Ensuring Honest Civil Servants

It now seems that Yaakov Neeman, one Israel’s leading lawyers, will be the new Minister of Justice. He will succeed Professor Daniel Friedman, a respected jurist. But ministers with any particular qualifications for their jobs is in Israel the exception, not the rule. The last time a legal standout was Justice Minister was when Neeman himself was previously minister, overa decade ago (until he was forced out by hostile prosecution officials who brought trumped up charges against him). Looking back on health ministers, I can identify only one with any particular background in health care (Dr. Ephraim Sneh).

The mighty United States is having similar trouble attracting and keeping talent at the top. Over a half dozen Obama nominees withdrew themselves from consideration for Secretary-level positions, and over a dozen senior Treasury jobs are still unfilled, months after the new President took office.

The ethical level of our ministers doesn’t seem much better.than their professional level. Recent Treasury head Avraham Hirschzon is on his way to jail for thievery at about the level of sophistication of purse-snatching, and Prime Minister Ehud Olmert is being questioned on suspicion of similar thefts.

In my opinion, low salaries are an important element of the problem in both countries. Israeli ministers are paid barely over $100,000 a year – less than middle managers in some medium-sized firms, despite the fact that they are managing huge organizations with billion-dollar budgets. The US Secretary of the Treasury gets paid less than $200,000 – not much for overseeing the finances of the largest economic entity in world history. The CFO of a medium-sized company gets paid more and has an easier job by far. Plus he doesn’t have to deal with being under constant and withering public scrutiny.

Compare this to the situation in the Asian Tigers. Senior ministers in tiny Singapore get over a million dollars a year. In tiny Hong Kong they get around half a million. Japan’s economy is less than half the size of the US’s, but their senior ministers get over twice as much.

All these countries have a reputation for clean government as well (all are before the US on a popular corruptions perceptions index), and many commentators believe that it is not a coincidence. High salaries contribute to quality personnel in many ways:

Candidate pool: when you have attractive conditions, you attract more qualified and ethical candidates in the first place. Most of the people who really understand financial markets, and are thus in a position to help the US cope with its severe financial crisis, are earning seven-figure salaries. Convincing them to work for 20% of that can’t be easy.

Incentive to steal: One of the reasons Lee Kwan Yew instituted high salaries for Singapore ministers was that so they wouldn’t need to steal in order to maintain the kind of lifestyle many people in ministerial circles are accustomed to.

Incentive to perform: If you have a very high-paying job, you will be very reluctant to risk your income through misconduct or even mediocrity.

The same thing goes for Knesset members. In a company where ordinary Electric Company line workers get paid close to 20,000 NIS a month, is it really reasonable that a legislator gets paid only 35,000 NIS? What kind of applicant pool is this likely to attract, again recalling the need to in the public eye?

Some make the case that we don’t want public servants motivated only by the desire for money, but I think that it is even worse to get people motivated only by a pathological desire for public recognition.

In public service like in anything else, there is no such thing as a free lunch. If Israel wants qualified, dedicated and ethical public servants it will have to pay for them.