Leaders
Face a pay-cut
Longer term question: With economics so irrevocably changed, will there be eventual review of the high-pay structure that was drawn up in a bygone strong growth era? By Seah Chiang Nee
May 12, 2003

IN a changed - and weakening - economy, high remuneration of ministers has come under increasing pressure from hard-hit Singaporeans and may be in for a second cut in two years.

These earnings, among the highest in the world, were calculated from high-earning professionals in the private sector and drawn up in an era of strong growth that is unlikely to return.

Last week, Deputy Prime Minister Lee Hsien Loong gave a hint of possible action when he prepared his people for more belt-tightening because many SARS-hit companies were suffering.

Ministers, he added, must lead by example and prepare themselves for another wage freeze - or even a pay cut.

The last cut was in November 2001 when their salary was reduced by 10% for one year, which was subsequently extended until December this year. Together with bonuses, the reduction was as high as 17.3%.

Reflecting public sentiments, opposition figures had lately been calling for a government pay-cut as a way of showing it is ready to share the people's pain.

It may now come as soon as next month, just before the state's National Wage Council - the advisory body on wages - announces its recommendations for workers in general.

People are speculating how deep it will go, but it will unlikely induce extreme hardship. The reason is that Singapore Inc pays its Cabinet and top civil servants the highest rates in the world.

The annual salary of Prime Minister Goh Chok Tong, for example, is S$1.74mil (US$980,000) compared with President George W. Bush's US$400,000. Junior ministers take home about S$870,000 a year.

To me, the whole exercise is not just a simple matter of "bad times cut, good times restore." The changed economy may call for a review of the whole structure, if not now, later.

Singapore has a unique system of selecting its political leaders not from a process of party election combats like in other countries.

Ministers were generally not People's Action Party (PAP) loyalists who had risen through the ranks of a thousand campaigns.

Many were co-opted from the outside, without political affiliation or experience but with achievements as business executives, professionals and academics.

Others were brilliant scholars who rose through the armed forces or trade unions. But loyalty to the PAP has never been a prerequisite
.
Lee Kuan Yew and now Goh Chok Tong want the best brains in the government, the civil service and armed forces.

Since politics has not been an entry point - and may in fact serve as a disincentive - for the elite from joining the Cabinet, the leaders consider another perk: financial reward.

Unless Singapore is prepared to pay premium wages, it can lose whatever has been achieved, Lee believes.

"That period of revolutionary change that threw up people with deep conviction and overpowering motivation is over.

"We are in an era of high growth, with fortunes being made by the enterprising," he added.

"Do not believe that we have escaped the problems that have plagued the region - corruption, collusion and nepotism. Our market-based pay and allowances will give no excuse for any slippage."

This line of argument has been generally accepted.

After all, Singapore has consistently scored high in international surveys for clean, corruption-free government, which is partly attributed to high wages.

Singaporeans are, however, against the "excessive" amount involved. Make it measure up with the developed countries, yes, but not so much in excess of them.

For some, it appears ridiculous for the environment minister of tiny Singapore to earn more than the president of the world's mightiest power of 280 million people and the biggest economic entity - with a finger on the nuclear button.

With changed fundamentals, Singaporeans are watching to see if the government will also restructure this pay policy and, if so, how it will do without losing its ability to attract talent.

One way suggested in some informed Internet messages is to follow the general flexible wage policy suggested for society where earnings are pegged to the economy and the worker's personal performance.

There are two components of income - a basic salary and annual bonus. Like everyone else, Cabinet pay should be able to rise and fall to reflect economic growth.

One suggestion calls for an additional retirement benefit that rewards ministers who retire in accordance with his term and achievement of service to the country. This will ensure security in their sunset years.

At any rate, ministers' real earnings should not return to what they were as long as workers are experiencing high unemployment and depressed wages.

The economy, upon which government salaries are based, has been irrevocably changed - so, it is argued, must the structure follow suit.

PAP Backbencher Inderjit Singh (Ang Mo Kio) suggested in an interview with the New Paper that the whole system could be restructured in the longer term.

Salaries for ministers and top civil servants were pegged to private sector wages and the latter were no longer that high, he said.

"The formula is not a very accurate measure. It is effective in attracting talent, but not in sending the right signals to the people," he added.

(The government salaries, which came into effect in June 2000, were calculated according to a complicated benchmarking system based on the income of the top eight earners of six well-paid professions.)

Most citizens see a problem in this. It's neither transparent nor understandable.

No one can tell what these top professionals earn except the income tax authorities - and they're not telling.

But more important is public sentiment. It is suspected that the majority of Singaporeans disagree with this policy although they tolerate and accept it as a price to pay for good governance.

This was tested in the 2002 general election when the PAP scored one of its biggest margins in at least 17 years.

But as people's hardship grew, so has vocal resentment among the critics who say this is promoting a them-and-us rift between well-paid leaders and poorer citizens.

Others complain the policy deals voluntarism a blow by hinting that top-rate people will shun public service unless they are paid right.

Now with a large number of SARS-hit firms putting workers on a partial no-pay leave, cutting wages and laying off workers, the government appears to be ready to act.

(This article was first published in Sunday Star on May 11, 2003.)