20

In the context of Russian Federation, a deputy of the Duma (the lower assembly) is said to be earning ~400k rubles per month on average (actual amount doesn't matter, only the order of magnitude), while the minimum and the living wage in the country is ~11k rubles. The deputies are the ones controlling both for most parts, so they could in theory raise their wages bit by bit unchecked.

Why wouldn't a country have a (constitutional?) condition under which government officials' wages would be tied to the minimum wage, and be no higher than, say, 10 times the minimum wage? Wouldn't that work as a motivating factor for the officials, so that they actually work to increase the standard of living of the population, instead of being guaranteed a very high wage irrespective of their achievements? The same could apply to other officials, e.g., ministers, judges, even the president.

17
  • 2
    The living wage in Russia is 165 USD? That seems a bit low.
    – Anoplexian
    Sep 20 '18 at 15:03
  • 1
    Surely a person working as a deputy/senator shouldn't be motivated by higher income. Even so, 10 minimum wages is, by definition, more than enough to survive. Sep 20 '18 at 15:42
  • 2
    @Gallifreyan: You can't have it both ways... You said in your question "Wouldn't that work as a motivating factor for the officials?"
    – James
    Sep 20 '18 at 16:47
  • 1
    Isn't calling elected representatives 'officials' a wrong use of the term? An 'official' is usually a salaried civil servant (an appointee or functionary). Where I live (UK) their salaries are notably lower than the private sector. Sep 21 '18 at 5:56
  • 1
    To avaoid the controversy of theminimum wage, why not use an average wage( or income) instead?
    – Hobbamok
    Sep 21 '18 at 8:02
30

Raising the minimum wage sufficiently slowly and minimally can arguably increase the wages of low income people accompanied by insignificant increases in unemployment and insignificant disruptions to the path of low skill workers to their first job. The minimum wage is what economists call a price floor. Many economists are against them on principle because of their deep distortions and tendency to cause surpluses. In this case there is a surplus of labor people who are willing to supply relative to the demand for jobs at that skill and wage. The minimum wage in particular is a contentious issue among economists and political groups. So changes to the minimum wage have to be handled very carefully to avoid negative consequences.

Tying legislative salaries to the minimum wage doesn't help legislators optimize the minimum wage to do the most good to low income workers. It does put pressure on them to increase the minimum wage, but increasing it (especially by a very large amount, quickly) could cause unemployment and make it difficult for unskilled, especially first time workers, to get their first job.

A method of tying legislative salaries to low income earning people's salaries that would not promote this one dangerous tool is indexing salaries to some sort of median income. This need not be the income of the 50th percentile person, it could be the income of the 75th percentile person or the 95th percentile person (where the 0th percentile person is the richest person and the 100th percentile person is the poorest). This would empower legislatures to use a wide variety of methods for combatting poverty instead of just one.

That being said, politicians already have strong incentive to fight poverty without additional income incentives. Most voters care about poverty reduction, especially the proportion of voters in poverty. In a state with democratic institutions, if the population doesn't care about poverty reduction, it won't matter much how much financial incentive politicians have to help the poor. Voters can always vote them out for trying to zealously decrease poverty and replace them with politicians sworn to reduce spending on anti-poverty programs.

5
  • 34
    I brought up the idea of using the median income to calculate salaries to a local city council candidate and he pointed out that while it's better than other things, it would encourage elected officials to try to push low-income people out of their district, because that's the easiest way to increase median salaries.
    – David Rice
    Sep 20 '18 at 15:08
  • 2
    Heh, "10% increase in min wage leads to 8% increase in unemployment" also translates roughly to "10% increase in min wage leads to 1.2% net increase in salary income directed to people on min wage", as the 92% see +10% increase in income. That is in an article critical of min wage increases!
    – Yakk
    Sep 20 '18 at 17:28
  • 10
    @Yakk A lot of people wouldn't call that a win. Having less people employed also causes a decrease in output and/or an increase in prices that can effect people of all income levels. Then you have to account for the increased strain on society to support those unemployed people somehow either at a family level or a governmental level.
    – lazarusL
    Sep 20 '18 at 17:39
  • 16
    "That being said, politicians already have strong incentive to fight poverty without additional income incentives." Only if the public is well-informed (they aren't), if their votes are enfranchised (they aren't, at least at the district level), and if they fluidly vote for the politician with the best economic policies (they don't. Pure party loyalty all the way). A politician can always implement bad economic policies and persuade their constituents that the policies are successful (actually, this happens quite a lot). I don't think the incentive is very strong at all.
    – John
    Sep 20 '18 at 17:56
  • 4
    @John You got me. My answer assumes democracy transfers popular opinion into law at any level of efficiency. You're right that this is not necessarily a reasonable assumption.
    – lazarusL
    Sep 20 '18 at 19:30
12

The political answer is: because turkeys don't vote for Christmas.

The practical answer is that tying wages to any particular metric is an invitation to game the metric. For instance if you tie legislators wages to the minimum wage then they might opt to raise the minimum wage but at the same time defang the enforcement so that everyone can ignore it.

