Singapore’s Ministerial Pay debate.


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It is no news to many that Singapore ministers are the highest paid in the world. In 2010, PM Lee Hsien Loong’s bagged USD$2,183,516, a salary which is four times that of the next highest-paid political leader, Donald Tsang (Hong Kong’s Chief Executive) who earned USD$513,245. PM Lee’s pay is also five times that of US President Barack Obama, who earned USD$400,000[2]].

In Singapore’s 2011 General Elections, the country’s ruling People’s Action Party (PAP) has seen a considerable decline in voters’ support, amid popular discontent over high housing prices, loose immigration policies, and income inequality. In particular, the principles behind Singapore’s high ministerial pay were criticised, and questions of whether it is justified were echoed by opposition leaders and online citizens alike.

Post elections, the Ministerial Salary Review Committee was set up, headed by NKF Chairman Gerard Ee. It sought to adopt a different model to assess how much ministers should be paid. Eventually, it was decided that the MR4 Minister’s salary will be benchmarked to the median income of the top 1,000 earners who are Singapore citizens and with a 40% discount.

In a minimum bonus situation, a MR4 minister gets 13 months of pay, ie $715,000 (the monthly pay is $55,000). Based on individual performance and various nationwide indicators, the minister can receive up to seven months of bonuses, hence achieving a 20-month package of $1.1million.
Ministers whose performance far exceed expectations can get a maximum 26.5 months pay.
The starting salary for an entry-level minister is recommended at $46,750, or 85% that of the MR4 minister's pay of $55,000.
The Prime Minister will be paid twice the amount of a MR4 minister. Under this new salary scheme, PM Lee will have a 36% pay cut. But he still is the highest paid political leader in the world.

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There are three principles which underlie the current wage system:

  1. Salaries must be competitive so as not to deter people of the right calibre from entering politics
    • Pegging the ministerial pay to top earners in Singapore “reflects the level of talent we hope to attract and the need to pay competitive salaries to minimise the opportunity cost for these people to come forward to serve”. Do be aware that many Singapore ministers were invited to join politics from previous higher-paying occupations.
    • Ministers who came from the private sector include former top lawyer K. Shanmugam, who is now the Law and Foreign Minister; Defence Minister Ng Eng Hen who was a surgeon; and Health Minister Gan Kim Yong, a former administrative officer who was the chief executive officer and president of NatSteel before becoming a minister.
    • Former public servants include Education Minister Heng Swee Keat, who was the managing director of the Monetary Authority of Singapore (MAS) and before that the Permanent Secretary for the Ministry of Trade and Industry (MTI); and Deputy Prime Minister Teo Chee Hean who was chief of the navy.
  2. Political service entails sacrifice and hence there should be a discount on the pay formula
    • A 40% cut is made from the median income of Singapore’s top 1000 earners. This is to “to signify the ethos and sacrifice that comes with political service”
  3. There should be a ‘clean wage’ with no hidden perks.
    • Unlike many countries, Singapore has chosen a transparent system where salaries are fully accounted for through a ‘clean wage’ with no hidden perks and privileges. There will be no more pension payments[4] with the Central Provident Fund (CPF) system being adopted as the sole basic retirement scheme.
    • Ministers do not receive perks such as housing and cars for personal use. They do not enjoy tax exemptions and have to pay tax like all who work in Singapore. In contrast many foreign leaders receive housing and car benefits.
    • Ms Lee Bee Wah (Nee Soon GRC) noted that having low political wages with hidden perks has led to politicians in other countries abusing their benefits and accepting bribes[5].


Comments:


Lee Kuan Yew: “Don’t underpay our ministers”
'We did not take Singapore from the Third to the First World by head-hunting ministers willing to sacrifice their children's future when undertaking a public service duty. We took a pragmatic course that did not require people of calibre to give up too much for the public good. We must not reduce Singapore to another ordinary country in the Third World by dodging the issue of competitive ministerial remuneration.'
‘Unless we have a steady stream of high-quality men and women to serve as PM and Ministers, Singapore as a little red dot will become a little black spot”[6]

Lee Hsien Loong: 'I don't believe that salaries were a make-or-break issue for any of them who have come in, but I have no doubt that proper salaries have made it easier for me to build the team which I have today and to provide the best service which we can to Singaporeans to govern the country.'[7]

Rupert Murdoch: "the most open and clear society in the world is Singapore -- the cleanest society you can find anywhere -- as every minister is paid at least one million dollars a year and has no temptation to transgress".

