The power, glory and a six-figure salary

PAY peanuts, you get monkeys. But what happens when you feed monkeys caviar?

PAY peanuts, you get monkeys. But what happens when you feed monkeys caviar?

PAY peanuts, you get monkeys. But what happens when you feed monkeys caviar?

And so seems to go the calibre of debate about this week's recommendation by the Remuneration Tribunal that federal backbenchers get a $44,090 pay rise to bring their base salary to $185,000.

How do you even begin to decide how much someone should be paid? Economic theory says workers should be paid according to the value of their marginal product: the value created when factory workers combine their labour with the factory owner's machinery. This theory works well when you're making widgets.

One can easily deduct from total profit a reasonable rate of return for the owner of the land and capital, along with the cost of other direct inputs to the production process, and arrive at an estimate for labour costs.

And if that all gets a bit sketchy, a firm's owner can simply look at what the going rate is for other factory workers what its competitors are paying.

But it gets harder when the product being manufactured is a less quantifiable one like, say, producing an efficient and effective democracy. Given there is only one federal government in Australia, making a comparison is difficult.

The closest proxy is to try and find work of equal skill level. The tribunal did this by commissioning a study by the executive remuneration consultancy Egan Associates, who asked MPs what jobs they had done before entering Parliament and what jobs they felt were most comparable to being an MP.

Comparable jobs were deemed to be that of middle-ranking public servants lawyers local government councillors and senior executives in middle-ranking businesses, all of whom were paid, on average, between $200,000 and $300,000.

So while the new $185,000 backbencher base salary is nearly three times the average full time wage of about $70,000 it is within the ballpark for similar work in the private sector.

Another economic argument as to why backbenchers should be paid more is that of compensatory pay for uncomfortable or unpleasant aspects of the job. Backbenchers spend a lot of time away from their families, travelling between their electorates and Canberra, and attending hearings for parliamentary committees all over the country. It can be a hard slog.

Egan Associates' survey found that 90 per cent of MPs say they have ''too little'' personal time. Join the club, some might respond.

At the end of the day, even this doesn't capture it. Politicians don't do what they do for the money. It's nice to think many do it as a calling to public service, to help their communities. Perhaps it's more realistic, though, to think they do it for power and status.

Most politicians nowadays start their careers serving time in political party head offices, or as staffers for parliamentarians. They work their way up the party ladder, wheeling and dealing towards preselection and, ultimately, government.

If we are to break the stranglehold of the career politician over Parliament and attract more people with real-world experience into office, we need to make sure money is not a potential deterrent. Paying MPs a salary in line with equivalent private-sector positions, then, makes sense.

Front-loading financial rewards into a politician's base salary, rather than in retirement perks linked to length of service, also breaks the incentive to stay in Parliament simply warming seats.

Parliament needs more politicians with a greater concern for legacy than political longevity.

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