How can New Zealand have the world’s highest paid public sector CEOs?

The greatest pay excesses, in New Zealand and elsewhere, are in the private sector. But pay rates for the chief executives of government departments have also spiralled over the last three decades.

And more so in New Zealand than almost anywhere else, it seems. The chart below, from the OECD’s Government at a Glance repPublic sector chief executive payort, shows the average chief executive in a New Zealand government department earned US$400,000 in 2011. Only in Italy, where average pay was a stratospheric US$650,000, did public sector chief executives do better. What’s more, if you compare the pay of chief executives with those of other people with university qualifications, as in the chart below, New Zealand’s government CEOs are the highest-paid in the world.

You might ask how on earth Italian public sector bosses can be paid so well, given the country’s apparently deserved reputation for inefficient and corrupt bureaucracy. (Actually, that might be the answer right here.) But for New Zealand,

Public sector chief executive pay 2the question is how can we have such high pay rates, in a country that is small by international standards?

The answers will be complex, but it would be no surprise if a large part of the reason is our enthusiastic embrace of corporatisation in the 1980s and 1990s. More than any other public sector, I think, New Zealand’s government departments were restructured to be more like big companies.

With big companies, typically, come big salaries, and all the related justifications (albeit with little evidence to back them up) about the need to pay ‘what the market determines’, get the ‘best’ talent, and so on. (It’s interesting, of course, that this rationale tends not to apply to people further down the tree. Pay rates for ordinary public sector workers haven’t risen out of line with what their private sector counterparts get.)

It is tempting to conclude, then, that while the highest-paid chief executives are, as I said at the outset, in the private sector, the spiralling pay rates both there and in the public sector may have similar roots.

2 comments on “How can New Zealand have the world’s highest paid public sector CEOs?
  1. I suspect you’re right in suggesting corporatisation is the driving factor. As the head of a government agency about to be corporatised, I think it would be pretty hard not to think a doubling of your salary as being in line with the demand for ‘good governance’. On the other hand, do you think that having regulatory controls on the size of public sector CEO salaries would have a brake-effect on the growth of private sector CEOs?

  2. Pingback: Local Bodies: National and the Poverty Deniers « The Standard The Standard

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