I have quite a few friends who are politicians. A decent chunk of them earn much less than they could in the private sector. Some of them left much more lucrative jobs to go into politics. Others that I know undoubtedly obtained a pay rise by going into representative politics, and I wonder whether they would ever have earned as much in any other pursuit.

I make these observations because, when people argue that politicians are not paid enough, I am left wondering: how much is enough? If some people take the job despite the fact that they could have made much more, and others get the job despite being unable to command anywhere near as much anywhere else, how do you determine what is fair?

The point is important at the moment because the debate over travel allowances brings with it the debate as to what is fair remuneration for our politicians.

Outside representative politics, most remuneration packages are established in a competitive setting. Both the public and private sector work to attract people through a combination of monetary reward and job conditions.

An employer makes decisions about the salary package based on its objectives. Is it more important to have the best person for the position, or simply an adequate person? If the latter, the employer will probably offer a lower wage. The employment market proceeds upon the assumption that, all other things being equal, the more talented and effective the employee, the higher the pay.

When an employer wants to employ someone, the common process is to advertise for applicants. Each applicant competes with the other applicants by arguing that he/she is the most meritorious applicant.

There are, of course, distortions in the employment market; reasonable ones like minimum wages, and less reasonable ones like unfair dismissal laws which protect underperforming employees and make it harder for unemployed people to get jobs. That said, there is a market, and, generally speaking, it is competitive.

There is no real competition of this kind for jobs as elected representatives. The number of people who get elected because of who they are, rather than because of the political force with which they are affiliated can, in any parliament, be counted on one hand. There is really only a competitive market for candidates, and it is a market populated by people who – almost exclusively – desperately want to be elected representatives.

These are people who have already looked at the salary package and said “alright”. In each case, the applicant has to convince a party to endorse them, rather than electors to elect them. It will come as no surprise that the skill set for which a political party looks is more to do with the candidate’s capacity to win than with the candidate’s potential to contribute to a parliamentary party.

It would be unfair to say that the latter criterion is not important in a pre-selection. In my experience it is very important; just not as important as the candidate’s capacity to win.

That preference for campaigning skills over governing skills is easily understood. At any given time, a political party already has its small group of people who will do the governing if it is elected. In any season of pre-selections, it is not looking to supplement that group. It is looking for foot-soldiers able to be sent into battle to bring power to that group. If some of the foot-soldiers are good prospects for the future, so much the better.

A party candidate is never elected because the electorate as a whole has endorsed that candidate’s personal qualities. Yes, some candidates are excellent and swing the last few votes required to get a marginal seat across the line, but even then, those last few votes are obtained by selling a party line as much as they are by selling a particular candidate. That candidate’s most valuable skill is as a campaigner; his/her talent as a legislator is secondary.

All of this has to be taken into account when examining the proposition that politicians should be paid more because it is the only way that you attract the best people. My view is that the pay has very little to do with attracting the best people.

At this point, one must ask: who are the best people?

If the best people are people like Malcolm Turnbull – highly successful business people who also demonstrate an enthusiasm for public policy – then the argument falls over at the first hurdle. Politics will never be an economically attractive proposition to such people.

Parliamentary salaries could never be raised so high. Any organisation that wanted to attract the sort of people we are talking about by paying the right amount would have to pay more than $500,000 a year.

The thing is, even if you raised salaries that high, the barrier to entry posed by party pre-selections prevents the desired outcome. The mere fact that people better qualified to legislate are attracted to apply for pre-selection does not necessitate the conclusion that the best-qualified will end up in Parliament. The interests of political parties in winning elections will still trump any desire (if it actually exists) for better legislators.

This is not to say that lower salaries and poor work conditions for politicians have no effect on the market for candidates. When John Howard decided to abolish the parliamentary pension, I made a decision that the remuneration package was simply not enough. I earn a decent chunk more than a federal MP and I will have responsibilities for a long time to come. I would really like to have a crack at politics. I think I would be a strong contributor, but it will have to wait until I have raised my son to adulthood and made sure he is okay. Then, assuming I can persuade my deeply sceptical spouse, I can afford to be a bit more cavalier about my own economic position.

Similarly, plenty of people – myself included – will be heavily discouraged by the requirement basically to ignore one’s family. That said, at the higher end of the salary scale, there are plenty of people already prepared to do that.

