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Money Ethic Scale Part 3

Money Ethic Scale Part 3. Pay Differential. The Matthew Effect & The Pay Differential. Tang (1996) Journal of Economic Psychology

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Money Ethic Scale Part 3

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  1. Money Ethic ScalePart 3 Pay Differential

  2. The Matthew Effect &The Pay Differential Tang (1996) Journal of Economic Psychology Tang, T. L. P., Furnham, A., & Davis, G. M. T. W. (in press). A cross cultural comparison of pay differentials as a function of rater’s sex and money ethic endorsement: The Matthew Effect revisited. Personality and Individual Differences.

  3. The Matthew Effect Gabris and Mitchell (1988):Apostle Matthew in the bible (13:12) For to him who has shall be given, and he shall have abundance; but from him who does not have, even that which he has shall be taken away (Matthew 13: 12).

  4. The Matthew Effect According to the Matthew Effect, merit increases are frequent and plentiful for good performers. But, poor to average performers suffer because money is taken from them to pay large merit increases to the good performers (p. 55). Heneman, Robert L. (1992). Merit pay.

  5. Sex and Money Equity (Merit) Vs. Egalitarian (Equality) Women rate social needs higher than do men (Lawler, 1971). Males, white-collar employees, high performers, achievement-oriented employees and those who already work under a merit plan tend to favor merit pay (Heneman, 1992).

  6. Pay Differential The pay differential, irrespective of job content or function, is defined as the salary at one level divided by the salary at the next lower level. Pay differential is a reflection of the relative worth of these positions to the organization and is not related to the job incumbents (Mahoney, 1979; Simon, 1957).

  7. Pay Differential--In History Plato sated in The Laws that society was strongest when the pay differential for income between the richest and the poorest was 4:1. Aristotle favored a 5:1 ratio.

  8. Pay Differential in 1970s Mahoney (1979)No. 1/No. 2 = 1.37 to 1.41 No. 2/No. 3 = 1.21 to 1.23

  9. Pay Differential in 1990s! Hausman (1996): No. 1/No. 2 1991 1.701992 1.631993 1.771994 1.70 and 1995 1.93 (~ 2.00).

  10. Pay Differential (Average CEO) Year CEO Worker ratio 1960 190,383 4,666 41 1970 548,787 6,933 79 1980 624,996 15,008 42 1992 3,842,247 24,411 157.

  11. Pay Differential (Average CEO) Year CEO Worker Ratio 1993 3,841,273 25,317 152 1994 2,880,975 26,388 109 1995 3,746,392 26,652 141 1996 5,781,300 27,662 209 1997 7,804,755 28,381 275.

  12. Pay Differential (Highest Paid CEO) Year Highest CEO Worker Ratio1991 58,999,000 18,462 3,1901992 127,000,000 24,411 5,203 1993 203,010,590 25,317 8,019 1994 25,928,000 26,388 9831995 65,580,000 26,652 2,4611996 102,449,000 27,662 3,7041997 230,725,000 28,381 8,130 1998 575,592,000 30,000 19,180 & This is different from the 4:1 or 5:1 ratio.

  13. Pay Differential USA 150 Japan 15 Europe 20 Nelsen-Horchler (Industrial Week, 1990, 1991)

  14. MethodOrganization Chart Hypothetical Organization Chart Mahoney (1969) C (CEO) = A b L-1 See Example (next slide)

  15. Organization Chart A C B 20,000 D E F C (CEO) = A b L-1

  16. Tang (1996) Men with high Money Ethic endorsement allocated significantly more money to the highest position and less money to the lowest position (creating a large pay differential) than did those with low MES. Women’s allocations of money were not affected by their endorsement of the MES.

  17. Top/Bottom Pay Differentials Sex x Money: F (2, 157) = 3.04, p = .051 Sex Groups F-Employee F-Student M-Student High MES 2.20 2.79 2.96* Low MES 2.42 2.53 2.04* *p < .05.

