Overpaid MPs

Here’s some good evidence that politicians are over-paid. A new study of German MPs says:

The average politician earns more than the average voter, even after controlling for observed characteristics which are commonly identified to affect earnings. Depending on the estimation method and the respective specification applied, the politicians’ wage gap is 70–90% compared to the full sample and declines to 40–60% compared to citizens with an executive position. Hence, we show that the widely used claim that politicians would earn significantly more in the private sector is not confirmed by our data.

Does this apply to the UK? Granted, German MPs earn slightly more than their UK counterparts: the median MP in this data gets £73,000 whilst British MPs get £65738. It's unlikely that British MPs are greatly more skilled than German ones. And their pay is more than twice the median wage of 40-49-year-olds. Even if we apply a graduate premium of 25% to the median wage of 40-somethings, we get a salary of just over £36,000. Which suggests MPs are 80% overpaid.
You might object here that this ignores unobservable facts which affect earnings. It could be that MPs’ ambition, self-control and capacity  for enduring dull work and duller people would cause them to earn big money outside politics. But that requires evidence that there are huge returns to non-cognitive skills.
This raises the question. If MPs were paid no more than their experience and qualifications would suggest (say, £40,000), how would it change our politics? Would it really cause many talented would-be MPs to pursue other careers? And would this be a serious loss anyway?

Comments

[rodney dawkins]

They should be paid double, considering that they are often in control of funds which dwarf board-level business leaders. We should encourage private sector visionaries to go into government and help to re-balance the economy.

[P Wilson]

The lower the pay the more they will identify with the average constituent. When will they stop behaving like they are at school? Half term hols, easter and christmas hols and weeks off in the summer.

[Marcin]

It strikes me that there are two, countervailing considerations:
1) Efficiency wages - by paying MPs more than they could otherwise earn, they have an incentive to avoid scandals, and so avoid scandalous behaviour, such as peddling influence while in office. This is good.
2) Higher wages bias them towards safety. Earning more than they otherwise would leaves them relatively content to try to advance their career within government, without rocking the boat. If they earned less, they would care less about having to exit politics, and take up some other line of work. This might make them more courageous, but would likely also make them more likely to grandstand, in order to gain the attention of a broad swathe of their party, to try to advance their careers that way.

[Keith]

mps are lobby fodder mostly and should be on minimum wage.

Any one mp controls no funds and has no executive responsability unless they are in the Government.

Collectively they can sack the Government despite requiring no formal education and being subject to no retirement age or competency assessment.
It is a odd mixture of enormous power and non existent ability and accountabiity as only the Queen can sack them. ( and they can still come back if they hold their seat after dissolution. )

Paying a median income wage with small supplements for shadow ministers is a fair compromise. Having a better system for selection and ejection would be more relevant to their Job, than quibbling about their pay.

[Gepap]

MP's determine how much MP's will make no? After all, they approve budgets and are in control of their own fate. It is more of a surpise that they don't make FAR more, as they in theory could. What keeps their pay down is the MP's own perception of what the public is willing to pay them. Its a political, not economic question, and it seems the political "market" is willing to bear that costs.

[kevin kirkwood]

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[2012 Timberland]

It's so nice to have you do all of the research for us. It makes our decision making so much easier!! Thanks.