Public disservice

by The Listener / 22 December, 2014
Disclosure of the latest salary figures for top public service executives throws the gap between the rich and the rest of us into sharp focus.
Russell Wills
Russell Wills: put his money where his mouth is. Photo/Hagen Hopkins

In the same week as the OECD released a politically embarrassing report on the gap between the rich and poor in traditionally egalitarian New Zealand, the State Services Commission disclosed the latest salary figures for top public sector executives. From the perspective of a government keen to persuade us that all New Zealanders are enjoying the benefits of economic growth, it was an exquisitely unfortunate coincidence.

Canterbury Earthquake Recovery Authority chief executive Roger Sutton, freshly bathed in glory following a sexual harassment fiasco that led to his resignation, was revealed to have been rewarded for his performance in 2013-14 with a salary rise of $30,000, taking his annual income to almost $600,000. State Services Commission chief Ian Rennie, denounced all round for his inept handling of the Sutton affair, did even better. His annual pay for the year ended June 30 rose to $620,000 – an increase of $50,000, which is more than the yearly income of many New Zealanders.

Ordinary wage and salary earners can only blink in astonishment at such figures and marvel at the anomaly that no chief executive’s salary ever seems to be adjusted downwards. Admittedly Sutton and Rennie fell from grace after their salary reviews. But in light of what we now know, people are entitled to wonder about their suitability for their generously remunerated positions.

Both men trailed well behind the highest-paid public service chief executive, the New Zealand Superannuation Fund’s Adrian Orr, who banked a salary of more than $800,000 – a $130,000 increase. But Orr is in a category of his own, having responsibility for nearly $27 billion in public funds. Not only does he operate in a high-risk environment, but his performance can be measured against the fund’s growth – in which case his salary increase of 18%, roughly in line with the performance of the fund, was not unreasonable.

Most New Zealanders understand that someone like Orr, one of a handful of public sector executives with skills that could easily be transferred to the private sector, deserves to be well rewarded. But the tendency for other top-level state salaries to continue rising inexorably year after year, above the level of inflation and in the absence of any clear performance assessment tools, merely breeds public cynicism. It gives the impression that a system has evolved that both lacks transparency and encourages the expectation among public-sector executives that their salaries will increase automatically, regardless of performance.

The argument that they could earn more in the private sector is as unconvincing as it is self-serving. An exception might be made in the case of Sutton, who was previously chief executive of lines company Orion. But most public sector chief executives, Rennie included, are public service careerists who would probably struggle to adapt in a commercial environment, assuming their services were even wanted.

At least one high-profile public servant has made his discomfort known. Children’s Commissioner Russell Wills noted the irony that on the day after he was notified of his 10% salary increase, Rennie’s commission sent a letter to public sector chief executives advising them to keep staff pay rises to a maximum of 2%. Wills, who knows more than most about the gap between rich and poor, put his money where his mouth is and said he would give his 10% back to his office. No one should expect a stampede of similarly altruistic public sector bosses to follow his lead.

The salary increases not only look bad in the light of the rising debate over inequality, but jar uncomfortably against statistics that show that while the economy is growing strongly and business profits were up by 10% in the past year, ordinary wage and salary earners are being left behind. Far from increasing, employees’ share of national income has slipped from 51.3 to 50%. Years of economic uncertainty have left many workers feeling insecure, to the extent that many are resigned to low wages and even prepared to accept conditions that would have once been considered intolerable, such as zero-hours contracts. The contrast with the apparent sense of entitlement at the top level of the public sector could hardly be more striking.

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