It was only a matter of time before politicians took a pay cut. Prime Minister Jacinda Ardern has done the right thing in announcing she will cut the pay of her own ministers and departmental chief executives – see Eleanor Ainge Roy’s Jacinda Ardern and ministers take pay cut in solidarity with those hit by Covid-19. And they’re quickly being joined by other politicians.
According to Herald political journalist Claire Trevett, the cuts were a no-brainer. She says politicians could hardly stand by, expecting others to shoulder the burden of the crisis while they remained insulated from it: “Ardern said it was about leadership. It is also about politics. As workers in the private sector lost jobs, took unpaid leave, or took pay cuts to keep their jobs, it would be unconscionable not to have taken such a step. She could hardly be blind to their plight. When politicians are asking others to make sacrifices, they need to be seen to be doing the same” – see: PM’s Covid-19 pay cuts won’t make a jot of difference, but politically necessary (paywalled).
Trevett also suggests the move will be accompanied by “a chorus of the world’s smallest violins playing”, as “politicians have long suffered from the public perception they are overpaid”. She points out that “The PM’s pay cut of about $47,000 for the six-month period is more than the annual wage of someone on the minimum wage.”
Questions might be asked if the amount being foregone by the high-paid politicians and public servants is actually enough. After all, they will remain some of the most highly paid people in the country – many in the top 1% of income earners. The accumulation of assets and houses by politicians also insulates them in ways that others do not share. For more on this, see my column from last year: Lifting the MP pay freeze – how much are politicians worth?.
For details of how much those senior MPs and civil servants will continue to receive, see Zane Small’s Here’s what Jacinda Ardern and Simon Bridges will earn after their 20 percent pay reduction. Some of the salaries of elites will still range between half a million and a million, and the Prime Minister will continue to be one of the highest paid heads of government in the world.It’s also worth pointing out that although the cuts are being in promoted as being 20%, they are only for six months. Over a year they amount to a 10% cut. Some, such as the Taxpayers’ Union are lobbying for bigger cuts that go on for longer. As Julie Iles reports, that group has “called for more drastic cuts to public sector pay packages, last week announcing it would draft a Parliamentary amendment bill that instructed the Remuneration Authority not to increase any remuneration until real GDP is at or above the Q4-2019 level” – see: Govt bosses take 10% annual pay cut (paywalled).
The same article points out that “Private sector bosses have publicly taken pay cuts – in just one example Mainfreight group managing director Don Braid told NBR last week he and the company’s board were taking a 50% pay cut.”
In fact, many businesses in trouble are taking bigger percentage cuts than the Government announced for themselves yesterday. Today, Stuff newspapers announced “Senior executives at Stuff have been asked to take a 25 per cent pay cut for the period and chief executive Sinead Boucher has agreed to a 40 per cent cut” – see Tom Pullar-Strecker’s Stuff staff asked to accept 15% pay cut for 12 weeks after huge drop in advertising.
It’s also reported that the MediaWorks chief executive, Michael Anderson, “had agreed to a 25 per cent cut in his pay.”
This is a point made today by talkback host Peter Williams, who disputes the Prime Minister has led the way on self-imposed pay cuts: “Leadership from the Prime Minister would have been joining that trend two weeks ago, not yesterday” – see: The Prime Minister’s pay cut wasn’t a display of leadership.
Williams claims private sector bosses have led the way: “It was anything but leadership. In fact, it was about being a very slow follower. The leadership on pay cuts came from the private sector. From Chief Executives to those on the factory floor or behind the wheel of the delivery truck, people have been taking pay cuts for at least two weeks, if not three.”
Should other politicians be taking pay cuts? The Prime Minister’s announcement excluded pay cuts for Parliament. But Act’s David Seymour is pushing for all MPs to be included, and he’s drafted legislation that he wants colleagues across party lines to support when Parliament eventually resumes – see: Cutting MPs’ pay appropriate way for House of Representatives to reflect Kiwis’ struggle – David Seymour.
Seymour has been pushing for this for about a month, arguing that “Cutting MPs’ pay is a symbolic action which shows the same economic conditions apply to the House of Representatives as the people they represent”.
But will this “generosity” of the politicians also mean they are more easily able to cut other people’s pay? It’s worth noting Seymour make this point to justify cuts to MP pay: “While MPs’ pay doesn’t make a huge impact when you have got Treasury talking about figures like $60 billion, what it does do is it allows Ministers to say to those highly paid civil servants in Wellington and elsewhere ‘it’s time for the public sector to fall in line with the private sector’.”
Similarly, Liam Hehir also makes the case for wider public service pay cuts – see: What is the real economy?.
There are certainly other politicians and leaders now under pressure to take a pay cut, or at least make a donation to charity, which has long been the preference of campaigning politicians or those seeking to turn their loss of income into an asset.
For instance, today New Zealand’s head of state has also chosen to hand over a portion of her income – see Amelia Wade’s Governor-General Dame Patsy Reddy to donate 20 per cent of her pay to charity.
The mayor of the country’s biggest city is also volunteering to give up 20% of his income to charity for six months – see Bernard Orsman’s Auckland councillors follow Jacinda Ardern and agree to take pay cuts.
According to this article, the highest-paid council bureaucrats are also, in the words of Council chief executive Stephen Town, “actively considering the possibility of taking pay cuts and what they may look like”. Other articles note the council is currently cutting the jobs of over a thousand temporary or contract staff.
In the capital, the top politicians and public servants are donating 10% of their salaries for the rest of the year – see: Wellington councillors, mayor, executives donate 10pc of salary.
Local politicians in other centres are now being challenged to take cuts – see Dominic Harris, Todd Niall, Ellen O’Dwyer’s Public sector CEOs react to 20 per cent pay cut.
According to this, on the one hand, some mayors and council chief executives are willing to take a temporary cut in line with the PM’s proposal, but others are either non-committal or refusing to. For example, Hamilton City Council chief executive Richard Briggs has agreed instead to a 5% donation to a staff hardship fund for two months.
The article reports that in Christchurch, “Mayor Lianne Dalziel has said she is willing to take a cut to her $195,000 salary, but by how much was unclear” and “Several Christchurch city councillors favour taking pay cuts, with some donating a portion to charity. City council chief executive Dawn Baxendale has been non-committal about cutting her $495,000 salary.” In Otago, the various mayors are donating 10% over six months (5% of their annual salary), while the Dunedin City Council CEO is forgoing 15% for six months.
In the South, the picture is more complicated – see Evan Harding’s Shadbolt won’t donate portion of his salary during Covid-19 pandemic. According to this, the Invercargill mayor is refusing to donate on the basis that he “seeking $448,529 from the city council to cover the costs associated with a defamation trial” and therefore can’t afford it. Shadbolt also argues: “I think if you want to help the ratepayers and businesses of the city it would be far more productive to support the nil per cent rates increase”.
Other Southern mayors and politicians are undecided. Environment Southland chairperson Nicol Horrell has an interesting perspective on the issue, being reported to “be happy to donate something but he believed a more practical way of helping ratepayers would be for the Remuneration Authority to give a nil per cent pay rise to local authority elected members across the country this year.”
Finally, for a take on what bloggers are saying about the cuts, see No Right Turn, who completely disagrees with “punishing” those politicians and public servants who are working harder than ever (Punishing our saviours) and Steven Cowan, who says it’s all just “a self-serving sham” by a Government presiding over worsening inequality (Jacinda Ardern’s meaningless and insulting gesture).