"However, if some public sector leaders wish to leave the public service for non-monetary reasons, should those who stay benefit indiscriminately from increased compensation? Are many of our top public leaders leaving the public service due to uncompetitive compensation? .... Some may choose to move on after completing their "national service" to successful private sector careers and compensation is unlikely to be the main driver".

Well said. :-) This whole argument about increasing pay to retain talent in the Admin Service is quite disingenuious. It's actually quite sad. :-(

The whole point about salary should really be about "how much is this job worth"? KTM believes in the free market. Singaporeans should be able to decide how much the want to pay their political leaders. If they pay too little and they get monkeys, that's their choice. That's what democracy is about. It is quite clear to the KTM that there is hardly any support for the upcoming salary hike.

"It's actually quite sad. :-("

Ben wonders what the KTM is really sad about. Is KTM sad about the lack of arguments for the pay hike, the poor arguments, or the later part of his comments regarding democracy and free markets?

You know whomsoever thought you can buy people off with money alone is right, economics-wise. Except that the person was sleeping during the economics class when they were teaching the 'diminishing returns' bit. At a million a year, each additional dollar you pay gets you negligibly more talent.

Seriously, if you can't buy the talent you want for a million a year, you think two will tempt them? A billion, maybe, but even so, not that much more compared to what you fork out.

And of course, once you factor in all the negative side-effects, raising the salary starts to make ZERO economic sense. Dare I even say, the decision that makes the most economic sense is to CUT the pay.

Let's see how many of them leave. (Test 1)

After that, let's see if the performance is impacted drastically after they leave (give time for the replacements to get used to their job, but if there's negligible retraining hit after they leave, it only goes to show that the position is a perfect waste of resources). (Test 2)

Now, *that* will be a true test of their money buys talent theory.

OK, that's enough free-market ultra-libertarian nastiness for today. I have hit my quota.

KTM:
No need to be sad lah. Since when did free market principles apply to the public sector in any country, anyway? :)

Ben,

The KTM's answer to your question is here.

RSE,

"Since when did free market principles apply to the public sector in any country, anyway?"

Good point. :-)

To RSE,

I like your idea of cutting the salary of the admin service and monitor the number of people leaving and if the public service performance really deteriorates. In theory this is beautiful but in practice it will be a disaster. Firstly, such experiments might take too long for any effects to be seen. Most of the public service decisions have long term effects unlike a company where the bottom line is visible on an annual or even quarterly basis. Next, if the public service really does deteriorate, what is Singapore going to do? Can we afford to lose out on that few year lead that we currently maintain on our competitors?

Sure, there are many examples of Ministers taking significant pay cut to join the civil service (Dr Vivian Bala, Dr Ng Eng Han etc.) How about others like Mr David Lim? He left civil service to join NOL (which is a GLC.) Though he was paid more in NOL, his stint was short. Why did he step down from NOL? Did NOL perform under his watch? Private enterprises are able to pay more because they are exposed to higher risks. Chances of getting ousted or asked to step down for weak performance is significantly higher - unlike the Ministers who seek a mandate once every 5 years (also the quality of the election, choices available to the electorate etc need to be taken into consideration. But that's another topic altogether.) So it begs us to ask if the top civil servants like Mr David Lim really worth all these mojo? The top earners in the legal, accounting, etc professions rotates on a regular basis. 1 year you are the top dog, the next year you are out. They are also subject to far higher risks (e.g. bankruptcy etc.) Has all that been factored into the benchmarking?

I look forward to the day whereby Singaporeans who are really passionate about serving the country stepping up and serve for the sake of serving. Quote the example of Mr Bloomberg, mayor of NYC. He took up the position of NYC for remuneration of just $1.00 and riding the subway to work etc. Of course Mr Bloomberg is already a billionaire and has little need for more $$$ and it is naive to expect someone to work for free. But I do not see that passion to serve. I for one, would gladly volunteer myself for civil service work, if the government is prepared to match my pay. (PS: If I qualify for the civil service in the first place)

Mr Economics:

Don't worry, I really do know what I said is 'theory'. Economics is only good for explaining things, but not so hot with prediction or prescribing things, it's based on way too many ridiculous assumptions.

