Mr Low Thia Khiang: Mr Deputy Speaker, Sir, when this topic on market benchmarking of Ministerial and civil service salaries against the top private-sector earners was first debated in Parliament in 1994, I spoke against it. Thirteen years after Parliament agreed to thesalary benchmarks, the debate continues over whether Ministers are being paid too much. The issues I spoke on at the debate remain relevant to date. This is blatant evidence that the public, like me, was not and is not convinced that the salary benchmark is fair and just. I see no point in wasting public resources debating this salary issue every few years, if the sole purpose of having this supposed debate is just to pacify the people that the Government has given it fair thought before approving the high salaries.
While the Government can claim to have secured the mandate of the people at the recent elections last year and therefore has the right to pay itself based on the terms of the Government deemed most suitable, I wish to remind the Government that I do not think Singaporeans have given the Government a blank cheque. Given the public disquiet and debate outside this House after the intended salary revision was announced, the Government should seriously consider setting up a panel for public consultation and coming up with a remuneration formula for the public service that can be adhered to, is practical and deemed reasonable by the public. Many people are not convinced of the rationale of benchmarking the current salaries of the Administrative Service, including the Ministers’, against the top earners in the private sector. One concern is that it is volatile. This is inevitable when the variable components of private sector wages, such as bonuses and stock option gains, are taken into account in the setting of annual wages. In addition, the benchmark not only considers the earnings of Singaporeans but also those of Malaysians and Permanent Residents. While most of the individuals in the benchmark change every year, the level of wages taken into consideration will most likely increase over the years. This is largely due to two factors.
Firstly, a larger income gap due to globalisation will result in more outliers earning very high incomes.
Secondly, the embrace of foreign talents in Singapore will result in a greater pool of high-wage earners that will qualify under the benchmark criteria, alongside potentially increased wage.
Even if the Government takes an average from the range within the benchmark, it may not be representative of the general trend of income earned by Singaporeans. In the worst scenario, such a benchmark may even encourage money-minded civil servants to focus on policies that ensure the existence of the pool of top earners that satisfies the benchmark criteria. Apart from the potential embarrassment from an escalating benchmark, that is headed for alarming high levels, it is also highly ludicrous that senior civil servants are consistently one of the highest paid in the workforce. Remuneration in the private sector is volatile and employees are subject to stringent performance reviews. For instance, stock option gains are possible only when an individual makes the correct investment decisions. More often than not, such individuals have also helped to improve the value of the company. However, human beings do not always make the right decisions throughout their entire life.
By benchmarking civil servants’ annual pay against individuals who have performed well during that year, there is an implicit assumption that civil servants and Ministers never make incorrect decisions. But are they truly super human beings, forever error-free? In addition, is there any job in the private sector that can guarantee that an employee is always amongst the highest paid in that sector regardless of the performance of that employee? There is much less job security in the private sector and even top performers face continual and fierce competition. Civil servants have an advantage as they are shielded from competition by foreign talent. Ministers too are guaranteed at least five years of job security from one election to next. Moreover, for the ruling party, there is always the flexibility of changing election rules in their favour to significantly increase job security for their Ministers. After all, did SM Goh and MM Lee not previously admit that the GRCs enabled them to bring in Ministerial materials?
It is also ironic that we are consuming taxpayers’ money and we are also discussing how much more of a fraction of a million to pay civil servants and Ministers, whilst we haggle over additional tens of dollars to hand out to our needy and disadvantaged citizens. According to the 2005 report by the Department of Economic and Social Affairs, United Nations, the Singapore Civil Service has some of the highest paid civil servants in the world. Our Government holds the view that this will ensure a clean, competent and effective civil service. However, the fact shows that other countries with lower paid civil servants are able to enjoy such qualities. Based on the corruption perception index and global competitiveness index, Singapore ranked below Finland and Denmark in 2005 and 2006. However, the governing of a country should not only take into account these two factors. A more important factor that directly affects the lives of every Singaporean living here is the quality of life. A survey that evaluates 39 quality of living criteria, including political, social, economic and environmental factors, personal safety and health, education, transport and other public services, found in 2006 that Swiss cities had topped the annual survey again while Singapore, with its highly paid and thus highly competent and clean government, ranked best amongst Asian cities, but was 34th in the world.