4
  • Okay, then what about the living wage, the sum of the expenses that are absolutely necessary to meet one's basic needs? This can't be gamed, unless someone starts producing very cheap basic need products, which would be a win. Sep 20 '18 at 11:40
  • 5
    @Gallifreyan living wage is quite a debatable and relative number.
    – Communisty
    Sep 20 '18 at 12:11
  • 8
    @Gallifreyan The minimum wage is a legal figure set by the government, but the living wage is an estimate of the cost of living. What if the living wage goes up? This means people are poorer than they were before. Do the officials get a pay rise? Sep 20 '18 at 12:15
  • 2
    @Gallifreyan: "Living wage" depends greatly on one's lifestyle. For instance, consider the cost of identical housing in Manhattan or the SF Bay Area, vs say Lake Woebegon, Minnesota. Or that because I like to cook, I can feed myself for much less than the person who subsists on convenience foods.
    – jamesqf
    Sep 20 '18 at 17:15
8
  1. It elevates the existence of the minimum wage to the level of a constitutional precept, even though it doesn't really belong there.

  2. It creates an incentive for members of the sitting government to raise the minimum wage in order to benefit themselves, even if it would be detrimental to the country as a whole. Constitutions usually set out to avoid such conflicts of interest, not create them.

5
  • It seems as plausible that what benefits a sitting government whole salary was some multiple of a minimum wage might also benefit the nation in a harmony of interests. Please clarify why raising the minimum wage might be detrimental to the country as a whole.
    – agc
    Aug 23 at 5:04
  • @agc I don't think it's necessary to provide proof that something could possibly be bad, but if you want, here's a thought experiment. Do you think that a minimum wage of $1,000,000/hour would be beneficial? If yes... we'll have to disagree. If no, then there is some number between $5.25 and $1,000,000 beyond which a further increase has a detrimental effect.
    – hobbs
    Aug 23 at 5:10
  • Sure -- billions an hour even, given enough inflation! (What those billions would buy in our dollars is the real question.) But supposing a stable currency, that $1M example invites the question of maximum wages -- suppose a CEO annually nets 500% of the US GDP, (i.e. all of the money, plus 4x in IOUs), dare the law be used to reduce this worthy manager? For another maximum wage post see: What are the advantages and disadvantages of having minimum wage automatically adjusted for inflation?.
    – agc
    Aug 23 at 5:51
  • But we digress: suppose officials raise their own multiple-MW wages. So the question is whether or not they can find that sweet spot.
    – agc
    Aug 23 at 6:06
  • @agc no, none of that is the question. Either an increase is always unconditionally good or it is maybe sometimes bad. If it is maybe sometimes bad, then the conflict of interest I cite exists. If, on the other hand, you think that it is always unconditionally good, then you're unreachable by logic to begin with :)
    – hobbs
    Aug 23 at 6:52
4

Incentives.

If I'm a talented Russian executive and my options are:

  1. Make a fortune in business
  2. Make a middle-class wage in government

Um, well, I guess I'll do business (cue public service brain-drain). Actually it's even worse than that, because there are (at least) two more subtler perverse incentives here: it means that the only people who can afford to go into politics are those who are already wealthy (entrenching elites) and if I already am a Russian government official and you cap my pay I can eat the gap... or I can look for ways to supplement my income, e.g. from bribery.

Figuring out what to pay people is hard.

5
  • Please clarify why the executive is Russian. That is, it's not obvious whether or not Russian wage laws have some special relevance to this Q.
    – agc
    Aug 23 at 6:10
  • @agc I made the hypothetical executive Russian because that was the motivating example from the OP's question, but it of course it is more broadly applicable. Aug 24 at 11:20
  • Please clarify whether the executive makes a fortune because of talent, or makes a fortune because of some other less edifying reason but publicly attributes it to talent. If the former, then it seems like the (dubious) subtext of this answer would be that talent usually is, and should be, well rewarded... in Russia?
    – agc
    Aug 26 at 5:27
  • ...usually such plans admit the possibility of: 3. Lose your shirt in business. Businesses fail even with talented people, for any number of reasons. (Whereas a well administered bureaucratic position is generally less risky.)
    – agc
    Aug 26 at 5:31
  • @agc I feel like you're digging for me to say something about sociopathy or amorality or some such. I'm not wading into that, here. All I'm saying is if you are an ambitious and talented person weighing your options, why would you pick the one that puts a (much) lower upper bound on how successful you can be? Some will, for a variety of personal reasons. Most will follow the incentives. Risk? Risks can be mitigated, but taking a (permanent! compounding!) 50% pay cut to work in the public sector seems to me to be a risk. Nor is that hypothetical, my salary more than doubled when I went private. Aug 26 at 12:42
3

There is a basic answer to this; one that I learned about in Political Science.

How a government official is paid is different depending on the state. Additionally, whether that official receives full time employment, part time employment, or additional staff is also dependent on the state. In short, a government official is going to find that their compensation depends on some factors.

