The Big Deal About Money

I'm never going to add anything original to the whole uproar, hoo-ha and national soul-searching and hand-wringing that's going on about the salary of cabinet ministers in Singapore. If you just google it you would be au fait with almost every opinion -- officially sanctioned as well as disputed ones-- out there. Even The Economist jumped in with two or three cents of their own. 

I'd like to talk about just two related things. First, what economists discovered about income and happiness (the subjective experience) and second, why the PAP should not waste any more time and resources on the issue of paying people so they would be politicians because the logic it stands on is as sturdy as a deck of cards.

Money is important to our feelings of well-being and happiness, but only to up to a point and there is a number to it. Kahnemann and Deaton have found that while life satisfaction, a judgment about how one's life is going overall, does continue to rise with income, the quality of subjective experience improves until an annual income of about US$75K and then plateaus. They conclude that "high income buys life satisfaction but not happiness [i.e., subjective experiential quality], and that low income is associated both with low life evaluation and low emotional well-being."

Clearly, money does not buy happiness, but having more of it gives you more opportunities to live your life in a way that brings you more satisfaction and less stress. For example, if you didn't have to work two jobs to pay the mortgage, bills and the kids' tuition, you could spend more time with them and having more or closer family ties brings people more happiness. You also get more sleep, which studies have empirically shown, improves your mood and feeling of well-being. If, at 62, you had enough to retire on (read: if your savings haven't been eroded by your over-priced property or you had enough to save at all) you also would have opportunities to do things for personal satisfaction rather than for basic survival.

But on the other hand, if you were already wealthy, earning over that 75K a year, it would take a lot more in real dollars to make you feel any happier with life. Now, hold that thought and bear with me a little bit more.

Now consider how some politicians believe they ought to be compensated. The dubious logic being sold is if one were to take a drastic pay cut (from his last drawn salary) to take on the job of cabinet minister, then that person would see very little incentive to do so and therefore Singapore would have a serious lack of capable, qualified ministers/politicians. Okay, if we indulge this logic, we can easily point to two problems:

1) People are not pure utilitarians (see Chen Show Mao's profile)
2) The assumption that a public service position can be monetized like that of the private sector. (It's like treating a grapefruit like a watermelon and saying the former just has less juice)

It is a mistake to treat point 1 as an axiom of truth and the PAP did that to their peril. When you assume that all humans make decisions on a cost-benefit-analysis, you dangerously disregard many factors that go into decision making, such as emotions (any Psychology undergraduate or person who reads pop psych can tell you that). Any thinking droid who went to college would tell you that political participation, along with activism and other civil liberties like free speech does not originate from the side of the brain that does calculations at the supermarket cashier.

People participate, serve, volunteer and help because a MORAL imperative tells them to and not because they can buy a holiday home in the Hamptons as a result of that (incidentally the brother of one of our highest office holders owns such a multi-million dollar home along the banks of a river in the southwestern region of Australia and the tour guide that takes people on the river cruise on said river is quite happy to announce this).

So the top cadre is probably spending sleepless nights thinking of ways to make Chen Show Mao disappear (when they aren't wasting brain cells trying to discredit his proposals) so they can salvage the flawed assumption that good, capable people need to be compensated handsomely to serve the nation. But my quarrel is not with the logic of a "clean wage" system. The Workers' Party have brilliantly summed up the problem with the Stoogie Ee Committee's recommendations, and my point, going back to what I said about income and happiness is this:

Any person who earns the kind of money presently made by PAP politicians and ministers far exceeds the US$75,000 barrier where happiness plateaus. Besides this making a case for them being a lot more miserable than previously assumed, we can say that they likely have very little in common with the average Singaporean who makes US$25,309 a year (gasp, the median income in 2010 was S$2710 a month!). Now, the average Singaporean doesn't have to make US$75,000 to be happier, but surely a little more would go a long, long way to improving levels of happiness, in turn health and hence productivity.

So even if you halved the minister's pay, he wouldn't really be much unhappier. He would complain a lot, probably have to divest one of his 10 stock portfolios and order the $50,000 chaise instead of the $80,000 one, but heck, he won't quit. (Even if he did, it's a win-win because you get to sit on a moral high horse declaring the riddance of a materialistic office-holder unfit for public service)

On the other hand, if you paid less attention to getting the sort of people you think are motivated primarily by money and finding ways to increase the wages of the first 40th percentile of the population, you would likely have a lot less problems. But of course, if you think a handful of highly-paid politicians are the only people with the intellect to lift the dismal spirits of half the resident population here, we will have this same conversation in 2016, with one difference: there will be fewer ministers to remunerate.