.
BTW, Anon 9:04 PM is right. Seniority-based salary structures are a problem. Circuit City apparently just laid off a whole bunch of people because they were old and overpaid for the jobs they were doing.
Kira,
The KTM doesn't believe that Bart was trying to refute the KTM's concern over moral authority. Bart was simply proposing another perspective to the issue, which the KTM thinks is fair enough.
It's really not about right or wrong. It's about politics and what the general population thinks is right/acceptable. Bart's theories while rational and reasonable are not likely to be accepted by the general population.
By
kwayteowman, at 4:23 pm
KTM,
I commend you for your sharpness and stamina too. Panadol Extra I believe was the password the last time.
"Kira,
The KTM doesn't believe that Bart was trying to refute the KTM's concern over moral authority."
KTM once again i reiterate, if you read my posts my argument almost nothing to do with the alternate "moral authority" arguments.
I only mentioned that:
"The expected career income theory in (Bart JP's) post was meant to set out a 'political economy' alternative to the argument of 'moral authority' set out by KTM (and many others) in order to explain the recent pay hike."
which was I believe was just a paraphrase of the introduction to Bart's post and has little to do with either our positions.
It was mainly to set down the chronology of the post before the comments by Luckytan.
I am quite sure you cannot fault me for misrepresenting your intentions here. I made no statement regarding your intentions whatsoever. Like I said to Bart JP , i think his theory is valid for the civil service.
I am afraid I cant recall any other references to your own theories on "moral authority" other than in that summary (perhaps clumsy if you will) of the introduction. I hope I have clarified my position.
By
Anonymous, at 6:22 pm
Just a disgression from the minister pay debate for those who are interested.
An article has appeared in the Asia Times accusing our beloved govt of "Fiscal Finagling".
http://www.atimes.com/atimes/Southeast_Asia/ID13Ae01.html
Like all articles on economics it is longwinded and difficult to fathom. After reading it a few times, I figured it is just saying:
1. The govt build up unnecessarily huge surplus through an austere fiscal policy - through hidden taxes etc.
2. The large surpluses shift money from consumers and private business to the govt. Resulting in low domestic consumption & private investments.
3.As govt is poorer at investing money, than if the money was invested privately.
4. This resulted in a depressed living standard for low and middle income families who shoulder the heavier tax burden.
5. The CPF is a timebomb because it earns a low state determined interest rate on the compulsory savings. Also, it was tapped to fund expensive public housing & medical expenses that reduces govt subsidy and further enlarges its surplus. The CPF money is also used by the govt for higher yielding investment which is yet another form of hidden tax.
6.Singapore is doomed because " the self-centered PAP's economic priorities ...... which over the medium term augurs ill for a small island country so highly reliant on the state for its economic, financial and moral direction."
While the article is seems to have gotten facts right, only an economist with a PHD or studying for one can figure out if our future is as bleak as what the article suggests.
By
Lucky Tan, at 9:23 pm
Lucky,
Not possible to treat these questions in comment. If I have time, I will try to say something in the next post.
Regards.
By
Bart JP, at 8:46 am
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