A few interesting studies on the wages and performance of lawmakers have suggested that high pay and benefits can foster better democratic outcomes, as they make politicians more receptive to voters rather than to special interests. This is a perspective worth analysing.
To begin with, across many countries, political leaders already earn far in excess of the average income in their respective countries. In Australia, backbench MPs earn approximately AU$200,000 annually, while the median Australian income is close to just AU$80,000. Two other particularly interesting examples are Singapore and Kenya – two countries at very different levels of development. Singapore’s Prime Minister is in fact the highest paid head of government in the world, earning close to 40 times Singapore’s US$50,000 GDP per capita. At the same time, the Prime Minister of Kenya earns a base salary that approaches 240 times the nation’s GDP per capita, despite 42% of its population living below the poverty line. It is also worth noting that while Singapore ranks 6th on Transparency International’s Corruption Perceptions Index (i.e. very low perceived corruption), Kenya ranks 143rd among 180 countries.
This data clearly reveals that the relationship between the remuneration for politicians and development outcomes is not a straightforward one. Nonetheless, there are some interesting points worth looking at in the literature which suggest that when it comes to politicians’ pay, ‘bigger is better’. There is an important distinction in the problems that high pay attempts to solve in developing countries, as opposed to developed countries, so this two-part article analyses along that divide. Part 1 examines the landscape of developing country politics, with Sri Lanka as a case study.
Corruption and the adverse selection problem in developing countries
Corruption is to politics what ‘shirking’ is to most other forms of labour in economics. However, the term is unhelpfully broad, since the nature of ‘corruption’ tends to vary subtly between developed and developing countries. Corruption in developing countries seems to revolve around infrastructure development projects and the management of natural resources. While these may not be exclusive to developing countries, advanced economies tend to be more preoccupied with the issue of fending off the influence of lobbying by powerful organisations and industries, undermining the power and interests of voters.
The process of development in low income countries is often hamstrung by the twin burdens of a lack of integrity and a lack of capability among political elite. An interesting case study to look at is Sri Lanka. Sri Lanka currently suffers from a debt-to-GDP ratio of almost 77%, and recently scored -0.2 on the World Bank’s Governance Effectiveness indicator (which ranges between -2.5 and 2.5). Poor economic decision making has been blamed for a vast proportion of the country’s development woes. This is no coincidence. A recent report revealed that almost half of Sri Lanka’s parliamentarians have not completed their secondary education. Further, only a handful of MPs are university graduates. Interestingly, the base salary for politicians in Sri Lanka is not far greater than the Sri Lankan GDP per capita. Thus, as it stands, the poor educational qualifications within the Sri Lankan Parliament might be attributed to a weak incentive for the more educated to choose politics as a career.
In contrast, high wage models like in Singapore seem to have successfully addressed the problem, and seem to attract to politics the ‘best and the brightest’ that normally head to careers in banking, finance and other corporate roles. Most of the ministers leading the country have at least masters level qualifications. Of course, this is also tied to the overall level of education in the country. In 2016, Sri Lanka had a mere 18% gross tertiary education enrolment rate, whereas Singapore boasted a rate of 92% in the same year. The question is whether the political environment evolves organically with increasing levels of education, or whether actions like drastically increasing politicians’ salaries (which the Sri Lankan government was considering in the first week of August), are necessary to help transform the political sphere.
* Transparency International Corruption Perception Index (2017).
** UNDP Education Index is calculated using Mean Years of Schooling and Expected Years of Schooling (2013).
As the diagram above reveals, higher levels of education in general do seem to be correlated with lower levels of corruption. An interesting aspect for research to analyse would be whether this outcome is facilitated by better benefits for politicians in these more educated countries.
