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MPs’ wages fall relative to average wages

Posted 6/10/2011 by Guy Woods


The Remuneration Tribunal’s current review of parliamentary remuneration is generating much public discussion and media comment. This FlagPost examines the growth in MPs’ basic salary (the annual allowance) against growth in average wages (as measured by male total average weekly earnings) over the last 40 years.

Since the 1970s the annual allowance for members of parliament has declined relative to the average wage. For instance in 1975 the annual allowance paid to an MP was nearly three times that of the average wage. In 2011 it was just over twice the average wage.

Much of the deterioration in the relative size of the allowance to average wages occurred during the 1970s and 1980s. This trend is illustrated by the following graph, in which the annual allowance and average wage have been converted into an index in real, that is, inflation adjusted terms.


Click on image to enlarge

From the table below it can be seen that in the decade 1970 to 1980 MPs’ annual allowance, in real terms, grew at an annual average rate of just 0.5 per cent whilst real average wages grew by 2.6 per cent.

In the 1980s real wages growth was fairly flat at just 0.3 per cent. However, the annual allowance for MPs actually fell in real terms by an annual average rate of 0.8 per cent. As a result the ratio of the annual allowance for MPs to the average wage fell from 2.9 in 1975 to 2.0 in 1990.

In the 1990s some ground was made up by the annual allowance relative to average wages. The annual average growth rate for the allowance, in real terms, was 2.4 per cent over the decade compared with just 0.8 per cent for average wages. This managed to raise the ratio of the allowance to average wages to 2.3 by the end of the decade.

Finally, since 2000 real average wages growth has slightly outpaced the growth rate in the MPs’ annual allowance. As a result the ratio of the MPs’ allowance to average wages has slipped again.

By way of illustration, if the allowance had grown at the same rate as average wages over the last 43 years it would now be 23 per cent higher than the actual case. More details can be found in a Parliamentary Library paper on this subject: see below.


Click on image to enlarge

For more information on this topic see the Parliamentary Library publications:


Post authored by Guy Woods and Deirdre McKeown

Comments

  • Kate Loynes said:
    21/01/2014 3:43 PM

    The two data sets compare the ordinary time earnings of males employed full-time with the base salary of MPs. The average weekly wages do not include over-time payments or bonuses, so could be said to be a comparative measure. The reason for choosing these two measures is that the data is available for the time period in question. Finally, over time the nature and level of MPs’ allowances has changed, as such it would be inconsistent to include these in any time series. Also, Some of the MPs’ allowances are tied to the MPs’ businesses expenses.

  • Anonymous said:
    21/01/2014 3:43 PM

    What happens when you include allowances pls?

  • Anonymous said:
    21/01/2014 3:44 PM

    Firstly, thank you for replying. It is great to see our democracy at work in this manner. The reason I ask is that it has been postulated that allowances and wages should be considered together as noted in this article: http://blogs.telegraph.co.uk/news/davidhughes/9902117/Did_Margaret_Thatcher_really_start_the_expenses_scam/ While the data would not be readily available, it seems to me that that just as these days, many jobs are offered as a 'package', we may need to see MP remuneration in this light. There is a risk that the data noted above will be viewed selectively and at least perhaps it would be worth noting that MPs receive other significant amounts. I note that the two links to the other remuneration publications no longer work (not a criticism - this is an old post)

  • Kate Loynes said:
    21/01/2014 3:44 PM

    The Review of Parliamentary Entitlements (the Belcher review) reported to the Government in 2010. One of the Committee’s recommendations (http://www.finance.gov.au/publications/review-of-parliamentary-entitlements-committee-report/chapter5.html) was that the ‘base rate of the electorate allowance and an amount in lieu of overseas study travel should become part of the salary package’. The Remuneration Tribunal reviewed the Belcher recommendations and concluded (http://www.remtribunal.gov.au/__data/assets/pdf_file/0013/12730/MPs-Report-15.12.2011.pdf) that the electorate allowance as a business expense should be maintained in its current form and that overseas study travel should be abolished prospectively (p. 39). The Government agreed with the Remuneration Tribunal’s conclusions. The Parliamentary Library’s most recent publication (http://parlinfo.aph.gov.au/parlInfo/download/library/prspub/1854082/upload_binary/1854082.pdf;fileType=application/pdf) on MPs’ salary and entitlements reflects the Government’s decision and does not include the electorate allowance as part of the parliamentary base salary. The Government accepted the Belcher review recommendation that parliamentary entitlements or ‘tools of the trade’ should be covered by a single piece of legislation and the Remuneration Tribunal is currently reviewing ‘tools of trade’.


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