Unlike hard-core libertarians I KNOW exactly when economic theory stops. ;)

However, the problem I find with most Singapore government policies out-of-the-box is that they are all catered to short-medium run gain or the latest fad in governance (stop at two, anybody?), even though they have long run repercussions... but that's another story. So I doubt any theoretical handover would have those effect. Anyway, if what you say is true, theoretically, it's a GOOD thing, because newbies will have time to learn by the time any effects kick in.

And frankly, public service deterioriation is overhyped. Most people-based systems have a pretty wide margin of tolerance (self-regulation via checks and balances y'know, oh wait... this is Singapore).

To the readers of the blog, does anyone know why MM Lee is paid $2.7M above the $1.2M? If the benchmark is $2.2M, isn't $2.7M more than $2.2M? Is it because MM Lee is also Chairman of GIC? Therefore, a minister can also be paid more than their ministerial salaries?

http://www.channelnewsasia.com/stories/singaporelocalnews/view/268475/1/.html
And when it comes to benchmarking, Mr Lee said his own annual income, which is S$2.7 million, is a fraction of what the top managers in the Government of Singapore Investment Corporation (GIC) earns.

Sze Meng,

"To the readers of the blog, does anyone know why MM Lee is paid $2.7M above the $1.2M?"

$1.2 million is the benchmark for MR4 (formerly called Staff Grade I). There are actually higher salary grades than MR4. The KTM would venture to guess that there must be MR1, MR2, MR3 as well, and maybe even an MR0. The MRx's where x > 4 are some multiples of MR4, or something like that.

By protocol, MM is higher than a full Minister, and so are the President, PM, SM and DPMs. Higher rank means higher pay loh. Same for the judiciary. CJ get higher pay than Judges of Appeal who get higher pay than the Judges (who the KTM believes are pegged to MR4 or something like that).

KTM - thanks for the clarification. So it seem that our President, PM Lee and SM Goh are paid more than $2.7M on an annual basis because I think only these three individuals are "ranked" higher than the MM.

I think that one of the main complicating factors is that it is nearly impossible to even somewhat accurately estimate the effects of a pay rise on the quantity and quality of talent that joins our government, as well as the values the talents bring to the government.

Regardless of how well those working in the public sector is paid, additional pay will always serve to increase the supply of labour willing to join the public sector.

On the other hand, selective recruitment is another important part of the process that leads to a talented public service workforce. Increasing monetary remuneration poses problems, problems which are described in economics as resulting from adverse selection and moral hazard.

While all of us can make qualitative and comparative claims on whether the pay rise is justified, there seems to be a lack of the quantative estimates of the consequences. There is too much subjective evaluation that can be fudged. Yet, I have not seen any objective evaluation model being used to provide rational arguments on this issue.

Without an objective method of evaluation, arguments can be twisted to suit the interests of the powerful, and any subsequent substantatiation might merely be a technique to mitigate objections, gain harmonious compliance, and to elevate the perpatrators to a moral high ground.

Without an objective method of evaluation, we might just be running in circles, like hamsters blindly on a running on a running wheel to power the dynamos of their evil masters.

*there are many who are extremely dedicated to their job/career role, in exchange for a decent living. the material benefits might induce some to pursue a certain career, but no matter what career they pursue, they put their very best into it.

roastbird - I agree with you the need for objective assessment and having the right fact (not just any fact such as the spread of high vs low performers in the ministerial ranks) to support the key assertions. This is why I wrote my article on "Information needed to support the closing of gap for Ministers' compensation"

Having the RIGHT, OBJECTIVE and QUANTIFIABLE facts are critical to convince people of the pay raise.