Cabinet is today discussing plans to consolidate the state sector with mergers planned in three sectors – Internal Affairs, Research, Science and Technology, and the Agriculture and Forestry Ministry. It is also considering the possibility of amalgamating the Ministry of Women’s Affairs into either the Labour Department or the Social Development Ministry (why not just axe it?).

The move by the Government has got me thinking about the cost of Government overall. A huge amount of power and wealth is transferred to Wellington every year – and I think it is something we should be increasingly concerned about. A paper http://ideas.repec.org/p/wai/econwp/07-20.html a few years ago concluded that the wage premium of working in Government amounted to 17 – 21 percent – and on top of that, they get a feel good factor too! These figures are adjusted for qualifications, job requirements etc. This kind of disparity in wages is likely to arise because Governments do not have strict budget constraints – if they want to pay higher wages, they simply raise taxes.

The graph below shows the yearly difference in wages depending on region. The message: move to Wellington if you want money.

wages by region 2009

If National is trying to reduce costs, I don’t believe that merging departments is the first step it should take. Although I believe that the Government needs to take action immediately to halt the growing bureaucracy and with it the growing number of public servants which are placing an ever larger burden on taxpayers, they should first take a step back and look at the bigger picture before jumping straight into mergers.

The first thing that should be asked when reviewing a Government Department is not whether it can be merged, but rather if the whole Department is actually needed. Departments most likely to be deemed unnecessary would be the Charities Commission, Families Commission, Ministry of Youth Affairs, Learning Media, and even the Ministry of Women’s Affairs.

Once this is complete, it would then be time to review the remaining Departments.