Paying top public executives less won’t fix inequality
Ilike Dawn Baxendale already. I don’t know her from a bar of soap, but it’s her name that inclines me to an initial fondness. Dawn Baxendale is a name suggesting many things, but most of all it implies resilience. She will need all the stoic hardiness evinced by her name as she takes up her new post as chief executive of Christchurch City Council (CCC).
Formerly the chief executive of Birmingham City Council, Baxendale will be greeted in Christchurch by an apparent maelstrom of controversy about her salary.
For a job that fills me with such dread that I would rather go down the mines to work at the coalface each day, she will be paid $495,000 a year. Let’s not forget that at least $120,000 of this will go on personal income tax.
The figure is a little more than the previous CCC chief executive received, but still significantly less than the salary of the chief executive
who reigned 10 years ago.
She is not earning that much more than her top managers. OK, she is making more than the prime minister, but guess which job most people would rather have?
So the fuss over Baxendale’s remuneration strikes me as a little ridiculous.
Clearly, there is a market for chief executives who can run modern cities and be accountable to elected councils. Some cities are easy to run and some, like Christchurch, have experienced recent calamities.
This forces councils to pay the going rate if they expect to employ a high-quality boss. Obviously, a balance must be struck between cognisance of the market and prudence with public money, but $495,000 doesn’t strike me as excessive.
I understand the arguments about inequality and the fact that Baxendale’s salary is probably about 10 times what the lowest-paid employees of the council earn. But her job is probably 10 times more difficult.
Plato, by the way, thought that the highest-paid members of society should be paid no more than four times the rate of the lowest-paid employees, and such ratios are very much in vogue.
For instance, in 2013 Swiss socialists tried to push through a law that would limit the pay of top executives to just 12 times that of the lowest-paid employees at the same firm. A referendum overwhelmingly rejected the idea.
Comparing Baxendale’s pay to those of the public service’s top bosses is also instructive. A State Services Commission report last year showed that the average pay of chief executives was more than five times the amount their average employees earned.
The highest-earning public service chief executive was Inland Revenue boss Naomi Ferguson, on about $680,000. This is still a pittance compared with top-earning New Zealand private sector chief executives, who command between $3 million and $5m.
A similar survey in 2014 looked at public service and state sector employees. It found that 7111 employees earned more than $100,000 a year. Close to 2500 earned more than $140,000.
Yes, life is unfair, and some people are better remunerated than others. It’s also true that wages and salaries have stagnated over the past two decades, and jobs are more likely to be temporary and insecure.
However, attacking the salary of people like Baxendale is not going to help inequality. It might reduce the envy and umbrage a little, as would higher progressive taxes, but Baxendale’s salary makes little difference to those in social poverty.
The key to tackling inequality is
not penalising people who have the skills, temperament and work ethic to command high salaries in the public or private sector. The key is increasing the incomes of people at the bottom so they can fully participate in society.
You can dream up every social programme you like, and some will make a difference, but the key is still income. That might mean a higher minimum wage, more subsidised housing, more generous benefits, and further government top-ups for the poor.
None of these are easy sells, and measures like higher minimum wages can act as a dampener on employment.
But these are the areas we need to be talking about, not a fairly modest salary package for a council chief executive facing a horrendous task. Putting a numpty in charge is not going to help those at the wrong end of the inequality equation.
Attacking her salary might be thought a vote-winner, but it’s not the great populist issue candidates should spend much time on.
The general unhappiness with inequality is generally overstated. Socialist resentment is not often shared by ordinary folk, who are more likely to be happy to see merit and hard work rewarded than the average malcontent or liberal columnist.
So I have no problem with Baxendale getting $495,000 a year. The test will be whether she is worth it. Imagine if she is a whizz-bang at saving the council money, or magic at ensuring public services are topnotch.
It is galling that no-one good enough for the job could be found in New Zealand, but let’s give Dawn Baxendale a chance. Even the name is worth a few bucks.
Putting a numpty in charge is not going to help those at the wrong end of the inequality equation.