  18. Pay Differential Taiwan, USA, UK Taiwan: 78 ProfessionalsThe USA: 137 ProfessionalsThe UK: 93 Professionals The 12-Item Money Ethic Scale

  19. The Matthew Effect • Taiwan USA UK • Sex F M F M F M High 2.63 2.77 2.20 2.83 2.56 2.39 Low 2.05 2.07 2.35 2.38 2.71 2.15 • The Whole Sample • Sex F M High MES 2.43 2.67* Low MES 2.36 2.18*

  20. Culture Collectivist cultures value strong, cohesive in-groups (i.e., equality), whereas individualistic societies emphasize individual freedom and the immediate family (i.e., equity). Individualism: USA (1), UK (3), Taiwan (44) Masculinity: UK (9/10), USA (15), Taiwan (32/33). (Hofstede & Bond, 1988).

  21. Confucianism Man’s interactions with his fellow humans (Rhody & Tang, 1995). The junior partner owes the senior respect and obedience. The senior owes the junior partner protection and consideration (Hofstede & Bond, 1988).

  22. Organization Chart A C B 20,000 D E F C (CEO) = A b L-1

  23. Results • MANOVA F = 2.78*** • Taiwan USA UK A 35,526 34,658 31,608 1>2>3C 19,754 19,326 19,007D 15,421 14,742 13,920 1>2>3E 15,280 14,698 13,768 1>2>3F 15,473 14,663 13,673 1>2>3.

  24. Pay Differential • MANOVA F = 3.31*** • Taiwan USA UK A/20000 1.77 1.73 1.58 1>2>3C/20000 .99 .97 .9520000/D 1.34 1.40 1.49 1<2<320000/E 1.37 1.41 1.51 1<2<320000/F 1.34 1.41 1.43 1<2<3.

  25. Pay Differential--PRC Tang, T. L. P., Luk, V., & Chiu, R. K. (2000, C&BR). Pay differentials in People’s Republic of China: An examination of internal equity and external competitiveness.

  26. Compa Ratio Compa ratio is usually defined as the ratio of actual pay to structure midpoint, or, the ratio of actual pay to competitive pay. In this study, we compare pay differentials within organizational structure (vertical) and across organizations.

  27. Higher Education In 1950, 43% of high school students in the USA pursued higher education, 6% of Americans were college graduates. In 1992, 66% of high school students went to college, and 21% of a larger American population had college degrees. Some 17 million students are attending classes taught by 762,000 professors on 3,400 campuses in the US (Elfin, 1992; Tang & Chamberlain, 1997).

  28. Education and Pay In 1963, College graduates 8.45/hr High School graduates 6.10/hr Ratio = 8.45/6.10 = 1.39 In 1990, College graduates 10.25/hr High School graduates 6.82/hr Ratio = 10.25/6.82 = 1.50

  29. College Tuition Tang, T. L. P., Tang, D. S. H., Tang, C. S. Y. 2004. College tuition and perceptions of private university quality. International Journal of Educational Management, 18 (5): 304-316. Academic reputation ranking is the most significant predictor of college tuition. Investment

  30. Reputation Kent Tool, IH: If you are looking for the best people, one way to be sure of finding them is to let someone else do the screening for you (Friedrich, 1981, Time).

  31. Reputation Judge, Cable, Boudreau, & Bretz (1995) studied 1,388 executives (9% Ivy League) and found that the predicted earning advantage for Ivy League graduates, over the course of a 20-year career, is more than $600,000 (p. 510).

