- by: Adam Creighton From: The Australian May 04, 2012
As Australians worry about their jobs and the government scrounges around for savings, department heads in Canberra are about to receive whopping pay rises.
The head of the Department of Climate Change — one of many departments of dubious value — is set to earn at least $700,000 a year by 2014, a 39 per cent pay rise in two years.
In March the Remuneration Tribunal promulgated “necessary” pay increases “substantially above the current levels” for all 20 permanent department heads.
The secretary of the Prime Minister’s department will get $825,000 a year, more than any other and a 50 per cent pay rise.
These increases are preposterous. For instance, the head of the US Treasury earns less than $200,000 a year and the Bank of England governor is paid about pound stg. 310,000 ($487,000). These are roles where the need to attract talent is surely at least as pressing.
Evidence that public servants have been leaving in droves for better conditions elsewhere is non-existent. This is no surprise: security, generous superannuation and travel allowances, perceived prestige and the interests of individual workers count for a lot when choosing careers.
These gouges are small if painful in the universe of taxpayer rip-offs; government spending is about $370 billion a year. But they reflect a costlier trend.
In the decade to the end of June, the Australian Public Service grew 39 per cent to 166,495, close to twice the rate of growth of Australia’s labour force. That number excludes all the bureaucrats, teachers and police state and local governments employ. This is self-evidently excessive.
The profusion of senior executive service personnel, the 2790 bureaucrats in Canberra who typically earn between $200,000 and $360,000 a year, is even starker. Their number remained broadly flat between 1984 and 2001, but since then their ranks have almost doubled. Entire suburbs of Sydney and Melbourne are paying tax to support these jobs.
The Remuneration Tribunal called this “a serious problem” requiring “specific action”. Yet nothing substantive has been done to slow the relentless expansion.
The ballooning bureaucracy is not only a growing direct cost to taxpayers. It retards the Australian labour market too, sucking the intelligent and educated into roles that add zero or negative value to society. Most public servants would be far better deployed in jobs that provide goods and services people want to buy. This cost is difficult to calculate but it is massive because the public sector has grown so large.
The tribunal says its new remuneration levels are necessary to “recruit and retain people with the necessary capabilities”. This argument is an irritating furphy. On the contrary, public sector salaries have become so high that only the biggest private firms can hope to compete with them.
Australia’s small and medium firms don’t have any hope of competing with public sector salaries. Starving these firms of educated workers is all the more foolish given their success or failure will guide Australia’s productivity and wealth in coming decades.
Causation runs the other way too. The public service has become so large and top-heavy with overpaid bureaucrats that private salaries are being driven up to giddy heights. The private sector has to offer more money because it cannot guarantee security. Ultimately, this makes consumer prices higher and profits lower. Remuneration in the public sector has lost its moral compass too. As the latest taxation statistics show, 90 per cent of taxpayers have taxable incomes of less than $100,000 a year. If any of these people refused to pay tax because they judged that having 118 people earning more than $280,000 in the departments of climate change and sustainability, for instance, was absurd, they would go to prison. However offensive some pay packets in the corporate world might be, shareholders could still sell their shares.
Thomas Jefferson said the natural progression was for liberty to yield to ever-expanding government. More than 200 years have borne him out, but that doesn’t mean our leaders shouldn’t try.