Debate and controversies (adapted from ST: Minister’s pay cut debate: Heated words over hot topic):


ON THE SALARY FORMULA
After Deputy Prime Minister Teo Chee Hean wrapped up the debate in a 45-minute speech, Workers' Party MP Chen Show Mao (Aljunied GRC) rose to dispute that there was not much difference between the WP's proposal and that of the Committee to Review Ministerial Salaries. WP's proposal is to peg an MP's allowance to that of a senior civil servant on MX9 (Superscale) grade, which comprises 1.2 percent of the 76,000 civil servants. WP's final figures recommend a $55,000 monthly salary, and an annual package of $990,000, compared to the committee's recommendation of a $46,750 monthly starting salary and annual package of $935,000.

DPM Teo argues that the WP's principles and methods are very similar to that of the committee, and that WP should not be bargaining over small differences such as the formula.

ON THE SIZE OF BONUS
After WP MP Pritam Singh (Aljunied GRC) delivered his speech, PAP MP Alvin Yeo (Chua Chu Kang GRC) questioned his point that a generous bonus system is not consistent with the principle of a 'clean wage'. PAP argued that it is justified for a minister's pay to contain a heavy weightage on bonus, like that of a typical CEO. Having a large part of remuneration based on bonus, ensures that a minister is made accountable for his performance, as bonuses would only be handed out if his performance is keeping with key performance indicators. On the other hand, WP, which recommends that bonuses be limited to five months instead of the maximum 13.5 months, argued that the ministers' pay "ought to have some comparison with the rank-and-file civil servants" who are not paid double-digit bonuses.

ON THE GUIDING PRINCIPLES
Minister of State for Transport and Finance Josephine Teo pressed Mr Singh on why the Workers' Party believed its proposals were that different from those of the review committee, since WP's formula of pegging ministerial pay to the top private sector earners were similar to the committee's principles. WP did acknowledge that they agree with the three principles distilled by the committee, but they


The Ministerial Salary Review Committee
Chairman
Gerard Ee

Committee members
John De Payva
Fang Ai Lian
Stephen Lee Ching Yen
Po’ad bin Shaik Abu Bakar Mattar
George Quek
Lucien Wong
Wong Ngit Liong





Some Thinking Questions:

  1. Do you endorse the high ministerial pay in Singapore? Why or why not? Consider why the high pay has irked the public: rich-poor divide, the question of whether ministers are overpaid, etc.
  2. If you were to be a leader of a country, do you prefer to give your ministers high pay and no perks, or a lower pay with more perks (e.g. housing grants and a car)?
  3. The revision of the ministerial salary has brought about huge pay cuts, but do you think that it is enough? Do you think that the new salary formula is reasonable?






For more details regarding ministerial pay, please visit the following sites:
  1. Full Review Committee Report: http://reviewcommittee2011.sg/report/
  2. Pay, bonuses What exactly a minister gets
  3. CRMS: Explaining some points again
  4. Committee Releases Report: http://reviewcommittee2011.sg/2012/01/04/press-release/




[1] Image source: http://www.tnp.sg/sites/default/files/styles/large/public/20196280%20-%2021_05_2011%20-%20htpay-1.jpg
[2] Radcliffe, B. (2011, October 18). Top 10 highest paid government leaders. Investopedia. Retrieved from http://www.investopedia.com/financial-edge/1011/Top-10-Highest-Paid-Government-Leaders.aspx
[3] Au, W. P. (2012, January 21). Retrieved from http://yawningbread.wordpress.com/2012/01/21/cut-in-ministers-pay-is-good-but-detailed-mechanisms-matter/
[4] Committee Releases Report. Retrieved from http://reviewcommittee2011.sg/2012/01/04/press-release/
[5]Wong, T. (2012 January 17). MPs favour clean wage system with no hidden perks or benefits The Straits Times.
[6]SPH (2012, January 19). 'Don't underpay our ministers'- Lee Kuan Yew The Straits Times
[7]Wong, T. (2012 January 18). Ministers faced 'very tough decisions' to join politics- PM Lee Straits Times