Based on the above facts, it would be interesting to know how much the civil servants are paid in countries such as Denmark, Finland and Switzerland, just to name a few. According to a United Nations’ report, the Switzerland Federal Office of Personnel revealed that the basic remuneration of civil servants ranged from 55,000 Swiss francs to 321,000 Swiss francs in 2006 which, based on an exchange rate of about 1.25, was about S$69,000 to S$402,000.
Good performers receive merit increments of up to 6% while worst performing staff may get a decrease in salary. Although bonuses can reach 12% of salary for outstanding performers, the residence and overtime allowances are paid, it still seems that the highest-paid Swiss civil servants receive a lower salary than what Singapore civil servants and Ministers receive. But, Sir, we have to note that they have neither a Prime Minister nor a President in Switzerland.
Sir, to cite another example, the 2006 United Nations’ report listed that the lowest monthly civil service salary in Finland was 1,200 euros, while the average was 2,600 euros for all wage earners. Even if the purchasing power parity is taken into account, it is highly likely that our civil servants here have a much better deal. Based on such evidence, we believe that there is no need for enormously large salaries to attract and retain the right talent to run a country in an efficient and corrupt-free manner.
The Worker’s Party is of the view that the Government should consider modifying the current benchmark in place of a more equitable and sustainable one. We suggest that the benchmark should take into account international practice, in particular, countries that could be taken into consideration would be those just cited, such as Switzerland, Denmark and Finland as well as those developed countries.
Sir, Denmark, like Singapore, employs a pay adjustment scheme to ensure that the pay of state employees in general and over a long period of time develops in parallel with the wages and salaries in the private sector. For the Danish, their pay adjustment scheme automatically adjusts the central government pay development to the private sector pay development, but subject to a certain time lag. Hong Kong tries to maintain their civil service pay level with the private sector, but they only maintain the broad comparability and not any explicit link. Unlike Singapore, they all do not have a sure-win formula that ensures civil servants always have the best deal by benchmarking specifically to the top few earners.
While we accept that basic salary may be benchmarked broadly with the private sector in line with international best practice, we believe that performance pay should also be introduced to establish a visible correlation between performance and pay. Currently, the civil service has no financial bottom line in ensuring good outcomes although part of the senior officers’ salary is linked to GDP growth.
Sir, while it is necessary to link a percentage of salary to performance, it is also imperative to provide a performance regime whereby it is possible to discriminate performance for non-performers or under-performers, and to reward them accordingly. Sir, in this respect, I welcome the adjustments in civil service pay structure just announced by the Minister. A performance-related pay system requires a comprehensive and objective system of measurement, in particular, performance appraisals have to be more vigorous and transparent to the public, something that the public can identify with. Variable bonus will only be given to civil servants and Ministers if the key performance indicators of the respective Ministries had been met. We recommend having different KPIs for different Ministries from time to time so that Ministers and civil servants can concentrate their effort in deriving the right policy for Singapore in their respective areas.
For instance, Sir, some possible KPIs that the Government can consider adopting at this point in time are: a 5% drop in Gini coefficient, reflecting efforts to reduce income disparity, for the Prime Minister; a 2% increase in the proportion of trips taken on public transport during the peak hours, reflecting efforts to make public transport a choice mode by the Ministry of Transport; a 5% increase in the total fertility rate, reflecting efforts to address the ageing population by Ministers and civil servants involved in the Committee on Ageing Population; and perhaps, a minimum long-term unemployment rate, reflecting efforts to address structural unemployment by the Ministry of Manpower.
