Posted 06/10/2011 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.
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.
For more information on this topic see the Parliamentary Library publications:
Post authored by Guy Woods and Deirdre McKeown