For higher salaries to have the desired impact, low expected earnings would have to have been the major deciding factor for more-educated individuals choosing not to seek public office. In reality, there could be other factors keeping people away from politics like the negative stereotypes associated with the profession (which are quite severe in Sri Lanka). Thus, simply increasing salaries overnight may not be a ‘silver bullet’ to solving the problem. What can be noted about the status quo is that the factors like negative perceptions of the profession, in combination with poor remuneration might be at the root of an adverse selection problem.
In Sri Lanka, where the basic official pay for politicians is quite low, the outcome has been that many of those drawn to the profession have been individuals who are prepared to employ illicit means in pursuit of higher incomes. The conduct of such individuals contributes to a negative perception of politicians in general, making the idea of increasing their pay extremely unsavoury. Thus the conditions that originally gave rise to the problem perpetuate themselves.
By and large, this has meant that politics is not a career path that most qualified or educated individuals willingly pursue in Sri Lanka. This is likely to be the case in most developing countries with a similar political environment. A possible short-term approach to addressing this could be by calling for higher salaries, which only take effect after the next election. The more holistic solution would certainly lie in the long-term, with gradual change towards a better political environment. This can only be achieved, if in the short-term the right individuals are involved in the process.
 Politico 2015, Should we pay politicians more?, viewed August 5, 2018, https://www.politico.com/agenda/story/2015/05/game-theory-pay-politicians-more-voter-attention-000039
 The Economist 2010, Leaders of the fee world, viewed August 7, 2018, https://www.economist.com/news/2010/07/05/leaders-of-the-fee-world
 Massola, J, Peatling, S, & Gartrell, A 2017, ‘Federal MPs to get pay rises and tax cuts in July 1 bonanza, The Sydney Morning Herald, 22 June, viewed August 6,2018, https://www.smh.com.au/politics/federal/federal-mps-to-get-pay-rises-and-tax-cuts-in-july-1-bonanza-20170622-gwwk6m.html
 Leaders of the fee world, https://www.economist.com/news/2010/07/05/leaders-of-the-fee-world
 Transparency International 2018, CORRUPTION PERCEPTIONS INDEX 2017, viewed August 6, 2018, https://www.transparency.org/news/feature/corruption_perceptions_index_2017
 The World Bank 2017, Worldwide Governance Indicators, viewed August 8, 2018, https://datacatalog.worldbank.org/dataset/worldwide-governance-indicators
 Schultz, K 2017, ‘Sri Lanka, Struggling With Debt, Hands a Major Port to China,’ The New York Times, 12 December, viewed August 7,2018, https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-china-port.html
 Range, I 2017, ‘Parliament has 94 MPs without O/Ls,’ Daily News, 15 March, viewed August 6,2018, http://www.dailynews.lk/2017/03/15/political/110458/parliament-has-94-mps-without-ols
 Prime Minister’s Office Singapore, The Cabinet, viewed August 7, 2018, https://www.pmo.gov.sg/the-cabinet
 The World Bank, School enrollment, tertiary (% gross), viewed August 7, 2018, https://data.worldbank.org/indicator/se.ter.enrr
 Hewajulige, S 2018, ‘Salaries of ministers likely to be increased?’ Daily Mirror, 2 August, viewed 3 August, 2018, http://www.dailymirror.lk/article/Salaries-of-ministers-likely-to-be-increased–153477.html
 CORRUPTION PERCEPTIONS INDEX 2017, https://www.transparency.org/news/feature/corruption_perceptions_index_2017
 United Nations Development Programme 2013, Education Index, viewed August 8, 2018, http://hdr.undp.org/en/content/education-index
 de Alwis, S 2018, ‘Of Peanuts & Monkeys,’ The Colombo Telegraph, 5 August, viewed 8 August, 2018, https://www.colombotelegraph.com/index.php/of-peanuts-monkeys/
 Fernando, L 2017, ‘Three Components & Sources Of Corruption In Sri Lanka, The Colombo Telegraph, 1 September, viewed 7 August, 2018, https://www.colombotelegraph.com/index.php/three-components-sources-of-corruption-in-sri-lanka/
Image: Didier Weemaels