Higher Pay Is the Only Way to Reduce Corruption - Essay Example

Higher Pay and Corruption Introduction This paper argues and defends on the point that higher pay is the only way to reduce corruption. Before doing this task however, it is important to describe the essence of the term ‘corruption.’ According to Carvajal (1999), corruption may be considered as a social pathology and its effect on the development of a nation may be compared to the effect of cancer on the human body. Corruption can be a serious problem, such as when it becomes a large-scale corruption which is considered an emergent social process. The occurrence of large-scale corruption is the opposite of efforts that promote development (Carvajal, 1999). On the other hand, Philip (2006, p. 45) describes corruption as having to involve high public office, substantial and systematic expropriation of benefits, and significant damage to the public interest. Corruption as having to involve high public office is considered as the most important of these three conditions and the other two are complementary to it. Lee (2006, p. 221) states that corruption is a destructive crime which not only undermines quality of life but also causes injustice and inflates business costs. The seriousness of this crime leads nations to improve governance by redefining the role of government, overhauling the system of incentives, and strengthening domestic institutions in order to ensure checks and balances (Rahman, et al., 2000, p. 17). Corruption is often called “black/grey market or “underground economy” whose rules are almost similar to those of legal markets (Stachowicz-Stanusch, 2010). It is considered a risky activity because of the presence of “policing” in society (Chakrabarti and Subramanian, 2003).The economics of corruption operates in such a way as serving as a means to satisfy certain planned and desired human ends. According to Klitgaard, et al. (2000), corruption is a crime of economic calculation in that the tendency for a public official to engage in it is when there is a slim probability of being caught alongside a mild penalty with large pay-off relative to the positive incentives. Since corruption is committed within the political machinery of the state, it is not only considered an economic issue but a political issue as well (Stachowicz-Stanusch, 2010, p. 122). The economic and political aspects of corruption are certainly the basis for advocating some solutions to this problem on an economic point of view (i.e., increasing pay and rewards) and political point of view (i.e. providing political and legal basis for sanctions). Stachowicz-Stanusch (2010) defines corruption as a process of breaking the established rules. Simply put, this act refers to deceive people, steal, and make something illegal and immoral. The prefix “co” attached to the term suggests an act of co-action or cooperation, which indicates a cooperative effort of two partners who are both guilty in the same measure. The person who corrupts is not the only corrupted one but also the one who accepts corruption (Stachowicz-Stanusch, 2010). This process leads to making a government or a country an entirely corrupt one. According to Rendtorff (2010), corruption is the use of money or gifts in order for a public official to acquire certain kinds of benefits and advantages. This crime is committed by individuals, state institutions, enterprises, and organizations in their pursuit to obtain a specific goal or set of goals. It is used as a mechanism for domination and power. Since it is considered as an act that challenges established and well-defined laws of justice, corruption is hence considered both illegal and unethical (Rendtorff , 2010, p. 112). Rendtorff states that corruption can take place in all levels of society including both the private and the public spheres and that a high level of corruption often indicates a society with little trustworthiness. It is apparent by these preliminary discussions that corruption is a serious problem that must be addressed by governments. This paper argues that higher pay is the only way to reduce it. 2. Why Higher Pay is the Solution to Corruption The evidence towards higher pay as a solution to combat corruption in the public sector is shown by Martinez-Vazquez, et al. (2007) as they present computations when public officials optimize corruption. They say that public officials choose their optimal value of corruption, which is equivalent to the value of corruption with maximum expected income. If the official decides not to engage in corrupt activities, his/her expected income will be equivalent to the public sector wage, which when low, might not satisfy his/her needs and those of his/her household. This observation is useful for analyzing that a public official considers engaging in corruption if the expected income at such particular level of corruption bears a higher amount than that of his/her current salary in the public sector. The author cites the computation made by Becker and Stigler (1974), noting that corruption could be controlled when there is a high level of public wages or when public wages are competitive enough. Thus, the position of this paper that higher wage is a solution to combat corruption. It must be noted that one’s involvement in corruption is optimized when the marginal benefit from further corruption is equated to the marginal cost of that additional corruption (Martinez-Vazquez, et al., 2007, p. 22). Based on this assertion, the level of corruption that an individual is motivated to participate in becomes higher when public sector wages are lower, when there is a greater difference between private and public wages, when the level of personal gain is higher, when there is a lower probability of detection, and when there is a lower amount of monetary value of the penalty (Martinez-Vazquez, et al., 2007). This explains the relevance of increasing wages in order to combat corruption. There is a need to recognize that albeit corruption is a distinct issue in public finance, it is closely linked to a range of other policy issues such as tax evasion and crime. In tax evasion, the taxpayer serves as the perpetuator; while in corruption, it is the public official. Moreover, the economics of corruption may be compared to the economics of crime since corruption per se is a crime of self-enrichment by individuals in public office. This crime is being committed at the expense of the users of government services or of the public treasury. The reason why corruption becomes a particularly complex problem is because its perpetrator generally exercises some degree of state power over the victim (Martinez-Vazquez, et al., 2007, p. 11). The work of Bourguignon and Pleskovic (2007) also mentions the general support for the solution to corruption which can be fought only by providing higher wages (carrots) and more severe punishments (sticks). This is yet another evidence towards higher pay as a solution for the problem. The motivation for corruption is assumed by the possibility and/or availability of opportunities for personal gain. At this point, the concept of corruption includes not only the