Written by Alfred M. Wu.

Methods for targeting corruption in China have been a fascinating topic for practitioners and academics. The Central Commission for Discipline Inspection of the Chinese Communist Party is investing all its energy into fighting ‘tigers’ in order to frighten all public officials to give up corrupt behaviours.

Alternative solutions to the current the anti-corruption movement have been discussed extensively. Proposed solutions include the use of the ‘rule of law’, the introduction of an independent anti-corruption watchdog, and the harvesting of a strong political will to eradicate corruption. Recently, when students in my comparative development policy class answered a question on the anti-corruption strategy in China, students from Hong Kong suggested that using an increased civil service wage to deter corruption would be a good solution. Students originally from Mainland China, where corruption is a more serious concern, cautioned that corruption could not be cured through improving civil service wages. The sharp contrast between these opinions was astonishing to me. What informs these polarised views on the relationship between the civil service wage and corruption control? What are the related policy implications? I don’t believe that corruption can be addressed solely by reforming civil service remuneration. Nevertheless, an alternative way of reducing corruption, rather than the current anti-corruption movement, is to use good remuneration to ensure clean government.

When I discussed this topic in media outlets in China, very few people (with the exception of a few anti-corruption experts) supported my argument. One intriguing comment on this topic caught my attention: “Using high wages to reduce corruption would be effective [if] public officials were honest and not greedy. However, for those greedy [people], using increased pay to curb corruption would not work. A gun [i.e. the execution of corrupt officials] would work in the end.” Similarly, at the annual meeting of the Boao Forum in early 2015, Professor Yongnian Zheng of the National University of Singapore argued that the Chinese government can learn from Singapore in respect to fighting corruption. As the Chinese economy moves toward a market economy, the public sector wage should also be market-oriented (and increased). A renowned entrepreneur, Dong Mingzhu, refuted this immediately, asking, “How much is enough [for civil servants]?” She cited some corruption cases involving millions of RMB. Reading the comments by Netizens on the debate, I found that many Chinese people agreed with Dong Mingzhu as opposed to Professor Zheng.

Some economists debate the impact of wages on corruption control. The shirking model predicts that in a bid to eliminate corruption, public sector wages should be very high, given that the level of a bribe could be several times higher than the formal salary a civil servant receives and, more importantly, the probability of detection is very low. According to the Van Rijckeghem and Weder (2001) study in India, the probability of detection was only 10 percent; the probability of being punished (after detection) was also 10 percent. I don’t have any equivalent reliable data on China, but based on anecdotal evidence, the probability of detection could be much lower. Therefore, given that the benefits of being corrupt are so substantial, implementing increased wages as a means of reducing corruption becomes a relatively weak solution.

Instead, the ‘efficiency wage’ hypothesis tends to support increased pay to reduce corruption. Public officials make a rational decision when facing the temptations of corruption: they calculate the benefits from corruption and the costs of being punished. Thus corruption control will be effective in the long run if public servants earn a relatively high salary in comparison to other wage-earners.

The Chinese seem to hold the belief that, given the probability of being caught is very low and the benefits from corruption are so huge, corrupt officials will collect both increased wages and bribes if a salary increase is implemented. In addition, the view appears to be that many public officials are greedy and that the assets corrupt officials have acquired far exceed their needs. This is true to some extent. Professor Ting Gong and I published an article using the case of China to examine the relationship between civil service pay and corruption. We found that the relationship was more complex than proportional – the Chinese government since 1997 had raised civil service remuneration substantially, however, the scale and level of corruption increased during the same period. This suggests that wage effects on corruption control are not immediate.

Cautioning the immediate benefits brought about by improved public sector wages, I would argue that a relatively high wage is still a viable and possibly effective solution for fighting corruption in the long run. In Van Rijckeghem and Weder’s influential study, they point out that civil service salary increment may not have a contemporaneous effect, meaning that it takes time for increased salary to minimise the temptations of corruption. In Singapore and Hong Kong, handsome salaries for public servants combined with other institutionally implemented processes for anti-corruption did not reduce corruption over a short period. It took years to consolidate the anti-corruption system to fight corruption effectively.

Earlier this year, several international media sources revealed that President Xi Jinping is earning US $1,832 per month. In fact, this is a miscalculation, as the Chinese government has adopted a different salary structure to that of public sector workers from the rest of the world. Based on my estimation, Xi Jinping is actually earning approximately US $4,000 – 5,000 per month. Nevertheless, with this salary, he would be unable to afford to buy a decent place to live in Beijing. Some China watchers have pointed out that this level of wage will result in informal supplementary payments by individual government departments (grey income) and even corruption. Van Rijckeghem and Weder also conclude that civil servants with low wages cannot resist the temptations of corruption.

Civil service pay in China increased after 2000, and the ratio of civil service pay to the manufacturing wage has risen. However, the formal wage of civil servants is only 1.3 times the manufacturing wage. In a sample of a large number of developing countries, when this ratio increased from 1 to 2, Van Rijckeghem and Weder found that the level of corruption dropped significantly. According to their research, if the government wants to eradicate corruption, civil servants should earn 3 – 7 times the manufacturing wage. Based on their study, the ratio of civil service pay to the manufacturing wage in Singapore was about 3.5 in the examined period.