The thing is, the logic does not stop with whether I’d be willing to be a parliamentarian. It misses the critical point: could I convince my party (the LNP) to select me as a candidate? I flatter myself that I could, but I can’t really know. As I say, those who make the decision will not prioritise my competence to be a member of parliament so much as my competence to be part of a campaign team.

So, a higher salary does not necessarily – indeed, likely will not – result in a very different make-up of parliamentary bodies. The central determinants have little to do with how much a parliamentarian is paid.

Ultimately, politics is a vocation. Most who pursue it are not motivated by money. They may be motivated by the will to power. They may be motivated by the incredible balm which apparent electoral approval offers to the ego, even though, as we all know, few individuals ever really obtain electoral approval on their own accounts. They may be motivated by the capacity, according to their own lights, to do good for their communities and their country. Most commonly, they are motivated by a combination of these things.

The discussion then has to be about what is fair remuneration in a moral sense, not what is economic in a market sense. What should we pay our politicians to be fair to them?

I think politicians’ remuneration has to take into account the following factors:
• there is any number of people willing to take the jobs they have;
• the undoubted sacrifice of family life it involves and the protection which most of the community receives against such sacrifice through industrial laws;
• the fact that, ultimately, it involves public service rather than participation in free-market activity and that public service usually involves some level of sacrifice;
• the fact that there will be a wide diversity of people in a parliament and that no argument can really be made that, on their varying skill sets and talents, one salary level is appropriate;
• the corollary that the salary is more of an honorarium to ensure that anyone who undertakes the service can live comfortably as distinct from remuneration fixed in a competitive market place;
• the further fact that a large part of what they do with their time is not directed towards public business but towards getting re-elected, which is really party business.

On that basis, it is difficult to conclude that the base remuneration of a federal backbencher is anything other than fair and adequate. It is significantly above the average income. It probably does not reflect what would be paid for a job of similar intensity in the ordinary economy, but taking into account its vocational nature and the sacrifice implicit in public service, it provides a means for parliamentarians to live comfortably.

So, I come to the issue of politicians’ allowances; what to do with travel allowances and the like? If they are really just compensations for the fact that politicians feel underpaid, then they have no real justification and should be abolished. The ethical approach is to improve base salaries and leave them to meet their own expenses.

The worst of the entitlements, in my view, is the study tour. There have been some laughable examples from both sides of politics published in the newspapers this week. For my money, the worst was Laurie Ferguson’s trip to study the plight of the Roma people in Hungary. Mr Ferguson justified it by saying he has a longstanding interest in human rights? So what?

It may be conceded that it would be better if our MP’s were more rounded, better read people, but that could be true in virtually any job that relies principally upon the exercise of intellect. I have many colleagues – both employed and self-employed – who are very well read and very well travelled. They bring the benefit of that experience to their work, but they paid for it themselves, because that is how the real world works.

There is simply no analogue in the ordinary economy for a study tour, with the possible exception of academia. In my experience, even then, academics are left to spend their own money rather than have great levels of subsidy, scholarships aside.

It seems to me that backbenchers have little to do outside their electorates other than travel to Parliament, and perhaps to do committee work. Once one comes to that conclusion, much of the difficulty with ambiguous rules and what can be claimed slips away.

The situation for frontbenchers, particularly opposition frontbenchers, is more complex. They have to travel to do their jobs. They have to do what they can to hold the government to account and this will obviously involve travelling to meet with people and to undertake research.

Of course, in this space, there is no clear distinction between what is campaigning and what is holding the government to account, but that is not a major problem. There is an obvious public interest in frontbenchers from both sides being able to travel to campaign so that the public has the benefit of hearing both sides of the argument in making up its mind.

So here is what I think is the best answer to how our politicians should be remunerated:
• backbenchers should be entitled to travel expenses for attending Parliament and for attending meetings of committees as well as to a fully funded car;
• country backbenchers should be entitled to travel expenses within their electorates;
• frontbenchers should be entitled to a fixed amount for travel expenses for whatever purposes they deem appropriate as well as the backbenchers’ entitlements;
• there should be no more study tours or publication allowances;
• there should be a small increase in salaries to allow for the loss of those benefits (say, $10,000 per annum).

Update: As is pointed out by Brosh in the comments section, the study tour has been abolished.  Judith Sloan has something to say about that at Catallaxy.