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More Money, Less Problems

Cutting politicians’ salary is in vogue these days. The most recent leader to take a snip is President Hollande, who just awarded himself a 23 per cent pay cut; though other leaders have gone further. The Prime Ministers of Japan and Singapore have taken 27.5 and 28.4 per cent drops, respectively, while the UK’s David Cameron swallowed a 26.8 per cent plunge on entering 10 Downing St (albeit largely due to a decision of his predecessor).

But does slashing leadership pay really do much to ‘clean up’ politics? Sadly, the cross-country evidence suggests: no. Money always makes its way in somehow, and countries offering mediocre rewards for public service, often end up with corruption and graft instead (see figure below: where a higher CPI score, indicates lower perceived corruption).

Of course, you might say that richer countries are less corrupt, and happen to be able to pay their leaders more. That is a clever objection. Sadly it is not valid: for if we calculate leaders’ salaries relative to average income, we find that the correlation gets even stronger. This can be seen in the figure below.

So should political reformers be aiming to increase, rather than reduce, politicians’ salaries? The answer could be yes: up to a point. Astute readers will notice that once leaders’ salaries exceed about 25 times average income, the relationship between executive income and lower corruption finally breaks down: salaries at this level reflect more the ability of leaders to reward themselves, than any commitment to the office. Yet twenty-five times average income is also an extremely high watermark. It would mean quadrupling David Cameron’s income from its current level, or for President Hollande to raise his own salary by another 150 per cent.

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