How much are New Zealand's MPs really worth?

MP salaries are back in the headlines after the Government announced it will freeze all their allowances and salaries for a year.

Most ministers in Cabinet earn nearly $300,000 - around $250,000 more than the average NZ salary of around $50,000. A backbench MP with no additional responsibilities earns $160,000, while the base primary teacher salary starts at $48,000.

Infamously, embattled former National MP Todd Barclay pocketed a sweet $40,000 by refusing to resign three months before the last election while others have taken pay cuts to serve.

Are they being underpaid - or do we need to offer more?


"Some MPs are underpaid, and others are overpaid," says Taxpayers' Union economist Joe Ascroft.

"For many, being a Member of Parliament will be the best paying job they will ever have, while others take significant pay cuts to embark on a career of public service.

"It's easy to imagine that more highly skilled, well educated people would run for Parliament if MPs were paid more than they are currently."

ACT leader David Seymour thinks the amount being paid is "about right", but wants to restrict the number of high-paid Ministers to 20.

"There are plenty of MPs who are earning more in Parliament than they would in the private sector," Mr Seymour told Newshub.

"MPs get used to the baubles and never leave. Look at Winston Peters - how would he fare in the real world?"

He says taking a pay cut shouldn't dissuade people who genuinely want to serve the public from standing for office.

So how should their MP's pay be determined?


Currently, salaries are set by the independent Remuneration Authority, and increases are pegged to increases in the wider public service. Average salary increases across the private sector, which have been lower, have no direct influence.

Dr Eric Crampton, the chief economist at libertarian think tank The New Zealand Initiative, says this can create the "perverse incentive" of linking pay to high public sector salaries - encouraging the Government to give pay rises to teachers, doctors and nurses.

Dr Crampton says he likes mechanisms that link pay to broader economic performance, and the others agree.

"MPs should be rewarded when they raise the living standards of ordinary Kiwis. That's why it's important to link our pay to increases in productivity and wages in the real economy," Mr Seymour says.

"An interesting option might be to simply bulk-fund political parties the equivalent of total current spending on MPs, staffers and other resources: then the parties could decide who deserved higher and lower pay - how much is used for MP's pay, and how much is used for support staff," Mr Ascroft told Newshub.

"Another option would be to simply link the wages of MPs to the median wage, in order to encourage good economic management."

Big private sector pay-outs for MPs


After they leave Parliament, New Zealand's MPs find a variety of roles and sinecures. Some move into executive and board positions, others go into highly paid lobbying - often in the same area they oversaw as ministers.

"Most MPs land on their feet when their former colleagues give them cushy board roles or ambassadorships," Mr Seymour says.

"Both National and Labour have made a habit of handing out jobs for the boys and girls."

Sir John Key has been appointed to the board of directors of Air New Zealand, as well as chairman of ANZ Bank New Zealand. 

Former Green Party MP Russel Norman is now executive director of Greenpeace, National MP Katherine Rich is the CEO of the New Zealand Food & Grocery Council and former Minister of Health Dr Jonathan Coleman left to run the private sector health company Acurity.

"Finding work as a former-MP is much easier than most people making a difficult career transition," Mr Ascroft told Newshub.

"There are an array of ambassadorships and boards that are regularly filled by previous MPs, while lobbying firms and companies seeking subsidies always find it useful to have experienced politicians stalking the streets of Wellington in search of Government largesse."

Overseas, other democracies have 'cooling off periods' which prevent MPs from working in the private sector, especially in the industries they used to regulate.

But Dr Crampton warns that this could prevent experts from bringing their experience to Parliament.

"There's only so many people with expertise in a small country," he says.

"Parliament's a really risky profession. You have a three year term then things are over. If you ban them from going back to where you make a living, you're less likely to want to move to Parliament."