Linking MPs’ expenses to the average wage
Author: Zoe Stavri
Published on Sep 03, 2012
The Independent Parliamentary Standards Authority (Ipsa) have launched a review into MPs’ salaries and pensions. The Daily Mail reports that one of the proposals they are considering is linking MPs’ salaries to the average wage. Under these proposals, MPs would receive a salary that is 2.5 times the national average wage. Ipsa will launch a formal consultation into the issue in the autumn.
At present, MPs’ salaries are reviewed annually. Sometimes they increase sharply compared to the average wage, while at other times there is a slow decline. Currently, MPs’ salary increases are lower than average wage inflation. Fixing their salaries to the average wage would remedy this issue. It would also be easier to calculate.
There are important questions to be raised about the proposal though. Firstly, a practical issue: what sort of average wage should be used as a metric? From the Mail’s report, it appears that Ipsa are considering linking it to the median wage, which is calculated by putting wage data in ascending order; the median is the number in the middle. An alternative is the mean wage, although this is skewed by outliers. Due to a small number of highly-paid individuals, mean wage is higher, and is easily raised by increasing the number of ultra-rich individuals. Conversely, there is the modal wage, which is the most commonly-paid wage. This is much lower than the median wage, as it is skewed by the effect of employers paying minimum wage. Each type of average has its strengths and weaknesses, which is linked to the broader debate about how much MPs should be paid.
Secondly, should average wage be tied to national average wage, or should each MP be paid in relation to the average wage in their constituency? The argument for this is that MPs might be incentivised to raise living conditions of the people they are elected to represent. However, it is debatable how much influence MPs have over average wage, although it may incentivise MPs to move poorer people out of their constituencies. This could perhaps be solved by linking average wage to regions or nations, although regions with lower average wage are typically further from London, which would increase travel expenses for MPs travelling from their constituencies to Westminster.
And finally, is 2.5 times the average wage the right ratio? On the one hand, this vastly differs from the level of income earned by the majority of their constituents. However, fixing salaries lower could lead to turning being an MP into the pursuit of those who are already more economically advantaged. Furthermore, a lower salary might mean more creative uses of expenses.
Clearly there is a lot to talk about before a decision can be made. How do you think MPs should be paid?