One of the fascinating aspects of the remarkable data collected by Andrew Leigh and Tony Atkinson on trends in top incomes is that profound disparity that has emerged between the public and private sectors in the past two decades.
The data on CEO remuneration for our 50 biggest companies only covers a period from 1992 to 2002 but shows CEO salaries ballooning from about 27 times average wages to just under 100 times average wages eight years ago.
Reckon they haven’t significantly increased further since then? Didn’t think so.
As limited as that is, it provides an interesting comparison with public sector wages, for which Leigh and Atkinson found data over a far longer period. Since early last century until just after WW2, MPs’ salaries have varied about 5-7 times average wages. From the Menzies era onwards, however, they began to grow more slowly than average wages, so that by the 1970s, they were about 2-3 times average wages — a level at which they’ve remained.
Data for top public servant salaries is sparser, but shows a similar trajectory, at about 10 times average wages in the 1920s and falling gradually, reaching just over thrice average wages in the late 1980s before recovering strongly in the Howard years — who said the coalition wasn’t bureaucrat friendly? — to just under five times.
Our top legal minds, High Court judges, started off early last century at an astronomical 34 times average wages, but gradually fell over ensuing decades, going below 10 times average wages in the 1950s. Since then they’ve been about 6-8 times average wages.
In short there’s been no contest between the private and public sectors: corporate remuneration is rapidly outpaced what we pay our politicians, our top bureaucrats and our judges.
Judicial remuneration isn’t as big an issue — most judicial appointees have had decades of success at the Bar, and judges’ superannuation is very good. But in a week where Malcolm Turnbull upped and went back to business, we should be thinking long and hard about how attractive we make public life.
The dramatic and accelerating disparity between CEO remuneration and that of the people we ask to run the country is all the more interesting given what has happened in Australia over the past 18 months. Some of our highest-profile companies have crashed and burnt, our banks have needed taxpayer guarantees, and the entire economy has had to be propped up with huge stimulus packages. The people who have staved off recession have been our politicians and top public servants, rather than our top CEOs, who have continued to hand themselves vast remuneration packages.
That might be worth considering next time you’re think we over-pay politicians or the bureaucrats who serve them.
An indicator of why corporations are out of control.