For many years this column has groaned about the madness of the remuneration policy with which the Commonwealth public service has been yoked.
In the early 1990s, the Keating government devolved pay fixing powers to allow industrial bargaining at the department/agency level. It was not intended to last and service-wide bargaining was restored. The devolved system was resuscitated, however, by the Howard government in 1996 and was steadily worsened by subsequent governments.
In those unfathomable days when Eric Abetz was public service minister and his chum John Lloyd was public service commissioner, the policy was dragged to new levels of awfulness and has more or less remained in that condition.
So the 100 or so public service agencies determine different pay and conditions with increases being required, in theory, to be offset by productivity gains. As productivity (units of output per hour worked) cannot be measured in the public service, the policy cannot be rationally and honestly implemented.
Needless to say documentation submitted to the public service commission rationalising remuneration increases has been kept away from the prying eyes of taxpayers. It's better they be shielded from certain duplicities in the handling of their money.
While it's not possible conclusively to prove, it's likely remuneration policy has reduced public service productivity. Certainly, staff growth, including through dodgy contractor and labour hire arrangements, has out-stripped reasonable estimations of increases in workload.
However that may be, devolved remuneration fixing has increased IR transaction costs perhaps by 100 times and thus contributed to a less efficient public service. Further, in creating significant differences in pay and conditions between agencies, the policy has:
- debauched both the classification and promotion and staff transfer systems, and
- made recruitment a matter of chance as the policy provides no assurance that public service remuneration is in a properly competitive position in comparable outside labour markets.
It's a dog's breakfast on which the most shameless hound in the country wouldn't cock a leg.
It's difficult to imagine how things could be worsened but, in a spasm of ingenuity, the public service minister, Ben Morton, has done so. Mr Morton's key change has been to replace the current 2 per cent cap on annual pay increases with a cap based on the annual seasonally adjusted wage price index for the private sector.
In doing so, Mr Morton is ignoring the most relevant market comparison for Commonwealth agencies - state and local government organisations, while applying an index based on occupational structures that are entirely different from those in the federal public service. That is, like is not being compared with like.
There's nothing wrong with saving public money but not by further stuffing up policy.
Applying any measure of wage movement is an absurd way to go about fixing pay as it provides no basis for ensuring the public service remuneration is properly pitched in relation to outside labour markets. That can only be done, as all rational private sector organisations do, by lining up levels of remuneration with those paid elsewhere for comparable work.
As the Bible on public sector remuneration, the UK Priestley Royal Commission report, makes clear, in making outside comparisons of remuneration "it must be right to use current rates rather than trends". If Mr Morton hasn't heard of the Priestley Report, he could protect himself from further error by obtaining a copy and trying to read it. In the meantime, he should ponder the prospects of getting staff and unions to sign up for three to four year blank cheque agreements on pay which will provide for increases that will be unknown other than they will be linked to a wage-price index.
As with many ministers involved with things on which they're ill-informed, Mr Morton tries to get by with rhetorical bluster. He says that "This new policy means Commonwealth public sector employees will directly benefit from ensuring the government's plan to strengthen the economy, create jobs and deliver private sector wages growth succeeds". What nonsense.
Heaping confusion on muddled "thinking", Mr Morton claims that "Unions, businesses and the wider community have long argued that public sector wages should reflect wage movement in the private sector". Well, minister, can you identify three such urgers? If you can, could you tell them that any such argument is ridiculous, as Priestley makes clear.
Finally, Mr Morton makes the assertion that "In the past, the government setting a cap on Commonwealth public sector wage growth can send the wrong signal to the private sector. Commonwealth wages policy should not be used as an excuse or a signal to restrain private sector wage growth. This policy will address that". But minister, you are setting a cap on Commonwealth public sector wage growth. You've just changed one cap for another.
Still, it's no wonder Mr Morton is promoting confusion with illogical rhetoric. The fact is the wage price index for the private sector has increased at annual rates well below 2 per cent and it is likely to continue to be so. That is to say, rather than striving for a sensible remuneration policy, the minister is on a savings binge. There's nothing wrong with saving public money but not by further stuffing up policy.
Dear reader(s), if any of you have got this far - on November 16 I asked Minister Morton, on your behalf, several simple, factual questions about his new remuneration policy. Setting a notable example to the public service for which he's responsible, he didn't reply.
The present madness can be brought to an end simply by adopting private sector best practice. That is to say, instead of seeking inflexibly to automate pay adjustments by linking them to wage indexes, the Commonwealth should adjust remuneration for each occupational category based on comparisons with rates paid for similar occupations in other parts of the public sector and the private sector.
This is fair to the Commonwealth as an employer as it can help it recruit and retain the staff it needs. It's fair to other employers as it doesn't put wage pressure on them. And it is fair to public servants as they can see they're on a reasonable par with others doing comparable work elsewhere in the economy. Of course, such a policy would require remuneration increases to be negotiated for the public service as a whole, something that would enable the present damaging differentials to be evened out and the integrity of classification, promotion and staff transfer systems to be restored.
Are any such moves likely in the short to mid-term? Well, not if Minister Morton has anything to do with it. He's put his mess behind him and moved on, setting up "a review of performance bonus arrangements for the Senior Executive Service and equivalent positions in the Commonwealth public sector". He says he wants "a consistent principles based approach to the payment of bonuses" about which agencies "should exercise restraint to the furthest extent possible consistent with community expectations".
This might be called the Cartier Watch Review and here "community expectations" might be taken to mean that which causes political distress, as sensible a remuneration principle as might be expected in the Morton era.
As a preliminary, the review will no doubt note the hapless failure of just about all performance pay arrangements in the Commonwealth. Putting that maudlin appreciation behind it, the review should also note that no performance bonus system will work unless:
- it is underpinned by proven, reliable methods of assessment based on identifiable contributions particular to each individual
- details of any bonuses paid are made public and included in agency annual reports, as they are in the private sector
- all staff in an agency can regard any bonuses paid as fair and justifiable, and
- bonuses or other forms of performance remuneration represent a significant proportion of individuals' annual salaries - at least 10-15 per cent, that is, enough for some senior staff to buy dozens of Cartier watches a year.
In the mean time, it is with regret that after further degrading government remuneration policy, it can be announced, in the public interest, that Minister Morton will not be eligible for a bonus payment in any form at this stage.
- Paddy Gourley is a former senior public servant. firstname.lastname@example.org.