Speaker Sir, When this topic on market benchmarking of ministerial and civil service salaries against the top private sector earners was first debated in Parliament in 1994, I spoke against it.
13 years after Parliament agreed to the salary benchmarks, the debate continues over whether ministers are being paid too much. The issues I spoke on at the debate remain relevant to date. This is blatant evidence that the public, like me, was not and is not convinced that the salary benchmark is fair and just! I see no point in wasting public resources debating on this salary issue every few years if the sole purpose of having this supposedly “debate” is just to pacify the people that the government has given it fair thought before approving the high salaries.
While the government can claim to have secured the mandate of the people at the recent election last year and therefore has the right to pay itself based on the terms the government deem most suitable, I wish to remind the government that I do not think Singaporeans have given the government a blank cheque.
Given the public disquiet and debate outside this house after the intended salary revision was announced, the government should seriously consider setting up a panel for public consultation and coming up with a remuneration formula for the public service that can be adhered to, is practical, and deemed reasonable by the public.
Concerns about Benchmarking against private sector
Many people are not convinced of the rationale of benchmarking the current salaries for the Administrative Service, including the Ministers, against the top earners in the private sector.
One concern is that it is volatile - this is inevitable when the variable component of private sector wages such as bonuses and stock option gains are taken into account in the setting of annual wages. In addition, the benchmark not only considers the earnings of Singaporeans, but also those of Malaysians and Permanent Residents.
While most of the individuals in the benchmark change every year, the level of wages taken into consideration will most likely increase over the years. This is largely due to two factors. Firstly, a larger income gap due to globalization will result in more outliers earning very high incomes. Secondly, the embrace of foreign talents in Singapore will result in a greater pool of high wage earners that will qualify under the benchmark criteria, alongside potentially increased wages. Even if the government takes an average from the range within the benchmark, it may not be representative of the general trend of income earned by Singaporeans. In a worse scenario, such a benchmark may even encourage money-minded civil servants to focus on policies that ensure the existence of a pool of top earners that satisfy the benchmark criteria.
Apart from the potential embarrassment from an escalating benchmark that is headed for alarmingly high levels, it is also highly ludicrous that senior civil servants are consistently one of the highest paid in the workforce. Remuneration in the private sector is volatile and employees are subject to stringent performance reviews. For instance, stock option gains are possible only when the individual made a correct investment decision. More often than not, such individuals have also helped to improve the value of the company. However, human beings do not always make the right decisions throughout their entire life. By benchmarking civil servants’ annual pay against individuals who have performed well during that year, there is an implicit assumption that civil servants and Ministers never make incorrect decisions - but are they truly super human beings forever error-free?
In addition, is there any job in the private sector that can guarantee that an employee will always be amongst the highest paid in that sector regardless of the performance of that employee? There is much less job security in the private sector, and even top performers face continual and fierce competition.
Civil servants have an advantage as they are shielded from competition by foreign talent. Ministers, too, are guaranteed at least 5 years of job security from one election to the next. Moreover, for the ruling party, there is also the flexibility of changing election rules in their favor to significantly increase job security for their Ministers. After all, didn’t SM Goh and MM Lee previously admit that the GRC enables them to bring in Ministerial material?
It is also ironic that we are consuming taxpayers’ money and resources discussing how much more of a fraction of a million to pay civil servants and Ministers, while we haggle over additional tens of dollars to hand out to our needy and disadvantaged citizens.
Our Proposal
According to a 2005 report by the Department of Economic and Social Affairs, United Nations, the Singapore civil service has some of the highest paid civil servants in the world. Our government holds the view that this will ensure a clean, competent and effective civil service. However, the facts show that other countries with lower paid civil servants are also able to enjoy such qualities.
Based on the Corruption Perceptions Index (CPI) and Global Competitiveness Index (GPI), Singapore ranks below Finland and Denmark for 2005 and 2006. However, the governing of a country should not only take into account these 2 factors. A more important factor that directly affects the lives of every Singaporean living here is the quality of life. A survey that evaluates 39 quality of living criteria, including political, social, economic and environmental factors, personal safety and health, education, transport and other public services, found in 2006 that Swiss cities have topped the annual survey again, while Singapore, with its highly paid and thus highly competent and clean government, ranked best only among Asian cities but was 34th in the world (ST 2 April 2007).
Based on the above facts, it would be interesting to know how much the civil servants are paid in countries such as Denmark, Finland and Switzerland, just to name a few. According to a United Nations report, the Switzerland Federal Office of Personnel revealed that the basic remuneration of civil servants range from 55,000 Swiss Franc to 321,000 Swiss Franc in 2006, which based on an exchange rate of 1.25, is about S$69,000 to S$402,000. Good performers receive merit increments of up to 6%, while worst-performing staff may get a decrease in salary. Although bonuses can reach 12% of salary for outstanding performance, and residence and overtime allowances are paid, it still seems that the highest paid Swiss civil servants receive a lower salary than what Singapore civil servants and Ministers receive. (Note: they have neither a prime minister nor a president)
To cite another example, a 2006 United Nations report listed that the lowest monthly civil service salaries in Finland are 1,200 euros, while the average is 2,600 euros for all wage earners. Even if the purchasing power parity is taken into account, it is highly likely that our civil servants here have a much better deal. Based on such evidence, we believe that there is no need for enormously large salaries to attract and retain the right talent to run a country in an efficient and corrupt-free manner.
