Proposal: Every few years, we adjust the politicians' pay by taking the average Canadian income and multiply it with a multiplier (I would be okay with 150-200% of Average Income, but we can debate what is the appropriate level). When the average income goes up, the politicians' pay goes up, when it goes down, they get a pay-cut. We should be able to get the base number from Statistics Canada or Revenue Canada.
This is not just about rewarding a job well done or docking pay for a bad job (although I'll admit there's an element of that). It's about instiling a sense of leadership in our leaders.
First, some definitions. By Average, for the statistics geeks out there, I am referring to the mean (add up everybody's income, divide by the number of people), not the median (whatever the person in the middle makes) or the mode (the income range that has the most people). I use this measure because it is the statistical measure that is most sensitive to changes in our most disadvantaged, and to changes that affects large swarths of the population.
By Income, I mean including the income of everybody who qualifies to file Income Tax forms, including those on social assistance and Employment Insurance (You may or may not want to exclude non-citizens, depending on your social views). This will result in a lower base number than the average Wage (of everybody working), but you adjust for that by using a bigger multiplier (more on that below).
When the Germans bombed Buckingham Palace during the Blitz, the Queen Mother said, "I'm glad we have been bombed. Now we can look the East End in the Eye."
There are legitimate policy reasons for our politicians to hold down the average income (eg. wage and price controls to ward off profiteers in times of national crisis or run-away inflation). There are legitimate reasons to give money to select groups which does not result in immediate improvement for most people (eg. to spur innovation). Sometimes, it is even necessary to cut back on support for our most needy when times are tough (eg. when faced with the stark choice between austerity and national insolvency - viz. Greece).
We need our leaders to be willing and able to make tough policy choices, but we don't want leaders to say, "You need to take the hit for the national good, but I am entitled to my entitlements." We need leaders to say, "I know you are getting scalped. It's necessary for the common welfare, but I will at least take a haircut".
Tying the politicians' salaries to the average income should not mean they never make tough policy decisions that require short-term pain. It does mean that when they do make these choices as our representatives, they will give thought to how it affects the people, just as it affects their own personal bottomlines.
As to where to set the multiplier (and why we need one). Firstly, by using Average Income, as opposed to Average Wage, that means our base number is less income than what the average working person is earning.
It is sometimes rationalized that we need to pay our politicians more in order to attract the talent of bankers, lawyers and businesspeople, who can earn way more in the private sector. I think this is wrong-headed. You don't pay your entire construction crew engineers' wages when you need to build a bridge. The job of Member of Parliament does not even have minimum educational requirements (as it should be). We have farmers and teachers and former pub managers serving (with competence and diligence, I presume). You don't pay 300 farmers and teachers and shop stewarts bankers' wages so you can have a competent Minister of Finance.
Rather, we need to pay our MPs and Senators enough so that the farmers and teachers and mechanics who will lose seniority and opportunities in the work-a-day world can afford to represent their fellow citizens. The bankers and lawyers should take a paycut, knowing that their service will contribute to a better functioning society, which in turn is good for business.
Sometimes politicians like to compare themselves to executives in a large corporation when they justify their pay. I would think a more apt analogy would be a board member of a large non-profit, where you serve for the prestige, the connections you make, and because you believe in the cause (in this case, the Nation). You don't expect to make a career of it.
When independent consultants look at political pay, they invariably, as with all guild-like professions where there are few comparable jobs to compare it to, rely on "what the other guy's getting". Our politicians are better than the worst, so they need to be better paid than the bottom 50% of lawmakers in other jurisdicions; then they are doing a decent job, so maybe they need to be in the top quartile....and then the salary arms race begins when the Swedish or Belgian lawmakers compare what they make to "those Canadians over there".
Let's get rid of all this and pay them the average income times X. You wouldn't even have to adjust for cost-of-living (it's built in).