By linking variable bonuses to clear and objective KPIs, the Government can concentrate on making the right policy for Singapore, rather than spending valuable resources and time tracking how much private sector’s top-earners had made each year and how the Government should therefore be paid. Such objective short-term goals also track the success and ensure that long-term policies can be gradually attained. In addition, this system will ensure that public officers are both accountable and responsible for the outcome of their formulated policies and keep the Government transparent to the public, in terms of its achievements, capabilities and accountability.
Sir, I would now like to move on to the issue of recruiting and retaining talent within the civil service. MM Lee has said that it is not possible to hire a foreign talent to run this country because political leaders must have the passion, the commitment and must share the dream of the people. Likewise, such qualities are essential in each and every one of our civil servants. Not everyone is cut out for a career in the civil service and the loss of able people who lack such qualities is not a loss to our country. In fact, I believe that civil servants with such qualities will never be induced by the attraction of a private career and a private life, no matter how great the financial rewards offered by the private sector. More importantly, Sir, it is common knowledge that the senior civil servants and Ministers in Singapore are hardly paid peanuts. Although statistics show that officers aged between 28 and 33 make up more than 80% of resignations in the past five years – and I suppose many of these are scholars – it is not unexpected that these officers will review their options when their scholarship bonds end. The alarmingly high percentage speaks of a bigger problem, perhaps, that scholarships funded out of taxpayers’ money did not attract the right mix of people.
According to one such civil servant who has resigned from the service, he said that the Administrative Service was not the best fit for him. In fact, some who left said that they were drawn by the different challenges and new experiences, more so than by the money. The earlier the Government comes to terms with this, the better for the people of Singapore. If the original intention for the scholarship holders to serve as civil servants is not met and the Government continues to invest more resources in the same process in the hope for a reverse trend, the Government could be wasting precious resources for the wrong reasons and expectations. In view of the above, I think more efforts should be made to explore other recruitment and screening methods to attract the talent for the right fit.
Sir, we agree that public servants should not be expected to make unreasonable financial sacrifice to be in the public sector. However, neither should they be seen being paid unreasonable wages for their contributions. According to the Department of Statistics, the bottom and top 10 decile of employed households registered an average monthly income of $300 and $6,990 respectively in 2006. Given such statistics, the argument that civil servants make unreasonable financial sacrifice is not convincing. Even in the private sector, no organisation can afford to keep paying increasingly high salaries just to retain and attract top performers since resources are inevitably limited. Moreover, in the case of public service, we need a different breed of people to come forward to serve. There is simply no point in offering high remuneration just to entice people to serve if what they are interested in is to make more and more money for themselves and their families in pursuit of material interest in life. Sir, do not forget that even if you do not pay peanuts, but pay with a bigger piece, say, a banana instead, you can still get a monkey.
In conclusion, Sir, the real issue is how to find the right leaders to run Singapore and to ensure that Singapore continues to succeed. Benchmarking the civil service and Ministers’ salaries to the cream of the private sector’s income-earners who may or may not be at the same top all the time is controversial and distracting. I would like to end this speech by quoting what Chua Mui Hoong said in the Straits Times: “How much they are paid is secondary. Pay them well, but do not let pay drive the search for leaders.”
The Minister Mentor, Prime Minister’s Office (Mr Lee Kuan Yew): A point of clarification, Sir. The Member has compared Singapore against Switzerland, Denmark and Finland. Can I ask him if he considers Singapore’s population to resource ratio equal to Denmark, Switzerland and Finland?
Second, have they brought the standard of living of their people up, multi-fold times, from third-world to first-world in one generation? To maintain that quality of government both in the political leadership that sets the tone for the whole civil service and for the whole country, can you get a Swiss-type government, Finnish-type government or a Danish government to bring about the results that Singapore has brought about in their own countries, let alone bringing them and their systems into Singapore? Please explain.
