Why increasing the salaries of Delhi MLAs is not a good idea?
An interesting news item was on the forefront of media, both social and otherwise, during the course of the last week. It related to a 400% salary hike given to the Delhi legislators by the AAP government. Some newspapers pointed out in tongue in cheek remarks that the Delhi legislators will now earn more than the Prime Minister.
Chief Minister Arvind Kejriwal vehemently defended the salary increase, first on the floor of the house and then in the HT leadership summit, saying that only when the MLAs are paid reasonable amounts, can they be expected to perform. He also compared the salaries of the MLAs to private sector employees and remarked that the salaries on their current level are not even 1/20th of the salaries of the top news editors. He assured that if someone is found to be misusing his position, they shall not be spared. Although the reasons seem legit, there are certain underlying problems with them.
First, MLAs and MPs in India are well allowed to have alternative sources of income. Most of them in fact have their own businesses, professional practices or sources of rental or other incomes. The salary hike does not take into account an MLA’s other sources of income and nor does it require the MLA to clock a certain minimum number of hours on his job, which is a norm in other jobs, public and private. This means that the MLAs will draw better salaries but the scope of their duties will still be the same. Sure, Mr. Kejriwal might assert that his MLAs do not have other sources of income and that that being an MLA is a full time job, past experiences of the electorate have proven otherwise. The salary hike must come with its own set of checks and balances, including a minimum attendance norm, cap on the salary for MLAs with certain amounts of other incomes and performance based bonuses.
Second, assuring that action would be taken if someone is found to be misusing the position is a thin premise to work with. There is enough legal recourse available already but the problem lies in its implementation. Allegations are followed by inquiries which are in turn followed by trials which take years. Similarly, the AAP government will face elections in five years’ time and the new government may or may not have the same commitment towards corruption. But the salary hike will stay and the government runs the risk of facing the problem of increasing sense of entitlement in the MLAs.
Finally, there is enough evidence that salaries and performance are not perfectly correlated. A 2013 Harvard study also points out that the correlation between increase in salary and job satisfaction (a proxy for motivation) is weak. Elementary economics suggests that it is the marginal productivity that decides the wage and not the other way round. In the case of Delhi, the salaries have been increased, hoping that the performance, motivation and productivity of the MLAs would improve.
Increasing the salaries of MLAs is an easy task, ensuring their cooperation and performance is a challenge that has hitherto not been addressed. Unless the government ensures a mechanism of checks and balances, raising the salaries is an exercise in futility and will only create an additional burden on the exchequer.
I am a final year student of the five year Integrated Programme in Management at IIM Indore and a Government of France’s Charpak scholar at EMLYON Business School in France. I have keen interest in politics, economics and financial markets.