The following was originally posted on Sen. Eric Brakey’s Facebook page. It’s republished here with permission.
Today, during a hearing on a bill to increase legislative compensation, I presented an alternative to the State and Local Government Committee.
My proposal was to establish “performance pay” for elected officials — based on a formula that factors the Maine median income, Maine unemployment rates, and Maine workforce participation rates.
Basically, the only way for elected officials to get pay raises would be for them to enact policies that impove the economic well-being of the Maine people.
What do you think?
For those interested, here is the formula I proposed.
LP = I * (1.05 – U) * (1 + WM – WN) * 1.10
LP – Legislative Pay Index (Annualized)
I – Maine Median Income – Current: $30,850
U – Maine Unemployment – Current: 3.1%
WM – Workforce Participation (Maine) – Current: 58%
WN – Workforce Participation (National) – Current: 62.4%
1. This formula treats 5% unemployment (which economists regard as “full employment”) as the baseline.
When unemployment rises above 5%, legislative pay would decrease.
When unemployment falls below 5%, legislative pay will increase.
2. Unlike unemployment, there is no recognized ideal rate for workforce participation. That’s why this formula measures Maine’s rate against the national average.
When it falls below the national average, legislative pay will also fall.
When it rises above the national average, legislative pay will also rise.
3. Based on current rates for Maine’s median income, unemployment, and work participation, legislative pay would equal $33,057.20. That would be the annualized pay compensation for a rank-and-file state legislator.
In reality, law-makers are only paid when the legislature is in session.
During the first regular session (6 months), this would result in 12 payments of $1,377.38, and total annual pay of $16,528.60. (Current rates for 1st Regular Session Salary is $16,245.12).
During the second regular session (4 months), this would result in 8 payments of $1,377.38, and total pay of $11,019.04. (Current rates for 1st Regular Session Salary is $11,668.32).
Effectively, the formula applied with current economic conditions would result in a break even with current legislative compensation, but it would fluctuate from there based on how well the economy is working for Maine people.
4. I specifically chose these three indicators because they balance each other.
Median income alone could be cheated with policies to mandate higher wages, but that drives up unemployment.
Median income and unemployment together are incomplete, however, because that can be cheated with policies to expand the welfare state.
People only count toward unemployment rates if they want a job, but can’t find one. Growing welfare programs discourages job-seeking, so it can artificially lower the unemployment rate.
Adding workforce participation rounds out the formula, ensuring that it captures the problem of working-age and work-capable people dropping out of the labor force.