LOCAL-EXPATRIATE DIFFERENCES IN PAY: HOW JUSTIFIED ARE THEY

IN A GLOBAL ECONOMY?

Stuart Carr & Ishbel McWha

Project ADDUPNew Zealand Psychological Society Annual Conference, Palmerston North August 29th,

2009

A Thought to carry with us…

• Left hand side of the room: – Remember a job you have done– Which entailed teamwork– Imagine your colleague/peer is receiving 1/4 of your

remuneration

• Right hand side of the room– As above, except You are the lower paid party

• Exercise (for both sides of the room together): • Can you predict your reactions?• E.g., in terms of “Contextual performance”?

A Context

• The United Nations’ Millennium Development Goals are a “grand plan” to bring poverty down.

• Grand goals work best when translated into context

• In poverty reduction, a common denominator is people working in organizations

• Much of which is is collaborative “capacity development”

• Hence poverty may be more effectively reduced by good work relations, in organisations

An Issue

• “Critical Incident” at UNIMA• Organisational Survey, with Rose Chipande (1998)• Expatriates reported guilt and superiority • Locals reported unfairness and de-motivation• Presented these findings to DAC/OECD (2005)• Collated anecdotal evidence from other countries• Secured grant from UK’s ESRC/DFID, to explore more

systematically across different economies• Landlocked (Malaŵi, Uganda), Island Nation (PNG,

Solomon Islands), and Transition (India, China)• A tentative journey, difficult terrain; Exploratory…

METHODOLOGY

1. Tried to minimise pay discrepancies!2. Flat structure, heavily participative3. E.g., Use of Delphi technique4. Country site visits (ethical approval 1).5. Survey design and piloting (ethical approval 2)6. Main survey (lingua franca = English)7. Preliminary analyses8. Country workshops (just completed). Interim synthesis.9. Final analyses and articles – under peer review10. Final report & publication/dissemination (Global Special

Issue: Psychology and Poverty Reduction)

Participants

• Total Number of Participants N=1290• Nationalities represented: N = 42• Local 77%, Expatriate 23%• Response rate = 46%(overall); 50%(local); 38%(expatriate)• Pay type: Local 76%, International 17%, [Volunteer 7%]

• Gender breakdown = 64% males, 36% females• Age: Mean=36.5yrs, sd=9.5 yrs• More than 90% of the sample tertiary-educated, from tertiary

diploma (9%) and Bachelor degree (37%) through to postgraduate diploma (12%), masters degrees (26%) and doctoral or postdoctoral-qualified (9%).

• Number of Organisations (nesting) = 202– Mean n per organization = 6.4

• Breakdown by type (sector) = Aid: 60 orgs, Commercial: 75 orgs, Education: 27 orgs, Government: 40

Measures

• PPP

• Single items, adapted from original study

• Item sets, developed for/trialled in the new study

• Covariates, including for example culturally-related values and culture shock (two-sides)

• Wider measures, including work engagement and job satisfaction

• Social desirability (statistical control measure)

Procedure

• Sample survey

• On-paper (by demand)

• Delivered in batches

• Distributed through gatekeepers

• Confidential and Anonymous throughout

• Collected by in-country teams

• Processed centrally and locally (in workshops)

FINDINGS: PPP

Salary Type International Local

------------------------------------------------ Expatriate 107,939 (50,260) 32,680 (15,194) n=95 n=26Worker ------------------------------------------------ Local 90,805 26,587

n=22 n=624 ------------------------------------------------

CENTRAL PPP RATIO - 4: 1 (2: 1)

______________________________________* We note a reduction in sample size, by about half, for reasons like contracts, reticence, etcetera* Volunteer category has been dropped due to multiple different interpretations of the term

Paris Declaration: Alignment?

• Both expatriates and locals indicated that their job brings them into contact with differently paid and benefited colleagues

• Asked at what ratio expatriate: local salary differences become “unacceptably large,” modal threshold (N = 1106) = between 2 (frequency=250) and 3 (frequency=254). – Stable across expatriate and local groups

• For the majority of expatriates n=216/286), their remuneration is sufficient - But for the majority of locals (n=610/970), it is not.

• Hence:(1)For local workers, expatriate: local pay ratios tend to exceed

subjective tolerance thresholds; + their needs are reportedly unmet.- NON ALIGNMENT

(2) For expatriate workers, the threshold may not appear to be clearly exceeded – at least if they often use home as the main comparison- BLIND SPOT?

Behavioural data: Replication?Perceptions of Motivation x major pay groups – items used/adapted from study with Rose

____________________________________________________________________________

Items bearing on guilt and superiority Remuneration is: Local International

• Some expatriates on large salaries feel guilty because they earn much more than local workers 2.7 2.6 ns

• In this type of job, the abler/better performers are mostly 2.8 3.2 ***expatriates

Items bearing on levels of motivation

• In this type of job, the more motivated workers are mostly 3.3 3.2 nsexpatriates

• There is de-motivation at work as a result of pay and benefits given to expatriates 3.3 2.7 ***______________________________________________________________________________

• The two items abler/better have been combined into a single index based on α = .651.• There is no multivariate effect for expatriate-local status, or interaction between expatriate-local and pay group (local salary, international

salary). Hence these are ignored and participants are classified on the basis of local-international salary type (F4,997 = 6.33, p<.001, partial η2=.024)

• There are effects on ability/performance from organisation (partial η2=.24), country (partial η2=.035) and region (partial η2=.034 ). As seen from the partial η2 statistics, the strongest effect is organisation (24%).

