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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.