  32. Method 1998 China Pay Level Survey Sponsored by the Hong Kong Industrial Relations Association and Wing Lung Bank International Institute for Business Development of Hong Kong Baptist University

  33. Research Data 19-page survey mailed to 200 companies in PRC 104 Companies (return rate = 52%) Covering 56,390 employees

  34. Benchmark Job 63 Benchmark jobs: 4 Levels Managerial Staff (14 jobs) Supervisory/Technical Staff (21) General Staff (19) Operative Staff (19)

  35. Region Beijing Shanghai Guangzhou Shenzhen and Zhuhai and Others

  36. Business Sector Retail, food and beverage, professional services, sales and marketing, property management, telecommunication, computer and electronics, electrical and machinery, metal, industrial materials, construction, and others. Service (48) vs. Manufacturing (35)

  37. Mode of Operation State-owned (SOEs, n = 5) and Privately-owned: Wholly-owned vs. Joint venture, cooperative venture, processing venture, representative office Wholly-owned (14) vs. Venture (84)

  38. Company Size Less than 300 Employees (69) Between 300 to 1,000 (15) More than 1,000 (20)

  39. Annual Salary Service vs. Manufacturing (RMB) A B Service Manuf. A/B Accounting Mgr. 52,476 80,387 .65 QC Supervisor 39,528 26,798 1.47Engineer 37,540 28,273 1.33Security Guard 12,133 8,689 1.40 Average 1.21.

  40. Company Size A B C Small Median Large A/C B/C Clerk 16,969 15,024 11,742 1.45 1.28Store 14,841 11,096 9,821 1.51 1.13

  41. Mode of Operation • A B Wholly Venture A/B • Sales Mgr 13,500 68,184 .20 • Purchasing Mgr 84,499 53,068 1.59Accountant 42,871 31,786 1.35 • Systems Analyst 30,144 43,463 .69 • QC Technician 21,772 14,257 1.53 • Average 1.07.

  42. Levels of Education PRC Jr. Secondary 9 years of education Sr. Secondary (HS) 12 Diploma (HS + 2) 14 High Diploma (3 yr.) 15 University 16.

  43. Starting Monthly SalaryService vs. Manufacturing • Engineering A B Service Manuf. A/B • Jr. Secondary (9 yr.) 626 371 1.69Sr. Secondary (12) 947 686 1.38Diploma (14) 1,061 615 1.72University (16) 1,974 1,302 1.52 • A 1974/626 = 3.15 • B 1302/371 = 3.51 A/B = .90

  44. Starting Monthly SalaryService vs. Manufacturing • Sales A B Service Manuf. A/B • Jr. Secondary 707 307 2.30Sr. Secondary 997 725 1.38Diploma 1,077 765 1.41 • A 1077/707 = 1.52 • B 765/307 = 2.49 A/B = .61

  45. Starting Monthly SalaryService vs. Manufacturing • Marketing A B Service Manuf. A/B • Jr. Secondary (9) 633 307 2.06Sr. Secondary (12) 894 431 2.07Diploma (14) 970 560 1.73High Diploma (15) 1,419 993 1.43University (16) 1,947 1,153 1.69 • A 1947/633 = 3.08 • B 1153/307 = 3.76 A/B = .82

  46. Starting Monthly SalaryService vs. Manufacturing • Manufacturing A B Service Manuf. A/B • Jr. Secondary 610 364 1.68Diploma 918 567 1.62 • A 918/610 = 1.50 • B 567/364 = 1.56 A/B = .96

  47. Top-Bottom Pay DifferentialAnnual Salary • Pay Dif FAdministration 4.58 17.28Information Tech. 3.41 • Accounting 2.36 2.85Marketing 1.90

  48. Top-BottomService vs. Manufacturing • A B Service Manuf. FAccounting Mgr/ 2.55 5.71 6.5*Entry University • A/B = .45

  49. Starting Monthly SalaryUniversity/High Diploma • Field Pay Dif. tEngineering 1.20 2.13* Sales 1.17 • Information Tech. 1.19 2.41*Sales 1.17

  50. Conclusion There are significant pay differentials within organizations (internal equity) and across organizations (external competitiveness). Organizations may have employed different strategic compensation policies due to the nature of their operation and environmental variables.

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