Official Salaries: Do Not Put the Cart Before the Horse
United Daily News editorial (Taipei, Taiwan, ROC)
October 29, 2010
Yesterday the Control Yuan held a press conference. Control Yuan Members Chao Yung-yao and Ko Yung-kuang pointed out that the annual salary of the Director of the Department of Health, National Health Research Institute was 8.41 million NT. The annual salary of the President of the Ministry of Economic Affairs, Industrial Technology Research Institute, was 7.8 million NT. Both were higher than the 6.24 million NT annual salary of the President of the Republic of China. The Control Yuan pointed out that these foundations had no objective salary scale, and that their salaries were much too high. The Control Yuan said the Executive Yuan had failed to properly supervise and manage them, therefore the Control Yuan should address this oversight.
The Control Yuan's corrective move is consistent with the public's desire to "stick it to the fat cats." Legislators have demanded answers. Pundits have raised a stink. Fat cat salaries have become a hot issue. The Control Yuan has officially intervened. It appears the Executive Yuan has no choice but to deal with the problem. But we do not approve of the Control Yuan's populist logic vis a vis salary evalution. We do not think the salaries government agencies provide these foundations should be dealt with in such a crude manner.
First let's address their logic. Why must the salary of the Director of the Industrial Technology Research Institute or the Director of the National Institute of Health be lower than that of the president or a ministry head? Control Yuan members explained their reasoning during their press conference. "Who has a busier schedule? The Minister of Economic Affairs, or the Chairman of the Industrial Research Institute?" The implication was that salaries should be directly related to how busy the individual is. Because ministry heads are busier than the chairmen of research institutes, therefore ministry heads' salaries ought to be higher. Based on the same logic, the president must attend to hundreds of matters each day, therefore his salary ought to be the highest of all. But this reasoning is utterly inconsistent with the basic principles of personnel management.
Economic theory tells us that the salary a person receives, depends on his economic contribution. Textbooks refer to this as their "productivity." Highly productive people receive high salaries. Less productive people receive lower salaries. Busy high officials are not necessarily economically productive. They are likely to be busy with ribbon-cutting ceremonies, busy giving speeches, busy attending weddings and funerals, and busy sucking up to their superiors. They may be busy dealing with unending, pointless issues that legislators have raised. These ministry heads run about like chickens with their heads cut off. What reason do we have to reward them with high salaries?
By contrast, when Morris Chang, the Director of the Industrial Technology Research Institute, planned and promoted Taiwan's semiconductor industry, he may have been in his office all day, poring through technical data. He may have been recruiting talent. He may or may not have been all that busy. But his contribution to our economy was enormous. What's wrong with paying him a higher salary? If every president of the Industrial Research Institute was comparable to Morris Chang, the taxpayers would be ahead even if they paid them five or ten times as much as the president. What would be wrong with that? The first mistake the Control Yuan members made was to compare the salaries of foundation heads with ministry heads. Their second mistake was to correlate their salaries to how busy they were. What right to they have to "correct" the Executive Yuan?
Secondly, our legislators and Control Yuan members, in criticizing the salaries received by certain people, have ignored the underlying cause. With hindsight, a high-paying job can be a featherbed for incompetents. But high-paying jobs can also attract highly capable talent. Even if we believe the current job holder does not deerve the salary he is being paid, that does not mean the government should reduce the salary for the job as such. If the Republic of China hopes to once again achieve new heights of industrial achievement, akin to those once pioneered by the ICT industries, we must not cut salaries. On the contrary, we must increase salaries for these industries. Only then can be attract the next batch of Morris Changs.
If the government allows itself to be corrected by the Control Yuan, and reduces the salaries of the President of the National Institute of Health in half, then the government will no longer be able to attract first-rate talent. We believe the salary of the President of the Industrial Technology Research Institute should not be reduced. We believe the salaries of senior government officials are on the low side. Everyone on Taiwan wants to emulate Singapore, but not when it comes to salaries for ministry heads. Singapore's ministry heads receive annual salaries amounting to 40 million NT, approximatly 18 times the salary of ROC ministry heads. It is precisely because public officials receive such excellent treatment, that Singapore is able to attract the best people to work in its government.
Government ministries are the entities that manage private enterprises. The ability of managers is supposed to be superior to the ability of those being managed. That is the only way management can work. But the situation is exactly the opposite on Taiwan. The salary of the Chairman of the FSC is far less than the salary for the general manager of any financial conglomerate. Is it necessary to ask how an individual of ability will decide when choosing between a public sector job, or a private sector job in the financial sector? The Minister of Economic Affairs is paid far less than the executive vice president of a computer company. Is anyone who understands the industry going to want to enter government service? It is precisely because the salaries of ministry heads on Taiwan are too low, that legislators and Control Yuan members do not respect them. Our society is unable to recruit competent people to become ministry heads.
The Control Yuan is not thinking about increasing the benefits for ministry heads in order to attract talent. Instead, it is using low salaries as a reference point, in the hope of cutting the salaries of the heads of the Industrial Research Institute and the National Institutes of Health. This is truly astounding. It is nothing less than putting the cart before the horse.