• There are effects on the item focusing on de-motivation at the level of organisation (partial η2=.285), country (partial η2=.061), and region (partial η2=.043). Again the strongest effect is organisation (29%).

• Inferential tests have controlled for effects of organisation, using mathematical formulae available in Kenny & Lavoie (1985) • *** Significant at the .001 level, two-sided. Although an adjustment to reduce the risk of Type I error due to the impact of country/regional

levels is advised, the link is unlikely to become ns.

More detailed measures of Alignment______________________________________________________________________________Construct Region/Country level Organisational level Individual remuneration

level 3 level 2 level 1ICC ICC Local

International______________________________________________________________________________Mobility .02 **** .05 *** 2.4 2.4 nsTurnover .01 * .12 **** 2.6 > 2.3 ****DeMotivation .08 **** .13 **** 3.1 > 2.5 ****Justice .07 **** .10 **** 2.6 < 3.1 ****Ability .00 ns .06 *** 3.3 3.4 nsComparison .04 **** .09 **** 3.4 > 3.2 ****______________________________________________________________________________MEAN .04 (SMALL) .09 (≈MEDIUM)______________________________________________________

• Notes- Level 3: Region/Country = Oceania, Africa, India, China (which differ p < .001, using MANOVA)- “Expatriate-local” ns on multivariate F-test, correcting for ICC at region/country level (based on Stevens, 1994, p. 242; Alpha was divided through by a factor of 5).- Significance levels for Intra-Class Coefficients (ICC) are based on the F-test (ANOVA).

* Significant at .05; ** = .01, *** = .005, **** = .001- ICCs of .05 are normally considered “small;” .10 = medium; .15 = large, i.e., Effects for level 2 > level 3- Comparisons between locally and internationally salaried means are therefore corrected for ICCs under Organisational level (after Kenny & Lavoie, 1985)

CONCLUSION: Data is multi-level, organisations are salient, local salaries are experienced by the locally-remunerated as both unjust & de-motivating

Across the sample as a whole: Starting general modelling;..

Correlation Matrix (N individuals=1156, N organisations=202)_________________________________________________________________

Mobility Turnover DeMot’n Justice Comp. Ability

Mobility .71 .31 ns ns ns

Turnover .57 .59 -.37 .46 .24

DeMotivation .18 .30 -.85 .37 ns

Justice -.11 -.24 -.43 -.26 ns

Comparison .15 .20 .31 -.22 .42

Ability ns ns .25 ns .27

_____________________________________________________________ Notes• Individual and organisational-level effects are separated (Kenny & Lavoie, 1985)• Organizational-level relationships are above the diagonal; individual-level below• At individual level, all significant coefficients are significant p < .001, two-tailed• At group (org.) level, all coefficients are statistically significant at p < .01, two-tailed

Translation ‘Up’ the diagonal:-

• Ability predicts comparison

• Comparison predicts justice-injustice.

• Justice-injustice predicts motivation/de-motivation

• Motivation/de-motivation predicts turnover cognitions

• Turnover cognitions predict thoughts about mobility

Partial SYNTHESIS…

Across Levels?

• Multi-level modelling: Let slopes + intercepts vary• By organisation only (level 2)

– Power too low for country/region (separate country studies)

• Controlling for individual differences in cultural values etc:- • Top predictors of De-motivation = In-Justice (and

comparative Ability)• Top predictors of turnover cogs = job satisfaction/work

engagement (-), AND de-motivation (from remuneration)• With both functions moderated by Organization• International mobility cogn was predicted incrementally more

by de-motivation than by job satisfaction/work engagement– (no level 2 effects on this criterion)

Workshop Recommendations

• Recommended, on basis of data, by subject-matter experts and stakeholders

• Interdisciplinary, and by consensus• (although few expats showed up):• Close the Gap• More Transparency• Performance-based remuneration• Including fair and equitable Benefits (JUSTICE)• Localisation• Need to reduce DISCRIMINATION…• ‘I/O’ CAN DO (SOME OF) THAT, AS ADVOCACY?...

Some Source Publications

• Carr, S. C., MacLachlan, M., & Chipande, R. (1998). Expatriate aid salaries in Malaŵi: A doubly de-motivating influence? International Journal of Educational Development, 18(2), 133-143.

• MacLachlan, M., & Carr, S. C. (2005). The Human dynamics of aid. OECD Policy Insights, 10, http://www.oecd.org/dev/insights.

Acknowledgements• We sincerely thank Professor Raymond Saner for

his expert developmental insights, and Drs. Duncan Jackson and Richard Fletcher for statistical advice.