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.

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.



View All Comments »
  1. Martin says:

    There are many types of compensation other than money. For a politician, these include power, influence, ego, “doing good,” deferred compensation (e.g. as a lobbyist) and in the worst case, patronage and corruption. There are also drawbacks already mentioned. I think that $$$ is a small part of the equation.

    Thumb up 0 Thumb down 0
  2. Witold says:

    This theory seems to presume that salary listed is the whole story. But there are at least two additional reasons why listed salary is just a meaningless number:

    1. Elected jobs generally carry very generous benefits packages. Very few jobs require ~150 days per year in office – and that includes 1/2 day Fridays and generous stipends to hire your own staff and fly home each weekend and retirement pensions after only a few years of work. Total compensation packages are much higher than salaries listed.

    2. Some jobs look good on your resume and others do not. A widget maker needs higher compensation because that is all he has, with minimal advancement prospects after their job ends. In contrast, many elected officials end up with lots of very profitable opportunities when they leave. There is no former president of the USA who is not a multi-millionaire as far as I know.

    Thumb up 1 Thumb down 0
  3. William Stuart says:

    I always have trouble with these sort of simple treatments of irrational systems.

    Thumb up 0 Thumb down 1
  4. Bobo says:

    This is an incomplete analysis. I wholeheartedly agree our congress, senate, and President should be paid more. But what is more? How much? And can the salary be based on measurable performance? But the problem between service to the country and higher pay can be balanced with term limits. One term for these guys and they are done. No lifetime retirement salary, no top notch elitist healthcare program. One and done. Now the extra money can allow them to legislate without the distractions of making this a career.

    Thumb up 0 Thumb down 0
  5. Tony J. says:

    I would prefer to focus on politicians that are more qualified. It’s hard to watch elected officials that make statements that are inaccurate because they never learned economics or history, or even geography. How about we require they be trained after the election, and tested. You know, like the rest of us are when applying for a job? Even with the best of intentions, it’s hard to do the right thing if you don’t know what that is, and depend on partisan advice to make those choices.

    Thumb up 0 Thumb down 0
  6. Fabio Cerina says:

    There is actually another paper by Fisman R., Harmon N., Kamenica E. and Munk I. ”Labor Supply of Politicians” (forthcoming in the Journal of European Economic Association) according to which, using data on Members the European Parliament (MEPs), ”[..] high salaries reduce the quality of elected MEPs (as proxied by the quality of the colleges they attended) [..]”. Moreover Hoffman and Lyons (2013) find almost no correlation between salary and politician performance or quality of US governors and state legislators. Finally, using data from the Italian Members of Parliament (MPs) provided by the Fondazione Rodolfo De Benedetti, we find that in the period 1948-2007 the pay of italian MPs in real terms increased by a factor of 12 and at the same time the ratio of MPs with at least an undergraduate degree steadily decreased from 95% to 68%. Broadly, it looks like the sign of the relationship between pay and quality is more likely to be positive at local level than at national level. In a recent working paper “Reward from public office and selection of politicians by parties” (https://ideas.repec.org/p/cns/cnscwp/201414.html) me and Luca Deidda proposes a rationale to these empirical findings. Our idea is that the sign of the relationship between pay and quality of politicians is might be the result of two opposing effects. First, a selection effect, whereby more skilled citizens enter politics, leading to an increase in average quality. Second, an information manipulation effect such that parties have incentive to manipulate information to increase the probability to be elected of unskilled activists, from whom they can extract higher rents. We find that, for a plausible range of parameters values, the information manipulation effect dominates the selection effect when: 1) The cost of manipulating information is low enough (which is the case of Italy according to several indexes of Press Freedom); 2) The degree of awareness of citizens is low enough (which is the case of Italy according to the IPSOS-MORI ignorance index https://www.ipsos-mori.com/researchpublications/researcharchive/3466/Perceptions-are-not-reality-10-things-the-world-gets-wrong.aspx). As far as we accept that manipulating information is easier at the national than at the local level (where citizens have often a more direct knowledge of candidates), our model predicts that the relationship between pay and quality of politicians is more likely to be positive at local level than at national level.

    Thumb up 0 Thumb down 0