In the next few weeks The Remuneration Authority will deliver its independent report on MPs’ pay. There has been no movement in MP salaries since 2017 and, writes John McGill, it will be hard for the authority to not take into account the large increases in pay in the labour market since then.
In the next few weeks The Remuneration Authority will deliver its independent report on MPs’ pay. It’s decisions (or determinations) are final.
While its mandate ensures it takes into account economic conditions, given there has been no movement in the pay of MPs since 2017 (a 2.25% increase that year), it will be hard for the authority to not take into account the large increases in pay in the labour market since that date.
These increases include large movements in the minimum wage from 2017 (48.8%) with 2% the most recent adjustment announced in February. For some groups this 2% adjustment will be a standard by which to compare other pay movements in 2024.
Large increases in pay have been apparent for groups such as teachers and nurses. The 27% increase in median weekly earnings between 2018 and 2023 clearly shows how the overall market has moved in recent years. Pay increases in NZ remain at historically high levels with average hourly earnings in the year to December 2023 increasing by 6.9%.
“…there’s no doubt the infrequent pay reviews create problems, particularly around public perceptions.”
Whatever comparisons are made and whatever the outcome of the Remuneration Authority’s deliberations there is no doubt the infrequent pay reviews create problems, particularly around public perceptions.
Between 2018 and 2023 our Australian neighbours have moved the pay of their MPs four times (increases of 2%, 2%, 2.75%, and 4% respectively), overall 11.2%. These movements limit public ire but retain a level of movement somewhat in line to more general market changes.
The Remuneration Authority website references their empowering Act when explaining how they reach their conclusions and very broadly what information they use.
Taking into account available data of professional levels of pay/pay movements and that of the wider marketplace, I imagine, informs their decisions. What these comparisons are all about is relativity which is one of the key drivers of pay levels. Within most larger organisations much time and effort is put into understanding and ensuring pay levels make sense while allowing for different levels of competence, the different pay markets the organisation operates, external markets and a host of related issues including affordability.
“The issue is not a new one. Paying MPs anything at all was a factor noted by commentators’ way back in the 1890s.”
The issue is not a new one. Paying MPs anything at all was a factor noted by commentators’ way back in the 1890s. At the time issues including teachers’ pay and pay equity were current along with the pay of MPs (it seems we have long debated MPs’ pay and these other issues). The idea that being an MP was a public service prompted the view that no pay at all for the role was a good idea.
MPs had initially received an allowance, introduced in 1854, and that became a flat rate from 1871. The reasoning for the 1892 review, much quoted at the time, was it would enable “working men to stand for Parliament”. The new rate was to be 240 pounds per annum. The role at the time was considered a part-time one, redefining it as full time had to wait until 1944, another story.
Debate around such an increase (the previous rate per annual parliamentary session was 150 pounds) included such choice comments as “…they will throw down their tools, and enter upon a career of professional politicians and political agitators”, and “…Nothing more shameless has ever overcast a shadow over the New Zealand Legislature” – and that is only one commentator.
The MPs got their 240 pounds. I note at that time in New Zealand we had both a Lower and Upper House. The Lower House or House of Representatives had 74 members and the Upper House or Legislative Council 40 members, all for a population of a 670,000.
At the other end of the scale to not paying MPs is the manner in which Singaporean’s MPs pay is determined. Deliberate government policy instituted by Lee Kuan Yew “created a super efficient government by paying top administrators’ salaries equal to those in private companies”. This included MPs. While Singapore has a very different economy and culture to NZ, many would see this policy as having worked for them.
“…we pay our MPs more than the USA, a bit less than the Australians, similar levels to the British but nowhere near the Singaporeans.”
Other international comparisons of MPs pay merely add to the difficulty and complexity of reaching a decision appropriate to our needs. A few clicks of Google will tell us we pay our MPs more than the USA, a bit less than the Australians, similar levels to the British but nowhere near the Singaporeans (as noted above). These casual comparisons make no allowance for bicameral parliaments (USA, Australia, Great Britain), federal systems (USA and Australia), or a host of other factors.
What internal comparisons are useful within New Zealand I have already noted. Other commentators have referenced groups such as teachers but I personally struggle with such a (hopeful) comparator – responsibility for teaching core skills is indeed critical to our country’s development but somehow dealing with issues such as signing off $166B budgets and setting the laws of the land paint a much larger role to me.
What pay is appropriate for a job, any job, always generates intense debate. For a newly elected Government committed to cut spending, finding a report in front of them perhaps mandating a pay increase for MPs (recent market trends certainly point to this although the authority could place more weight on other factors as they can do) would be unwelcome.
The opposition parties and other interest groups will, of course, seize on such a report should its results give them ammunition to make political points or highlight their own causes. The media, both social and conventional, will also no doubt get in on the act (one NZ headline in 2017 screamed “MPs’ massive pay rises unveiled” with the accompanying article noting a relatively small 2.25% increase). Much of what social media will say will probably be unrepeatable.
We may not be dipping quill pens into inkwells but we will easily compete with our 19th century forebears in putting together prose as purple as they managed.
For any other group of senior professionals in the country holding their pay at 2017 levels through to today would be inconceivable. However, we are talking about politicians so maybe the rules have to be different.
It is unfortunate that we find it virtually impossible to discuss MPs’ pay in any sort of fair and reasonable manner. The current system appears to work well for the other groups under the Remuneration Authority’s purview (judges, the Governor General, other senior public offices) so perhaps just tweaking the existing rules can improve where we are currently at – and that could well be very good for our country.
John McGill is the chair at Strategic Pay. www.strategicpay.co.nz