The Workers’ Party is of the view that the government should consider modifying the current benchmarks in place of a more equitable and sustainable one. We suggest that the benchmark should take into account international practices. In particular, countries that could be taken into consideration will be those just cited such as Switzerland, Denmark and Finland.
Denmark, like Singapore, employs a pay adjustment scheme to ensure that the pay of state employees in general and over a long period of time develops in parallel with the wages and salaries in the private sector. For the Danish, their pay adjustment scheme automatically adjusts the central government pay development to the private sector pay development, but subject to a certain time lag.
Hong Kong also tried to maintain their civil service pay level with the private sector, but they only maintain the “broad comparability” and not any explicit link. Unlike Singapore, they all do not have a sure-win formula that ensures civil servants always have the best deal by benchmarking specifically to the top few earners.
While we accept that Basic salaries may be benchmarked broadly with the private sector in line with international best practice, we believe that Performance Pay should also be introduced to establish a visible correlation between performance and pay. Currently, the civil service has no financial bottom line in ensuring good outcomes, although part of the senior officers’ salaries is linked to GDP growth. (Defence Minister Teo Chee Hean - ST 3 March 2007)
Sir, whilst it is necessary to link a percentage of salaries to performance, it is also imperative to provide a performance regime whereby it is possible to discriminate performers from non-performers or under-performers, and to reward them accordingly. In this respect, I welcome the adjustments in civil service pay structure just announced by the minister. A performance-related pay system requires a comprehensive and objective system of measurement. In particular, performance appraisals have to be more vigorous and transparent to the public - something that the public can identify with. Variable bonuses should only be given to involved civil servants and ministers if the key performance indicators (KPIs) of the respective ministries have been met.
We recommend having different KPIs for different ministries from time to time so that Ministers and civil servants can concentrate their efforts in deriving the right policies for Singapore in their respective areas. For instance, some possible KPIs that the government can consider adopting at this point in time are:
- a 5% drop in the Gini coefficient reflecting efforts to reduce the income disparity by the PM
- a 2% increase in the proportion of trips taken on public transport during the peak hours reflecting efforts to make public transport a choice mode by the MOT
- a 5% increase in the total fertility rate reflecting efforts to address the ageing population by Ministers and civil servants involved in the Committee on Aging Population and perhaps
- a minimum long term unemployment rate reflecting efforts to address structural unemployment by MOM.
By linking variable bonuses to clear and objective KPIs, the government can concentrate on making the right policies for Singapore rather than spending valuable resources and time tracking how much the private sector’s top earners have made each year and how the government should therefore be paid. Such objective short-term goals also track the success and ensure that long-term policies can be gradually attained. In addition, this system will ensure that public officers are both accountable and responsible for the outcome of their formulated policies, and keep the government transparent to the public in terms of its achievements, capability and accountability.
Recruiting & Retaining Talent
Sir, I would now like to move on to the issue of recruiting and retaining talent within the Civil Service.
MM Lee said that it is not possible to hire a foreign talent to run this country because political leaders must have the passion, the commitment and must share the dreams of the people (ST 4 November 2006).
Likewise, such qualities are essential in each and every one of our civil servants. Not everyone is cut out for a career in the civil service, and the loss of able people who lack such qualities is not a loss for our country. In fact, I believe that civil servants with such qualities will never be induced by the attractions of a private career and a private life no matter how great the financial rewards offered by the private sector. More importantly, it is common knowledge that the senior civil servants and Ministers in Singapore are hardly paid peanuts.
Although statistics show that officers aged between 28 and 33 made up more than 80% of resignations in the past 5 years, it is not unexpected that officers will review their options when the scholarship bonds end, the alarmingly high percentage speaks of a bigger problem - that scholarships funded out of taxpayers monies did not attract the right mix of people. According to one such ex-civil servant, the Admin Service was not the best fit for him (ST 31 March 2007). In fact, some who left say they were drawn by the different challenges and new experiences, more so than by the money. The earlier the government comes to terms with this, the better for the people of Singapore.
If the original intention for the scholarship holders to serve as civil servants is not met and the government continues to invest more resources in the same process in the hope for a reverse trend, the government could be wasting precious resources for the wrong reason and expectation. In view of the above, I think more effort should be made to explore other recruitment and screening methods to attract and retain the right fit.
Sir, we agree that public servants should not be expected to make unreasonable financial sacrifices to be in the public sector. However, neither should they be seen being paid unreasonable wages for their contributions. According to the Department of Statistics, the bottom- and top-ten decile of employed households registered an average monthly income of $300 and $6,990 respectively in 2006. Given such statistics, the argument that civil servants make unreasonable financial sacrifices is not convincing.
Even in the private sector, no organization can afford to keep paying increasingly higher salaries just to retain and attract top performers since resources are inevitably limited. Moreover, in the case of public service, we need a different breed of people to come forward to serve; there is simply no point in offering high remuneration just to entice people to serve if what they are interested in is to make more and more money for himself and his family in pursuit of material interests in life. Sir, don’t forget that even if you don’t pay peanuts but pay with a bigger piece, say a banana instead, you can still get a monkey.
In conclusion, sir, the real issue is how to find the right leaders to run Singapore and to ensure that Singapore continues to succeed. Benchmarking the civil service and Ministers salary to the crème the private sector income earners who may or may not be at the same top all the time is controversial and distracting.
