Big Income increases fora Few

Published HBT  10 March 2015

Government has overridden the Remuneration Authority decision to award a 5.5 % increase in MP’s salaries back dated to July last year. The Authority is an independent body established by Government to set the salaries of salaries for MP’s, Mayors, Councillors, Government Chief Executives, Heads of Crown Entities, and various tribunals.  

That a 5.5% increase was awarded means the Renumeration Authority had determined this was the extent of the movement in salaries for equivalent positions elsewhere. Clearly senior management have been receiving significant increases despite many other workers being limited to CPI increases, or changes in the minimum wage rate. 

Relativity is clearly the major driving force as demonstrated by the recent comment by authority chair John Errington “that the pay gap between ministers and executives in the private sector was growing and would have to be addressed”. To ensure the salaries under its durestriction are competitive the Authority consults with others, though exactly who is not clear. It seems likely however that professional salary surveys are a major tool, and it seems probably these surveys are contributing to the distortion of incomes that is occurring.  

These surveys are undertaken at regular intervals and produce a range of salaries for each category of job as defined by the knowledge and experience needed, certain dimensions such as turn over or number of staff, plus the freedom to make decisions, or level of authority. Most employers have a salary policy or preferred position in the range for senior staff. They may pay at the upper quartile, or the medium or somewhere else in the range. Few employer will admit to paying below the medium. 

When the review is undertaken the organisation inevitably finds it is paying below its preferred position, and as a result and almost automatically this becomes the reason for a salary hike. This of course is happening right across the country so there is a general upward movement. When the next survey is undertaken these increases are picked up, and again most organisations will find they are paying below their preferred position, thereby justifying yet another upward adjustment thereby ratcheting salaries to ever higher levels.  

Government may have justified the lust for fairness over MP’s salaries but the changes will do nothing to fix growing inequality.  Increases for Chief executives, judges, Government and Local Government Heads must also bought into line with the wider population. This must not stop some people being paid more because of greater the levels of skill and knowledge or stop salary increases for justifiable reasons including, improved performance and increased responsibilities. However the use of surveys is part of a system that feeds on itself to create compounding increases. 

Once those at the bottom were protected by trade union negotiated awards plus a more egalitarian attitude, but an abundance of lessor skilled workers means there is no pressure to improve their incomes. In fact the system now encourages those at the top to exploit those at the bottom with zero hour contracts and other income restraining measures. It also needs to be remembered that the people who have upheld this blatantly unfair system, including those in governance roles, are clearly part of the club that benefits. 

To some extent we should be grateful that we were alerted to the widening gap between the well paid and less well remunerated but doing something about this relatively small group does nothing to fix the growing disparity between those at the advantaged end of the gravy train and the rest.