Whether or not corruption is driven by necessity or greed is beyond the scope of this study. Many corruption cases in China do not point to either side. Confucius said that the superior man cares about virtue and the petty man only thinks about material things, i.e. there is a relationship between moral integrity and material life. If public officials earn such low salaries, it is difficult to ask them to maintain a good spirit in serving the people; shirking, cheating and corruption is unsurprising. When discussing civil service pay in Africa, a researcher quoted a civil servant saying: “My government pretends to pay me, and I pretend to be working. We are in perfect equilibrium.” This is also valid in today’s China and is not an acceptable arrangement in modern public administration, because taxpayers pay substantial taxes to the government.

Why is there a lack of support in China for the Singaporean policy of addressing corruption? In addition to a number of discouraging, sometimes ungrounded reasons (i.e. the notion that people tend to be driven by greed), one significant reason is that egalitarianism aggravated by the Communist ideology is still dominant in the country. Egalitarianism means that a wide pay gap — even remuneration based on merits and performance — is not acceptable in Chinese society. Cooke, an expert on human resources management in China, pointed out that, “Egalitarianism as a distributive ideology has for centuries characterised the thinking of the rural class struggle with the property-owning class”.

With the Communist ideology dominating the country, the People’s Republic of China promoted and institutionalised pay egalitarianism substantially. Therefore, it laid the foundation for a sentiment against substantial pay rises for civil servants. People generally believe that the pay gap should not be too significant among workers in different sectors. When discussing the salary level of public sector workers, Deng Xiaoping, the then prominent leader in China, said that, “There should not be too large a gap between workers’ and peasants’ lives, and between urban and rural lives… we must adhere to a rational low wage system and do our best to let everyone have a meal to eat.” (Takahara, 1992).

Public attitudes converge with the official ideology adopted by Communist China, even after the onset of the economic reform in 1978. I followed the discussion about the relationship between public sector pay and corruption control appearing in People’s Daily (人民日報), the Chinese Communist Party’s mouthpiece. After Lee Kuan Yew, the founding father of modern Singapore, introduced the Singaporean style of anti-corruption approach to China, People’s Daily published a number of articles investigating the relationship between public sector wage and corruption control; the Chinese deliberately avoid using the term ‘using high pay to ensure a clean government’ (高薪養廉). Instead, they asserted that ‘using adequate pay to ensure a clean government’ (以薪養廉) is the policy embraced by the Singapore government. It means that public sector workers in Singapore do not earn particularly high salaries, but that other anti-corruption systems play a more important role in eradicating corruption in the territory.

Some observers in People’s Daily stated that some greedy officials might still try to obtain money illicitly, even if they receive increased pay from the government, and that therefore the government should encourage public officials to lead a frugal life; only if public officials purify their inner world through frugality will the anti-corruption movement succeed. When Zhu Rongji, then viewed to have an iron will and iron hand, intended to improve civil service remuneration whilst downsizing the government, he carefully said that this was conducive to using adequate pay to maintain a clean government (以薪養廉).

Civil service pay is not the only factor affecting corruption. I don’t intend to argue that the Singaporean approach will be effective immediately in a Chinese context. However, Chinese public officials have too low a ‘formal salary’. In a webpage listing the salaries of world leaders, the president of Russia was cited as earning US $12,272 per month, the president of Mexico US $13,307 per month and the president of Argentina US $26,258. Among the heads of these important emerging economies, only the president of India (US $2,447) earned less than President Xi Jinping. As previously stated, the Chinese government has raised public sector salary substantially over the past decade. In 2000, Premier Zhu Rongji said that he earned US $240 per month; in 2002, he earned US $480 per month. Thus today, Xi Jinping earns a much higher salary than his predecessors.

Nevertheless, civil service pay rises have never reached a point where formal civil service pay is competitive terms of recruiting talent and offering civil servants a ‘decent’ life. Many rank-and-file civil servants are struggling to make ends meet, and although it should also be noted that securing a red-collar job is not easy in China, some mid-career civil servants opt to leave the public sector. In the past 5 years, the central government has made efforts to address the pay gap among public sector workers and to halting extra benefits offered by individual government departments. This approach is not about increasing public sector salary across-the-board.

If President Xi Jinping would like to prove to the Chinese people that the Communist Party is taking fighting corruption seriously, he should consider using salary increases to maintain a clean government, in addition to continuing with his anti-corruption movement. If conducted properly and within the law, President Xi giving himself a substantial salary increase may, in the long run, earn him credit for fighting corruption and, eventually, promoting a well-functioning market economy.

Dr. Alfred M. Wu is Assistant Professor in the Department of Asian and Policy Studies at The Hong Kong Institute of Education. Recently he published “Governing Civil Service Pay in China” (NIAS Press, University of Copenhagen, 2014). Image credit: CC by omefrans/Flickr.

References:

Cooke, Fang Lee. 2005. Public-sector pay in China: 1949-2001. In Human resource management in China revisited., ed. Malcolm Warner, 279-300. London,New York: Routledge.

Gong, Ting, and Alfred M. Wu. 2012. Does increased civil service pay deter corruption? evidence from China. Review of Public Personnel Administration 32 (2) (March 26): 192-204.

Kiggundu, Moses. 1994. Civil service pay in Africa by Derek Robinson. Canadian Journal of African Studies 28 (2): 356-8.

Takahara, Akio. 1992. The politics of wage policy in post-revolutionary China. Studies on the Chinese economy. Houndmills, Basingstoke, Hampshire: Macmillan Press.

Van Rijckeghem, Caroline, and Beatrice Weder. 2001. Bureaucratic corruption and the rate of temptation: Do wages in the civil service affect corruption, and by how much? Journal of Development Economics 65 (2): 307-31.