(I don’t have time to write a coherent post, so I’ve just written up a few comments I had in response to the latest furore over ministerial salaries.)

Not too long ago, a stately professor giving a seminar in theoretical physics on this campus revealed a graph showing how experimental and theoretical values agreed pretty well with a straight line model passing through the origin. This then prompted this experimentalist’s riposte from the floor:

Q: I don’t see any units on the axes. What’s the gradient of the graph?
A: The gradient is 1.
Q: Yes, but in what units?

The point of all this, of course, is that all straight line graphs are equivalent to this graph with a proper choice of units1, and the theorist didn’t immediately understand what the experimentalists’ fuss was all about. But the theorist isn’t completely in the wrong - many theoretical analyses work much more smoothly when more suitable units are chosen. For example, molecules are typically 0.000 000 001 meters long, typically take 0.000 000 000 000 1 seconds to move, and involve changes in 0.000 000 000 000 000 001 joules of energy.

Carrying around superfluous orders of magnitude often merely obscure the points of comparison being made. In this vein I have chosen more convenient units to analyze civil service salaries apart from the S$/yr.2 I hereby define a more convenient salary unit, the standardized peanut, which is defined as S$600,000 per year.3

The peanut is a convenient unit of measure, since it removes the confusing conflation of currency and cash flow units. (see footnote) In particular, much of the available rhetoric tends to compare annual salaries of top civil servants with monthly salaries of everyone else. Such intellectual laziness, if not outright deceit, will hence be eliminated with the adoption of a common unit of the standardized peanut.

From a recent CNA news article, I therefore learn that MM Lee earns 4.5 peanuts, and that all civil servants from the parliamentary secretary level upward get paid a mere 77 peanuts in total.

When all salaries are converted into peanuts (and various metric equivalents, such as the centipeanut = 0.01 peanuts) per year, the most relevant quote from the news becomes this:

“So for the average family earning [3-6 centipeanuts], we are talking of astronomical figures but for people like me in government, to deal with the money which we have accumulated by the sweat of our brow over the last 40 years, you have to pay the market rate or the man will up stakes and join Morgan Stanley, Lehman Brothers or Goldman Sachs and you would have an incompetent man and you would have lost money by the [thousands of peanuts],” said Mr Lee.

In this context, we see that raising ministers’ salaries from 2.0 peanuts to 3.7 peanuts correspond to an 83% rise; proposals to increase welfare handouts from 5.2 millipeanuts to 5.9 millipeanuts per year are merely a 12% rise.4 Widening the income gap, then, appears to not only be the callous side-effect of globalization, but also deliberately designed government policy to suppress the downtrodden and elevating the people it thinks worthy of doing so.

The salaries of top civil servants are periodically revised by benchmark values drawing comparisons with “analogous” private sector renumerations. Alex Au rightly questions the fundamental assumptions in these benchmarks; his critiques remain one of the handful of analyses that go beyond reflexive minister-bashing and the same tired rhetoric. After all, the benchmarks are blatantly and hopeless biases in favor of those who are best paid, who are not necessarily the same people year in, year out.

Nonetheless, Alex Au doesn’t push his point home enough. Not only are the premises of benchmarking salaries flawed, there is not a conclusive correlation between salaries of top executives and the “quality of leadership” they provide their respective organizations. Entrepreneurial executive officers often do not get paid a single cent until their business take off. Google’s top executives earned a paltry 2.5 micropeanuts each. 5 In comparison, Lay Skilling was paid up to 396 peanuts as CEO of Enron.6

Ultimately, no valid criticism can be made of the renumeration procedure for politicians and top civil servants without questioning the meritocratic foundations upon which the salary benchmarks are justified. After all, the civil service routinely takes in something on the order of the top 0.2% of every cohort7, based on top scorers on standardized examinations. Assuming this is true, how could they be paid anything less than their due worth, i.e. on a level comparable with the “top” private sector salaries?

(Comment)

It strikes me as ironic that MM Lee says that Singapore can’t afford a “revolving door” style of governance, yet very few civil servants actually keep their portfolios unchanged for more than two years, let alone five.

References

  1. Asha Popatlal, Channel NewsAsia, “S’pore cannot afford “revolving door” style of govt: MM Lee“, April 4 2007.
  2. Alex Au, Yawning Bread, “Singapore government promotes obscenity“, March 2007.
  3. Alex Au, Asia Times, “Singapore’s ‘fat cat’ ministers to get fatter“, April 5 2007.
  4. Barbara Ortutay, Seattle Post-Intelligentser, “Google CEO, founders get $1 salary“, April 4 2007.
  5. CNN, “The day in numbers: 24 years, 2 months“, October 24 2006.
Footnotes
  1. A proper choice of units can include an appropriate choice of zero, such as for quantities like energy and temperature.↩
  2. Honestly, what can a miserable S$1 coin buy nowadays?↩
  3. Note that the peanut is not a unit of currency, but rather a unit of monetary flux, or cash flow.↩
  4. For those of you who don’t get the irony, this particular analysis is independent of the choice of units. Then again, I’m not sure if the irony-oblivious are the type to read footnotes either.↩
  5. Each of them got paid $1 in salary, excluding other compensatory renumeration. Conversion rate used was $1 = S$1.50. Arguably this might be misleading, since Google’s top execs are sitting on all sorts of stock options and other unexercised benefits, but then again as Alex Au points out in his Asia Times article, the Singapore government has been extremely quiet about the fact that top civil servants begin receiving pension payouts once they hit 55 in addition to any salaries that they might already be drawing.↩
  6. Conversion rate used was $1 = S$1.80, reflecting the higher exchange rates in 1998-2001, the golden age of energy deregulation à la Enron.↩
  7. This figure is a guesstimate from assuming an intake of 100 government scholars a year who eventually make it to the Admin Service or something of equivalent stature, out of a batch of approximately 50,000 students a year.↩