Sunday, July 07, 2013

We Get What We Pay for In Legislative Salaries

Some people are under the impression that we run a "populist" website here.   Not so.  We run a "good government" website.   The issue of legislative pay is an example.    You get what you pay for, this is economic reality.  We grossly underpay our legislators considering the job they do, so it is not surprising at all that we have a legislature with which most of us are dissatisfied.   We can't attract and retain good help with the compensation we are offering.  It is simple economics.

Oh, occasionally you will get some public-spirited person who decides to take the hit on their family budget and take a job which currently pays about $16,000 a year and has a schedule hectic enough so that one cannot hold down a regular job while you are doing it.  But that is the exception, not the rule.   The rule is, you get what you pay for.

What I see is that on average, in the long term, people work for who pays them.   If We the People are paying them, they work for us, if special interests are paying them, they work for them.  Consider Rep. John Burris and Speaker Davy Carter.  Both pushed hard for Obamacare after running against it when they were campaigning.    Hospitals and insurance companies will profit handsomely from the deal they made, at the expense of most of the people who voted for them.   One will wrap up his legislative career and take a job as a lobbyist for some of the people he helped out as a legislator, and the other will also leave the legislature- for a high paying job at a bank owned by a close friend of Gov. Mike Beebe.   You get what you pay for.

Friends, if we want a legislature which represents us, we are going to have to be the ones who are paying them.   To expect anything else is unrealistic, to put it kindly.  

Legislative pay was defined by Amendment 70 to our state constitution, passed in 1993.   Pay was set at $12,500, to be increased only by inflation adjustments as reported by FEDGOV.   Unfortunately, FEDGOV has been lying about inflation the whole time.   This has magnified the original policy error as legislative pay has fallen further and further behind in real terms.

This means the number of people who are running for the right reasons falls, and the number running because some special interest will offer them a cush-job in exchange for their vote increases proportionally.   You may protest that people who run for public office should want to work for you for peanuts, but that is not the way it has worked in any country in the world- ever.  Every country on earth where the official salary is unreasonably low has corrupt public officials.  Such a practice invites corruption.   We are not an exception to economic reality.   Nor are we an exception to spiritual reality, as the Good Book says "the worker is worthy of his hire."

Until recently, the legislature tried an end-run around amendment 70 by paying themselves for "office expenses" to the tune of about $1,200 a month.   The problem was that few of them were spending the money on legitimate office expenses.   They were putting the money into their own pockets, their own family budget.   In other states, state legislators have legitimate offices with a sign on the door where they can service constituent needs.   Here you didn't see those, because the legislators were living off of the money.   This was dirty pool, and the practice was recently ended as the result of a court case.   But that does not change the underlying truth that we get what we pay for.   The abuse of office expenses problem was solved, as it should have been, but the underlying issue of legislator compensation was not solved.

In 1993 gold sold for about $250 an ounce.   Now it is about $1,200 an ounce, and it has been a lot higher.   If legislative pay was adjusted by the gold price rather than adjusted by the dishonest numbers FEDGOV puts out about inflation then the original $12,500 salary would be worth about $60,000.   It is pretty obvious that the "adjustment" from $12,500 to $16,000 falls far below a true inflation adjustment.

There is a group called Shadow Stats which tracts the true inflation rate, using similar data from all years instead of making "adjustments" to what is being measured in order to come up with a lower number (A policy initiated by Bill Clinton).    By that more constant measure, inflation since 1993 has been at least 6%, not the 2% or less that the government has reported.   Based on an inflation adjustment of 6% annual inflation, that $12,500 salary should be roughly $40,000 by now, not $16,000.

Gasoline in 1993 was about $1.10 a gallon.   Let's say it is $3.50 a gallon now.  That amount of increase on a $12,500 base also results in a salary of about $40,000.   The gap is not so great in milk prices, but we recently learned that farm bill adjustments could have resulted in $6 a gallon milk.

Basically by every possible measure, legislative salaries have fallen behind even the real-purchasing power amount that people intended when they passed amendment 70 because they made the mistake of relying on FEDGOV to provide truthful data.

Even if you measure legislative pay by the least-prosperous measure- the gains in our own incomes, then our legislators are underpaid.   In 1993 the median pay in Arkansas was $16,692.   This was when we deemed legislators to be worth $12,500, that is 75% of the average pay that one of us earned. Now we all know that wages have not kept up with inflation during this time, and inflation was what we meant to tie legislative wages to.   Still, the average working Arkansan earned $34,723 in 2012.    75% of that figure is still $26,000, far more than the $16,000 they are getting paid now.

It is true that people who have the job of legislator are people who mostly want to keep it.  But that does not mean that is because the pay from their official salaries is high enough to attract and keep competent and honest people.   As the vote on Obamacare (some times called the "Private Option", a name about as honest as FEDGOV's inflation statistics) shows, we are not attracting and retaining quality people.    The common-sense answer that any employer would have to face in such a situation is that they need to raise the compensation.   If we want them to work for us instead of the special interests which are out there trying to buy them, then we better pay them what we want them to be worth.

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