Would Paying Politicians More Attract Better Politicians?

Singaporean Prime Minister Lee Hsien Loong at the G20 Cannes summit in 2011. (Photo: Pablo Manriquez)

Whenever you look at a political system and find it wanting, one tempting thought is this: Maybe we have subpar politicians because the job simply isn’t attracting the right people. And, therefore, if we were to significantly raise politicians’ salaries, we would attract a better class of politician.

This is an unpopular argument for various reasons, in part because it would be the politicians themselves who have to lobby for higher salaries, and that isn’t politically feasible (especially in a poor economy). Can you imagine the headlines?

But the idea remains attractive, doesn’t it? The idea is that, by raising the salaries of elected and other government officials, you would a) signal the true importance of the job; b) attract a kind of competent person who might otherwise enter a more remunerative field; c) allow politicians to focus more on the task at hand rather than worry about their income; and d)  make politicians less susceptible to the influence of moneyed interests.

Some countries already pay their government officials a lot of money — Singapore, for instance. From Wikipedia:

Ministers in Singapore are the highest paid politicians in the world, receiving a 60% salary raise in 2007 and as a result Prime Minister Lee Hsien Loong‘s pay jumped to S$3.1 million, five times the US$400,000 earned by President Barack Obama. Although there was a brief public outcry regarding the high salary in comparison to the size of the country governed, the government’s firm stance was that this raise was required to ensure the continued efficiency and corruption-free status of Singapore’s “world-class” government.

Although Singapore recently cut its politicians pay drastically, the salaries remain relatively very high.

But is there any evidence that paying politicians more actually improves quality?

A 2009 paper by Claudio Ferraz and Frederico Finan (abstract; PDF) makes that case:

In this paper, we examine whether higher wages attract better quality politicians and improve political performance using exogenous variation in the salaries of local legislators across Brazil’s municipal governments. The analysis exploits discontinuities in wages across municipalities induced by a constitutional amendment defining caps on the salary of local legislatures according to municipal population. Our main findings show that higher wages increases political competition and improves the quality of legislators, as measured by education, type of previous profession, and political experience in office. In addition to this positive selection, we find that wages also affect politicians’ performance, which is consistent with a behavioral response to a higher value of holding office.

And a new working paper by Ernesto Dal Bo, Frederico Finan, and Martin Rossi (abstract; PDF) finds that the quality of civil servants is also increased when higher wages are offered:

We study a recent recruitment drive for public sector positions in Mexico.  Different salaries were announced randomly across recruitment sites, and job offers were subsequently randomized.  Screening relied on exams designed to measure applicants’ intellectual ability, personality, and motivation.  This allows the first experimental estimates of (i) the role of financial incentives in attracting a larger and more qualified pool of applicants, (ii) the elasticity of the labor supply facing the employer, and (iii) the role of job attributes (distance, attractiveness of the municipal environment) in helping fill vacancies, as well as the role of wages in helping fill positions in less attractive municipalities.  A theoretical model guides each stage of the empirical inquiry.  We find that higher wages attract more able applicants as measured by their IQ, personality, and proclivity towards public sector work – i.e., we find no evidence of adverse selection effects on motivation; higher wage offers also increased acceptance rates, implying a labor supply elasticity of around 2 and some degree of monopsony power.  Distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities. 

I am not willing to argue that paying U.S. government officials more would necessarily improve our political system. But, just as it seems a bad idea to pay a schoolteacher less than a commensurately talented person can make in other fields, it is probably a bad idea to expect that enough good politicians and civil servants will fill those jobs even though they can make a lot more money doing something else.

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  1. D says:

    It isn’t that the quality of representation is bad, it’s that the people have a the feeling that they aren’t represented well.

    The two party system makes it easy for the economic powers-that-be to fund both sides of the aisle. This results in a never-ending back-and-forth political signalling that never actually goes anywhere.

    Change the electoral system to one that doesn’t result in only two parties.

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  2. Eric M. Jones. says:

    I think if we pay our CEOs more they will spend their time trying to run the business better instead of thinking about how to make more money…oh, never mind.

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  3. MikeM says:

    Is this a joke? Any politician can make many times their salary in awarding of contracts or “consulting” as a side business … at least until they’re indicted.

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  4. ZNS says:

    It’s a complex question. One side of it would suggest that paying them below the market wage would insure that the only people who participate in politics do so because of their genuine interest in public service.

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  5. Steve Gibson says:

    In the US the cost of running for public office is often multiples of the pay while in office. So, the basis of what constitutes compensation should be better defined. We need a variable loosely defined as “increase in wealth as a result of holding office.” Also, positions are taken as a springboard to jump into other positions so pay might not be a factor at all.

    The key question though might also apply to the corporate world. Salaries levels are set too maximize competition for the position and are not based on actual performance which comes later. So , until we can peg pay to actual performance, reason would have it that the politician or executive would perform the minimum amount necessary to keep his job as there is little added compensation for exceeding base expectations.

    My suspicions are. in politics or business, that pay and performance are loosely correlated at best, but I would yield to available data.

    Could the efficiency and “corruption free” status (if true..) in Singapour be from other factors such as harsher than usual punishments for criminality?

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  6. Jay says:

    No. Our system has wealthy individuals running for positions having salaries that are only a fraction of the amount spent running for the position. The economic incentives provided by the salary are clearly irrelevant, otherwise why would the politicians (and those seeking their election) be willing to spend more than the positions pay? Clearly it must be the “power” (meaning the ability to provide favors to those willing to return the favor through campaign contributions or other forms of allowable payments — even if those payments are received after leaving office) that attracts people to political office, not the salary paid by the government.

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  7. Kevin H says:

    I believe that is not a linear correlation as it is an U shaped curve. Better salary may attract people with higher education, but too much money can at the same time create division among the public servants and the people they serve. I would like to see the cases of Sweeden, Denmark and Finland included in this ecuation.

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  8. Breno Lara says:

    All this seems to make sense. However, I guess both researches are kind of misleading. What is the point of measuring the quality of any services by the background or IQ of the managers/politicians? The real point is: does a better background correspond to a better service?

    In a system like ours, here in Brazil, that provides high incentives to cheating, I doubt that could be true. In fact, when integrity is missing, a better background or IQ actually make things worse!

    Is there any research connecting these points?

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