Politicians' pay

There is a case for paying politicians well, according to this new paper on the effects of variations in salaries paid to local politicians in Brazil:

We find that among municipalities that offer higher wages more educated candidates run for office...Higher wages also encourage politicians to stay in office longer resulting in a higher share of experienced legislators...
Wages also affect politicians' performance. Among municipalities that offer higher wages, politicians submit and approve more legislative bills. This is consistent with an increase in effort induced by the higher future value of holding office....Legislators also signal effort by providing petitions for public works and improvement in public services for their voters. We find that in municipalities with higher salaries, there is an increase in the number of schools, local clinics and an improvement in their infrastructure.

Even if we take all this at face value, though, there are some problems here.
1. Do we want politicians to do more? It's a natural tendency for people on high salaries to want to keep busy to justify such salaries. But activity isn't the same as productivity. There's much to be said for doing nothing.
2. If the cost of job loss is higher, politicians will have more incentive to pander to the median voter rather than follow their own principles and wisdom. If the median voter is a fool, this will produce worse governance. 
3. Do we really want talented people to be taken away from jobs where they can do good merely so they can enter politics?
4. MPs' pay doesn't come only from the tax-payer. It comes from the private firms who pay MPs to be directors or consultants. And this pay-off is big. This paper estimates that a Conservative candidate who became an MP died twice as rich as Conservative candidates who lost their elections, because being an MP gave access to directorships and consultancy work.

Comments

[Bob B]

For some inscrutable reason the recollection of which momentarily eludes me, I'm reminded of Harold Wilson's penetrating insight of 1970 that: "One man's wage rise is another man's price increase."
http://www.newstatesman.com/forum_view.php?newTemplate=OpenFullList&newTop=300000026522&newDisplayURN=300000026522

Btw the collected quotations from the history of industrial relations in that source are often illuminating as well as instructive.

[spencer]

Ever since I learned that in the UK a firm can put an MP on the payroll and everyone realizes that when the MP speaks he is speaking for the interest of the firm I have wondered how that works compared to the US system. Does it reduce corruption, etc?

Do you know of any good papers on this question?

[Mike Woodhouse]

I wonder if, instead of paying them more (or allowing more unaudited expenses, for that matter) we should offer them (even) more generous pension terms? I think I could afford to be an MP, if those expenses are as juicy as they say, but I couldn't afford to lose my seat - my admittedly comfortable income depends in no small part upon my technical geek skills, which need to remain relatively current to maintain my market value.

So I'd probably end up pandering to Johnny Voter like nobody's business to ensure re-election, rather than considering what action (or inaction) would best benefit society.

But then again, too generous a post-MP package would perhaps lead to a host of single-term-and-take-the-money merchants. Which might (might) not be a good thing either.

It's a bit tricky.

[jameshigham]

3. Do we really want talented people to be taken away from jobs where they can do good merely so they can enter politics?

Who said they'd be entirely taken away? Such people are high achievers and work 17 hours a day. And their talents would be used for the national good so of course they must be paid commensurately.

[flapple]

"Among municipalities that offer higher wages, politicians submit and approve more legislative bills"

My god, the last thing you want is legislators passing more legislation. We are already overwhelmed with the stuff, much of it of very marginal use. I have seen many pointless bills seemingly driven by not the needs of the community, but the needs of either the Minister (for example, to be seen as a "reformer") or the Government (to fill up sitting days). It really is a case of effort exapnding to fill the space alotted.

I am not at all convinced that the higher salaries will attract more "talent". Obviously at some marginal case it is true, but surely no one is arguing that in aggregate that diffreent professions that get paid more are "better" than others, for example, that finance workers get paid more than history professors and thus are "better" and we need to attract them to politics? On this score David Beckham should be Prime Minister.

while within cetain professions there might be correlation of talent/pay, between professions it is just as likely to be about personaility, desire etc. People work in finance because they value money more than other forms of remuneration, maybe balanced by negative "psychic" income. Maybe they value income measured status more.

Second, even the higher salary is some returns to skill, the specifc skills of one prfession are unlikely to transfer over to politics automatically. Do we want to attract people who otherwise would have choosen to expose themselves on Big Brother as there way to leverage a good salary?

[reason]

Chris...
"If the median voter is a fool, this will produce worse governance."

Why do you think having better governance is desireable? Surely, having responsive governance is more important? It is like saying we should design better sharks, rather than letting them evolve. I thought your whole thing was that management was doomed to failure because it asked too much of individual knowledge and insight. We need to use the power of emergent systems. If people only learn by making mistakes, then mistakes must be made.

[QuestionThat]

I really like the way reason puts it.