Mr Low Thia Khiang: Sir, I have to admit that these are the reports that I got from the United Nations. They have put up these reports. I believe that, based on the reports of what they have assessed today, they are not lousier than Singapore, in terms of living standards or the performance of the government. They have different conditions from us, but I gather that when we move forward, we are also emulating the standard of living of Switzerland. Are we not?
Mr Lee Kuan Yew: The Member has not answered my question. Is he saying that we are comparing apples with apples? Is he saying that the system of government in Finland, Denmark and Switzerland can bring them from First World to a superpower? Can they do that? Does he realise that Singapore’s GDP is only one-third of its external trade – that our external trade is three and a half times that of our GDP, higher than Hong Kong, by three times. And that if this economy ever falters, it is the end of Singapore and its First World status. Denmark, Switzerland and Finland are part of Europe. They can fail and they are still caught in a European situation. If we fail here, we fall back to a South East Asian situation. Just look around you.
Mr Low Thia Khiang: Sir, is the Minister Mentor saying that without paying such a high salary, we are bound to fail? Even if we pay top-earner salaries, I do not think the present Government can bring Singapore to superpower status.
Mr Lee Kuan Yew: I am putting a simple question and ask for his clarification. He has compared Singapore as if it were a Denmark, a Switzerland or a Finland. Their system, their governments, never produced the kind of transformation that we have had, and their system and their governments have a broader base, and can afford a mediocre government.
The Singapore base is less than 700 square kilometres. When we started, it was less than 600 square kilometres. Could the system in Denmark, Switzerland or Finland produce a transformation as in Singapore?
Mr Low Thia Khiang: Sir, on what basis does Minister Mentor think that if the system in Denmark and Switzerland is put in Singapore it will not be able to transform Singapore into what we are today? I want to know what is the basis. I have no claim that it will happen. But I would like to know, from the wisdom of Minister Mentor, why he thinks that it will not happen.
Mr Deputy Speaker: Mr Low, I do not think that you can see the clarification of Minister Mentor! Mr Lee.
Mr Lee Kuan Yew: I would like the Member to explain why he thinks Singapore is comparable to Denmark, Switzerland and Finland. Look at the size of the country, the location of the country, the resources of each country and the history of its people. Then look at Singapore, its size, its history and the nature of its population.
To make the transformation from what we were in 1959 or 1965, whichever the starting point, to what we are requires an extraordinary government with extraordinary government officers to support it, to bring to where it is.
If we go back to an ordinary system that exists around us, then we will go down to those levels. It is as simple as that. There is no guarantee that Singapore with less than 700 square kilometres can maintain this position.
(Ms Irene Ng Phek Hoong and Mrs Josephine Teo interrupted the debate at this point.)
Mr Chiam See Tong (Potong Pasir): Mr Deputy Speaker, Sir, thank you for allowing me to join in this debate.
A Minister in Singapore gets an annual salary of $1.2 million, our Prime Minister gets $1.9 million, and our Minister Mentor gets $2.7 million, as reported in the press. Compared to our office-bearers, the President of the United States gets an annual salary of only nearly $1 million. The Prime Minister of Canada gets paid about S$400,000; the Australian Prime Minister receives an annual salary of about S$300,000; the Prime Minister of the UK gets about S$500,000 and the Chief Executive of the Hong Kong SAR government gets about S$600,000. The salaries of these heads of government that I cited are amongst the highest paid in the world and the salaries of our Ministers easily surpass them. It can be said that our Ministers receive the highest salaries in the world. This can be entered into the Guinness Book of Records as a world record. This is another first that Singapore can boast of, ie, Singapore is a small country described only as a dot on the world. The United States of America has a land area of about 15,000 times that of Singapore and over 60 times more people than us, but our Prime Minister earns more than President Bush.
Yet, our Prime Minister and other Ministers are still dissatisfied – they want more. The question is: if the heads of governments of other bigger and more industralised countries can live on salaries less than a million dollars, why can our Ministers not do the same?
