International-local remuneration differences across six cultures: do they undermine poverty reduction work?

Abstract

Despite the rhetoric of a single global economy, professionals in poorer countries continue to be remunerated differently depending on whether they are compensated at a local vs. international rate. Project ADDUP (Are Development Discrepancies Undermining Performance?) surveyed 1290 expatriate and local professionals (response rate = 47%) from aid, education, government, and business sectors in (1) Island Nations (Papua New Guinea, Solomon Islands), (2) landlocked economies (Malai, Uganda), and (3) emerging economies (India, China). Difference in pay was estimated using purchasing power parity, from the World Bank's World Development Indicators 2007. Psychological measures included self-reported pay and benefits (remuneration), self-attributed ability, remuneration comparison, sense of justice in remuneration, remuneration-related motivation, thoughts of turnover and thoughts about international mobility. We included control measures of candour, culture shock, cultural values (horizontal/vertical individualism/collectivism), personality (from the “big five”), job satisfaction and work engagement. Controlling for these and country (small effects) and organization effects (medium), (a) pay ratios between international and local workers exceeded what were perceived to be acceptable pay thresholds among respondents remunerated locally; who also reported a combination of a sense of relative (b) injustice and demotivation; which (c) together with job satisfaction/work engagement predicted turnover and international mobility. These findings question the wisdom of dual salary systems in general, expose and challenge a major contradiction between contemporary development policy and practice, and have a range of practical, organizational, and theoretical implications for poverty reduction work