Adept Economics Director Gene Tunny had a good chat with Scott Emerson on his 4BC Drive program on Tuesday 15 June 2021 about the fat pay packet of Brisbane City Council boss Colin Jensen, who is paid over $700k each year, placing him easily in the top 1% of earners. First, Gene noted that it is comparable to salaries paid to people with similar levels of responsibility (i.e. heads of department at state or federal levels or university Vice Chancellors, some of whom are paid $1M) and that even some school principals (e.g. of Brisbane Grammar) are paid $500k. Scott noted Brisbane City Council is almost like a state government given its size.
That said, Gene did note he would want to do a benchmarking exercise of salaries of people in similar positions around the world to determine if it was an appropriate salary. Such a comparison may not necessarily be favourable for Mr Jensen. For instance, Gene was surprised to learn that the head of the New York Port Authority makes under US$300k per year (see Port Authority’s Bloated Payroll Grew $150 Million Last Year: Report).
Finally, Gene told Scott that with bureaucracies we need to worry about the Principal-Agent Problem. It is very possible the management of organisations can exert undue influence and extract excessive salaries for themselves. This may be more likely to occur in taxpayer-funded institutions (including councils, government department, and educational institutions), which are less subject to market discipline than many private sector companies.
You can listen to Gene’s conversation with Scott via this link:
Posted on 17 June 2021. For further information please call Adept Economics on 07 3085 7417 or email us on email@example.com.