Like any other job, no one wants to work that job if the pay is not equal to the work necessary. As you may imagine, the job of a full time congressmen may prove to be quite hectic (especially within a large state). Literally no one would run for office if they knew that pay was minimum wage.

Unless they're wealthy

See, poorer folks do not have the time nor the funds to run for an office that pays them minimum wage. So, if all government officials got paid minimum wage, then only people who 1. Have Free Time and 2. Have Plenty of Money could run for office. Not very democratic!

5
  • I wonder how many congressmen/senators/deputies don't come from money already. My (skewed) perspective is that plenty of them do, given that even getting elected requires considerable spending. Sep 21 '18 at 0:53
  • 1
    "Like any other job, no one wants to work that job if the pay is not equal to the work necessary. As you may imagine, the job of a full time congressmen may prove to be quite hectic" - this seems to imply that minimum-wage jobs are not hectic, high-stress or exhausting, which is simply not true.
    – starchild
    Sep 21 '18 at 23:12
  • @chirlu Political Science
    – user22543
    Aug 5 '19 at 20:52
  • @starchild My statement does not imply that. I stated people simply do not want to work a job where the pay is not equal to the work necessary.
    – user22543
    Aug 5 '19 at 20:54
  • This answer wrongly presumes capable and serious work can't be done at minimum wage. To the contrary, there's any number of excellent artists, musicians, authors, actors, et al creating famous work who wound up netting less than minimum wage. Some are swindled by rascals making considerably more than minimum wage, and a few rare rascals even steal the credit of authorship too. Much of the world's Free Software has been coded for minimal to no wages. Workers in dangerous jobs and soldiers may net negative wages, when their injuries are counted against their wages...
    – agc
    Aug 23 at 5:35
2

In a comment, you said:

Okay, then what about the living wage, the sum of the expenses that are absolutely necessary to meet one's basic needs? This can't be gamed, unless someone starts producing very cheap basic need products, which would be a win.

Why can't it be gamed? Consider a simple tax on groceries, rent, utilities, and clothing paid by the buyer. It cranks up the living wage, so the official makes more money for making people worse off. That's the opposite of what you want. And in general, you want the living wage to be low, so people have more excess over the living wage. This would encourage politicians to make the living wage high.

The average and median wage can be gamed by increasing the minimum wage so sharply as to ban many jobs. Sure, most everyone is unemployed, but the few people who still have jobs have a lot of money.

Per capita Gross Domestic Product (GDP) is calculated by the government, who then get more money when they calculate a high value.

In general, averages mean that giving more money to rich people is as effective as giving more money to poor people.

Medians reward giving money to middle class people at the expense of either the poor or the rich. And of course, as noted in a comment, medians incent politicians to encourage the poor to emigrate.

Others have already explained why tying it to the minimum wage could be counter-productive: minimum wages in general distort the economy. They are bad tools for their goal. Further, a high minimum wage may prevent people from getting entry level jobs. No entry level job means no promotion for experience. The best way to keep wages up is not to ban bad jobs but to encourage good jobs. If everyone can get a good, high-paying job, there would be no reason to take low-paying jobs unless they are actually better in some way.

The best way to keep government wages down is to vote for people who will pay themselves reasonably. If you don't have that, then no system will prevent them from paying themselves. They'll just change the system.

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  • 1
    Your last paragraph high lights the problem with the question: keeping governmental officials from profiting from being a government official is a bad goal. The goal should be the same as for any other employee, that they bring more value than they cost.
    – jmoreno
    Sep 21 '18 at 10:42
  • 3
    Good answer, one nitpick. "The average and median wage can be gamed by increasing the minimum wage so sharply as to ban many jobs. Sure, most everyone is unemployed, but the few people who still have jobs have a lot of money." That only would work if you remove all the $0 wages from the data, which is an odd thing to do when calculating average or median income of a population.
    – lazarusL
    Sep 21 '18 at 12:52
  • The best way to keep government wages down is to only ever vote for people who are independently wealthy - billionaires, multi-millionaires. Ensure that we have a true oligarchy of the rich and we won't need to pay the officials very much. No idea why that would be a good goal, but it'd work.
    – David Rice
    Sep 21 '18 at 14:00
0

There is some demand in states for congressional pay to be tied to constituents' earnings, but it's usually tied to the median income (calculated by creating a list of all incomes per region, order them from smallest to largest, and find the middle point) of the constituency rather than the legal minimum. This in theory would inspire a "rising tide lifts all boats" scenario where the politician's pay is tied to decisions that are economically beneficial to everyone as the politician.

There are problems as it is all about rigging numbers but this can be controlled by other rules. In the U.S., Congress may not benefit from a pay change without being re-elected. If they give themselves a pay increase, it will not take effect until at least the next session and full effect won't be reached for six years (the lower house serves 2 year terms and the upper house serves 6 year terms, but one third will be up for re-election every two years, and always only one senator from any one state).

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