Sunday, August 10, 2008

How to Think about the Recent Row Over Bureaucratic Pay Raises

It is no coincidence that every time I take a summer vacation the BC government announces a major pay raise for top officials and the Opposition deplores it. It is August and the Olympics are on, so the Games begin, in more ways than one.

Just over a year ago British Columbia had a debate about politicians' pay. On the one hand, the government was able to implement the majority report of its hand-picked Independent Commission to Review MLA Compensation, the composition and terms of reference for which were heavily influenced by executive compensation trends in the private sector, as well as other factors such as long hours and the inherent insecurity of the job. Hence we have seen a 29% increase in the basic pay of MLAs (to $98,000), a 50% increase in cabinet ministers' pay, and a 90% raise for the premier, plus a significantly better pension scheme. On the other hand, pundits such as David Schreck and Rafe Mair argued that since MLAs had little or no power, they didn't deserve a large pay raise or a new pension at all. Carole James and the NDP managed to suck and blow at the same time by calling the increases "obscene," temporarily giving their pay raises to charity and yet acquiescing in a pension scheme estimated to be twice as rich as what typical public servants at the same pay scale and years of service would receive. (Ironically, this compromise forged in the cacaphony of BC NDP caucus led them right back to where the federal LIberals were in the 1970s when, fearing voter reaction over high salaries, started paying themselves through the back door.)

I argued in a local newspaper op-ed and here on my blog that a coherent compromise would accept a one-time increase of 30% in base -level MLA pay, but would not change the additional increment earned by Cabinet ministers and would only give a more modest additional increment to the premier. MLA pay thereafter would be linked to a range of indices, the most important of which would be the rise (or not) in average provincial incomes. (A commentator on my blog, Budd Campbell, usefully suggested a permanent pay panel that would make recommendations on all provincial salaries not set by collective bargaining.) The pension scheme would be neither the old group RRSP scheme nor the newfangled 37% tax-funded portion of MLAs salary with generous retrocative buy-back provisions, but as much as possible a standard government pension plan based on the Members' salary and years of service. (I drew some moral support for this position from the fact that one of the three members of the Independent Commission, Sandra Robinson, dissented from the majority on the subject of pensions.)

In other words, I did not object to the Independent Commission being sensitive to executive trends, I merely thought that it was highly inappropriate to allow that consideration to swamp all others. Nowhere did the Commission or the government discuss the wider societal debate over the social justice of recent executive pay trends, which reflect the power of managers and weakness of either shareholders or taxpayers who all too often subsidize them. Nor did the Commission discuss the theory of parliamentary democracy, according to which the premier is supposed to be merely the "first among equals" and dependent upon the Legislature for his authority to govern. The Commission was clearly thinking of the premier as the equivalent of a corporate CEO; but the very idea of un-hitching politicians' incomes from those of society and their representatives, and hitching them to those in the corporate sector, is deeply disturbing in the long run. If Bay Street lawyers and CEOs continue to pull away from the rest of society in terms of their incomes, they should not be pulling MLAs and MPs with them. Our elected representatives should be well compensated, but their fates should be linked to ours.

I believe that the same balanced perspective should inform the current discussion about bureaucratic salaries, although the implications are somewhat different. When the Commission on MLA pay stated that "over the past six years, the salary gaps between legislators and other senior managers have widened", it grated on my democratic ears, because legislators should not be thought of principally as senior managers. Deputy ministers and ADMs should be and are. They have greater mobility than either legislators or lawyers and their skills are readily transferrable to other jurisdictions, and, to a considerable extent to the private sector as well.

As a former public servant myself, I know that these people should be motivated at least in part by the inherent fascination of the job and by the privilege of public service in the Best Place on Earth. The median salary for Canadian DMs and ADMs ought to be sufficient. By that criterion, ADMS (ranked 10th in the country) were deserving of a healthy increase. And since they provide the basic talent pool from which to replace retiring DMs, and should be within a reasonable distance of their counterparts in Alberta and Ontario, a 20% increase seems reasonable. But deputy ministers and the premier's deputy, who were already in the middle of the pack (6th according to the most recent survey) neither needed nor deserved an increase of greater than 10-15%. They actually received hikes of 35% and 43% respectively. With government's budget increasing in the low single digits, and healthcare eating up increasingly large portions of it, such increases can only come at the expense of compensation and/or employment at middle and lower levels of the BC public service (or at the expense of public services). The question has to be: Is That Necessary or even Wise? One could probably hire several quality policy analysts or policy directors with the savings from unnecessary salary and pension expenditures.

This points up another flaw in the corporate analogy: the elitist assumption that while top earners need proportionately higher incomes to motivate them, poorer people need lower incomes to motivate them. This is reflected in the fact that B.C. has the lowest minimum wage in the country and health care workers had their contracts torn up by the government because they were higher than elsewhere in the country. Are we well-served by being a magnet for people willing to work for lower wages? Why not abolish the minimum wage altogether, if it results in high employment in lower-wage jobs? I suspect that this might be the premier's ideological preference, not indulged for political reasons. But there may be a good policy reason for it as well. The logic that higher wages attract better workers does not just apply to politicians and senior managers. In a national and increasingly international labour market, making BC a mecca for low-wage labour could cause service standards, product quality, work safety and labour standards to all suffer. Creating a large American-style class of working poor in BC would bring with it all manner of social ills. And, with our natural advantages, levels of productivity and education, and current levels of employment, such a debasement would seem to be entirely unnecessary. And very unwise.

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