motivation to involve oneself in the act but also the opportunity for it. Factors affecting the opportunities for corruption are influenced by perspective focusing on corrupt systems. The factors affecting opportunities for corruption are said to be financial discretion yielded to government officials, the monopoly power of these personages, and the accountability to which they are subjected (Martinez-Vazquez, et al., 2007). Chakrabarti and Subramanian (2003) investigate the effects of compensation structure on corruption within an equilibrium framework and propose a model of corruption with each individual being capable of corruption. Corruption is able to decrease societal output by the degree that individuals exploit their potentials for corruption. Theoretically, the evidence for stating that higher pay is a solution to corruption is shown by what Van Rijckeghem and Weder (2002) call the “fair wage-corruption” hypothesis which points out to the notion that individuals choose certain levels of corruption in order to reach an expected income level. The fair wage can be ascertained according to a range of mechanisms including wages of peers within and outside the organization, societal expectations, and the market clearing wage, among others. The corresponding computation presented by Van Rijckeghem and Weder (p. 84) indicates that a higher government wage is necessary to eliminate corruption. The use of increased pay and benefits to fight corruption is illustrated in the evidence of security forces in the United States in which appropriate compensation levels were able to aid in preventing a culture of corruption (U. S. Army, 2010). The insight behind providing better compensation is that it is cheaper to provide adequate wages and produce effective security forces than to pay less and produce corrupt and abusive forces. Providing adequate compensation to the police is seen as an important endeavor since their nature of duties and contact with civilians often provide opportunities for corruption (U. S. Army, 2010). Preventing these opportunities is thus addressed by raising the police’s compensation. This case in point is a relevant example showing the importance of providing higher pay to fight corruption. It is however important to note that good pay and attractive benefits must be combined with strict code of conduct. Van Rijckeghem and Weder (2002, cited in Lambsdorff, 2007, p. 37) investigate the extent that the level of public sector salaries is related to the amount of corruption and provide evidence that low salaries force public employees to engage in illicit ways to supplement their incomes, such as corruption. They likewise emphasize that high salaries are a premium lost once the individual is caught with the practice and is fired. This assertion indicates that given a higher compensation, the public sector employee would think twice committing the act because of the probability of losing the high pay and that there is no immediate circumstance (i.e., insufficient salaries) forcing him/her to engage in corruption such (Lambsdorff, 2007). Diaz-Briquets and Perez-Lopez (2006) found evidence that there is an inverse relationship between wages and corruption. This evidence indicates that the lower the wages, the higher the occurrences of corruption. They identify the quality of the bureaucracy, which is often combined with the level of wages of the public officials as a major determinant of corruption. While generally assumed to be significant, the role of remuneration received by public servants may be termed as vague, due to the several factors mediating the level of corruption such as the civil service tradition, the professionalism of the public service, and the availability of on-monetary incentives. Despite this, empirical studies support the inverse relationship between wage and corruption (Diaz-Briquets and Perez-Lopez, 2006). It then suggests that when public service employees receive higher compensation, their likelihood to engage in corruption becomes lesser. Similarly, increasing the compensation of government employees while strengthening efforts of anti-corruption have been widely applied with considerable success (Dowling and Yap, 2007). Dowling and Yap emphasize the abundance of several works pointing on the fact that increasing salaries can be a powerful means to reduce corruption. They also stress that given stiff penalties and high chances of getting caught, the outcome would be less corruption particularly if individuals can make a decent living without having to engage in corrupt practices. These works are evidences to the argument that higher pay is the only way to reduce corruption. 3. Conclusion This paper argues on the point that higher pay is the only way to reduce corruption and provides evidence to this end. It is inferred that receiving low wages is a major determinant of the occurrences of corruption and that there is an inverse relationship between corruption and low wages received by public sector employees. This points out to the necessary response of the government to increase compensation to the extent of making it competitive and/or sufficient enough as to enable the employee to provide for his/her household adequately. Existing literature likewise indicates that raising the compensation up to the level that would inhibit the government employee to engage in corrupt practices must be combined with legal sanctions that punish the act. References Becker, G. and Stigler, G. (1974) ‘Law enforcement, malfeasance and the compensation of enforcers, Journal of Legal Studies, 1: 1-18. Bourguignon, F. and Pleskovic, B. 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(2007) The institutional economics of corruption and reform: Theory, evidence, and policy, New York: Cambridge University Press. Lee, A. (2006) ‘The Public as Our Partner in the Fight Against Corruption’, in C. J. G. Samford, A. Shacklock, C. Connors, and F. Galtung (eds.) Measuring Corruption, England: Ashgate Publishing Limited. Martinez-Vazquez, J., del Granado, J. A., and Boex, J. (2007) Fighting corruption in the public sector, Oxford, UK: Elsevier. Philip, M. (2006) ‘Corruption Definition and Measurement’ in C. J. G. Samford, A. Shacklock, C. Connors, and F. Galtung (eds.) Measuring Corruption, England: Ashgate Publishing Limited. Rahman, A., Kisunko, G., and Kapoor, K. (2000) Estimating the effects of corruption, Policy Research Working Paper 2479, Washington DC: The World Bank. Rendtorff, J. D. (2010) ‘The Concept of Corruption: Moral and Political Perspectives’ in A. Stachowicz-Stanusch (ed.), Organizational immunity to corruption: building theoretical and research foundations, USA: Information Age Publishing Inc. Stachowicz-Stanusch, A. (2010) Organizational immunity to corruption: building theoretical and research foundations, USA: Information Age Publishing Inc. U. S. Army (2010) Counterinsurgency field manual, New York: Cosimo, Inc. Van Rijckeghem, C. and Weder, B. (2002) ‘Bureaucratic Corruption and the Rate of Temptation’ in G. T. Abed and S. Gupta (eds.) Governance, corruption, and economic performance, Washington DC: International Monetary Fund. Read More