It does not mean when a country is able to pay its Ministers more, they can automatically ask for more. Why was Mr Durai of NKF ostracised for receiving more, although NKF can well afford to pay him more? The reason is that NKF is a charity and its funds all come from donations of Singaporeans who themselves are not rich. Poor people are also supporters of NKF and the money they donated should mostly be used for the benefit of the patients and not to line the pockets of its employees. A charity must be run for the benefit or the purpose of the charity. Although the Government is not a charity, it has many similarities with charities, especially in the way it runs with honesty and integrity. A government should be run entirely for the benefit of the citizens of Singapore. When Ministers are paid exorbitant salaries, then Singaporeans perceive that the Government is not doing everything it can for the people of Singapore but it is more interested in lining the pockets of its Ministers.
Only recently, Members of Parliament have been trying unsuccessfully to get the Minister to increase the Public Assistance from $250 to $300 per month. How will the people react if they found out that the Government is asking for a pay hike of Ministers’ salaries when the Ministers are paid of about $100,000 a month? The people in the bottom 5% are still paid only about $1,000 a month. What are the Ministers going to say to these people when there is such a great disparity of incomes between them and the lowly-paid workers? As far as I am concerned, they have all lost their moral authority, vis-a-vis the low-income workers. The gap of their incomes is too great, in fact, 100 times.
The poor worker has to work 100 months to earn the amount of salary a Minister earns in a month. The duty of political leaders is different from that of a leader in a commercial world. In the commercial world, the CEO or the manager has to only think of the bottomline, but the political leader must, at all times, maintain integrity and moral authority to inspire and to rally the people. Once the moral authority is lost, the whole credibility is also lost.
A Minister receiving a salary amount of $1.2 million will certainly undermine his moral authority. As John F Kennedy said, “Ask not what your country can do for you, but what you can do for your country.” The question is how to determine the salaries of Ministers. The Government chooses to fix the benchmark of Ministers’ salaries by pegging them to the highest earners in the private sector. I think this is unfair to the taxpayers who are footing the bill because the high performance managers and the CEOs are given all kinds of extras, incentives and perks, such as bonuses, stock options and also bonus shares. In other words, their salaries are highly inflated. How can our Ministers take that as a benchmark?
A fairer way is to peg Ministers’ salaries to the Ministers of other First-World countries. I think Hong Kong is a good country to follow. Hong Kong is an Asian country about the size of Singapore. They are paying the head of government of about $600,000 a year or about $50,000 a month. I think this is a fair salary.
At the last debate in this House on the revision of Ministers’ salaries, I suggested at that time that we pay our Ministers $50,000 a month. This time round, I would suggest that Ministers be paid higher, about $70,000 a month or $840,000 a year. If we pay our Ministers overall less by $20 million, that amount can be saved and we can easily use that to up the PA allowance – $300 per month – to benefit another 66,000 cases. The last time, I believe it was Dr Lily Neo and others who were asking for more PA allowance. There you are, if you can save on the Minister’s salaries, we can have another 66,000 people benefiting from the money we save by giving less to the Ministers.
What are the jobs of the Ministers? Are they paid to grow the economy or, simply, just to take care of the Ministries or to lead the nation? The Minister Mentor, last Wednesday, in Sydney, said that Singapore should not save on the $20 million or Singapore’s $210 billion economy will be jeopardised. Now, he is assuming that Ministers are responsible for growing the economy. But there is one glaring example of the Shin Corp fiasco which showed that the Ministers’ judgement and decision, if they are involved, do not justify the huge amounts of salaries they receive. Maybe the Ministers can explain why the Ministers have not made a decisive decision in the Shin Corp deal, which I think it is not very wise and gets Singapore into a bit of a fix.
Come down to the #ReturnOurCPF 4 protest on 27 September 2014 at 4pm at Hong Lim Park. You can join the Facebook event page here.