Bureaucrats’ High Super Costs Taxpayers Dearly

Here’s a pertinent question for taxpayers who work in the private sector or run small businesses: why should a hefty slice of their incomes be going to fund gilt-edged 15.4 per cent superannuation contributions for public servants and politicians? Such rates are 62 per cent above the 9.5 per cent paid in the real world, where wages and super are funded from profits created by productive output. Higher public sector wages and conditions, in contrast, are funded by taxpayers or by increasing public borrowings.

At a time when federal government debt has soared to 19 per cent of GDP (steadily rising from zero at the end of the Howard era in 2007), businessman Tony Shepherd, who oversaw the Abbott government’s commission of audit in 2013, has raised a significant issue, calling for a review of federal public servants’ superannuation entitlements. The matter was not canvassed in Mr Shepherd’s audit. But the anomaly should be removed, saving taxpayers about $1.6 billion a year, as Adam Creighton writes today.

Many university employees do even better, with super entitlements of 17 per cent. Judges, too, enjoy an overly generous retirement benefit of 60 per cent of salary after 10 years’ service. NSW, the national leader in public sector reform, is looking to lift the retirement age of judges from 72 to 75 and tighten access to the judicial pension, to keep skilled judges at work longer and deliver savings. Other states should follow suit. Mustering the courage to cut politicians’ entitlements is a big ask for any political leader. And there is an argument for improving prime ministerial and ministerial salaries to levels commensurate with the responsibilities those offices entail. But that is no justification for politicians enjoying superannuation benefits so out of kilter with the community.

At least most politicians work long hours, as Bernard Salt writes in Inquirer today. Many bureaucrats, however, belong to what Salt calls the “rich lifestylers’’ category, working less than the average 44 hours a week while earning above-average incomes. Theirs is “a world of six-figure salaries and of jobs that start and finish every day”, he writes. “Compare this lot with livestock farmers, whose job never ends and whose income is perhaps a third of the six-figure set.’’ In the public sector, these “undisputed winners in the effort-remuneration stakes fly just below the radar’’, their skills and expertise “remunerated from the deep and protected resources of public funding’’.

Community and Public Sector Union secretary Nadine Flood, predictably, found the suggestion that her members’ super rate be cut “revolting’’. Hard-pressed labourers and shop assistants would also find paying for such largesse for public servants just as revolting. There is no logical reason why the government — acting in the interests of the nation rather than one cosseted section of the workforce — should not initiate reform. Lifting all workers’ super to the same level as that of public servants would be impractical and unaffordable in the short to medium term.

In bygone eras, public sector job security and generous retirement benefits were seen as compensation for the fact many of them were less well paid than private sector employees. That is no longer the case. Generous bargaining agreements and runaway growth in the number of executive and senior executive positions on the highest pay grades have reversed the picture. Since 2013, public sector wages have grown faster than private sector wages, and the gap is widening. In 2017, public sector workers earned $92,000 a year on average, compared with $82,900 for those in the private sector. In 2016, mid-level federal public service managers were paid $169,918.

In December last year, Institute of Public Affairs researcher Aaron Lane wrote a paper showing 26.2 per cent of federal public servants held executive level classifications, up from 19.4 per cent in 2002. It is no surprise that the income profile of working Australians shows public servants are heavily over-represented in upper-middle to high income brackets. Fourteen per cent of public servants earn between $104,000 and $156,000 a year, compared with just 8 per cent of private sector workers.

The Coalition has cut the number of commonwealth employees to 239,800 from a peak of about 250,000 during the Rudd-Gillard era. That reduction, however, has not cut overall wages costs. Labor states have increased public service numbers as well as wages, a trend that must be discouraged. A large public sector is a sign of a high regulatory burden and overlap between federal and state governments.

These days, public sector wage levels make a mockery of the need for such a generous superannuation scheme. Reform is essential to assist with budget repair, especially in view of economic pressures created by an ageing population. Even more fundamentally, making workers who receive 9.5 per cent super stump up for 15.4 per cent super for bureaucrats offends the Australian understanding of a fair go.

By The Australian

14 April 2018

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