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

Area of Science:

• Development economics
• Organizational psychology
• International human resource management

Background:

• Professionals in developing nations often face unequal pay based on local versus international compensation rates.
• This disparity exists despite the notion of a unified global economy and impacts various sectors like aid, education, government, and business.

Purpose of the Study:

• To investigate the impact of dual salary systems on professionals in developing economies.
• To examine the relationship between pay discrepancies, perceived injustice, motivation, and employee turnover/mobility.

Main Methods:

• Project ADDUP surveyed 1290 expatriate and local professionals across diverse economies (Island Nations, landlocked, emerging).
• Pay differences were assessed using purchasing power parity; psychological measures included remuneration, ability, justice, motivation, turnover intentions, and mobility.
• Control variables included candour, culture shock, cultural values, personality, job satisfaction, and work engagement.

Main Results:

• Local professionals perceived pay ratios between international and local workers as unacceptable.
• These professionals reported a sense of relative injustice and demotivation.
• Perceived injustice and demotivation, combined with job satisfaction/work engagement, predicted turnover and international mobility.

Conclusions:

• Dual salary systems in development contexts may be counterproductive, fostering inequity and hindering performance.
• Findings challenge current development policies and practices, highlighting a contradiction between theory and implementation.
• Implications exist for poverty reduction work, organizational management, and theoretical understanding of global compensation.