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Non-monetary rewards & compensating differentials 1. What are non-monetary & non-wage rewards? 1. What are non-monetary & non-wage rewards? –MNCs –Other.

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Presentation on theme: "Non-monetary rewards & compensating differentials 1. What are non-monetary & non-wage rewards? 1. What are non-monetary & non-wage rewards? –MNCs –Other."— Presentation transcript:

1 Non-monetary rewards & compensating differentials 1. What are non-monetary & non-wage rewards? 1. What are non-monetary & non-wage rewards? –MNCs –Other jobs 2. Theory (Compensating differentials) 2. Theory (Compensating differentials) 3. Empirical evidence 3. Empirical evidence –Executive pay –Teachers

2 1. Non-monetary & non-wage rewards Components of compensation in International Business (MNCs) – senior managers Components of compensation in International Business (MNCs) – senior managers 1.Base salary + performance component 2.Foreign service inducement 3.Allowances – housing, education, travel, security 4.Benefits – insurance & pensions – see Lazear = Total remuneration – Note: Local circumstances

3 Local Issues Legal constraints Legal constraints – Mandated benefits; Rewards limitations – Tax law; Labor relations law Social custom Social custom – Role of family & employer – Role of government Economic differences Economic differences

4 1. Non-monetary & non-wage rewards Components of non-monetary compensation for lower level jobs Components of non-monetary compensation for lower level jobs – Flexibility of hours – Security & risk of injury – Conditions of work – Training Preferences & tastes are heterogenous Preferences & tastes are heterogenous

5 2. Theory Two types of worker Two types of worker – Worker A: strong preference for flexible hours – Worker B: weak preference for flexible hours More generally More generally – Workers vary in their preference for non-monetary or non-pecuniary factors E.g. teachers E.g. teachers E.g. nurses E.g. nurses

6 2. Theory Indifference curves – worker A Flexible hours Wage

7 2. Theory Indifference curves – worker B Flexible hours Wage

8 2. Theory Flexible hours Wage S C X Z Y TCTC TSTS WcWc WSWS Worker A Worker B (Pecuniary) (Non-pecuniary)

9 2. Theory Flexible hours Wage S C X Z Y TCTC TSTS WcWc WSWS Worker A Worker B (Pecuniary) (Non-pecuniary)

10 3. Empirical evidence: School teachers For current teachers there are 2 key issues in teacher labour supply: For current teachers there are 2 key issues in teacher labour supply: (a) Retention of teachers; (b) Distribution of teacher quality across school systems Why do teachers exit teaching? Why do teachers exit teaching? Policy debate: the relative role of pecuniary and non-pecuniary factors Policy debate: the relative role of pecuniary and non-pecuniary factors Shape the appropriate policy response Shape the appropriate policy response

11 Pecuniary and Non-Pecuniary Factors Previous literature Previous literaturePecuniary: Relative wage in other professions (Murnane and Olsen, 1989; Dolton and Van der Klaauw, 1995,1999) Relative wage in other professions (Murnane and Olsen, 1989; Dolton and Van der Klaauw, 1995,1999) Non-Pecuniary: Non-Pecuniary: Maternity (Stinebrickner, 2002) Maternity (Stinebrickner, 2002) Class size and workload (Mont & Rees, 1996) Class size and workload (Mont & Rees, 1996)

12 Data Source Use MOHRI (Minimum Obligatory Human Resource Information) for the Australian state of Queensland. Use MOHRI (Minimum Obligatory Human Resource Information) for the Australian state of Queensland. Covers whole population of state school teachers (31,000) Covers whole population of state school teachers (31,000) Quarterly individual level data for 2001 and 2002 Quarterly individual level data for 2001 and 2002 Detailed human resource information: Detailed human resource information: – Pay, allowances, contract type – School information (school size, class size, performance) – Personal characteristics (gender, ethnicity, disability, education, subject specialisation)

13 Permanent Teaching Labour Force - Summary Males Females StayedMoved Exited Stayed Moved Exited StayedMoved Exited Stayed Moved Exited Pecuniary : Predicted Wage (log) Own wage (log) Locality Allowance Non-pecuniary: School size (log) Average Class size (log) High student Perform Low student Perform Remote Rural Part-time Tenure yrs Observations 7, ,176 19, ,269

14 Selected Estimates – MNL Logit, Marginal Effects MalesFemales (p-val) Turnover Mobility Turnover Mobility_ Pecuniary: Predicted Wage0.021 (0.03) (0.13) (0.80) (0.00) Own Wage (0.00) (0.01) (0.00) (0.01) Locality Allowance (0.08) (0.03) (0.00) (0.00) Non-Pecuniary: Primary (0.03) (0.62) (0.01) (0.70) School Size (0.13) (0.00) (0.22) (0.00) Average Class Size (0.11) (0.00) (0.22) (0.00) High Student Perform (0.57) (0.25) (0.98) (0.29) Low Student Perform (0.00) (0.08) (0.28) (0.00) Part-time0.061(0.00) 0.121(0.00) (0.00) (0.00) Remote School0.009 (0.32) (0.00) (0.00) (0.00) Rural School (0.41) (0.21) (0.00) (0.06) Additional Controls: Primary, Part-time, Ethnicity, Disability, Subject specialisation, Education Quals, % Female staff, % degree staff, Number private schools in district, local unemployment rate.

15 Summary of evidence Pecuniary effects Pecuniary effects Higher wages deter turnover. Higher wages deter turnover. Locality allowances deter turnover and encourage mobility especially for female teachers Locality allowances deter turnover and encourage mobility especially for female teachers Locality allowances retain male teachers in rural/remote locations Locality allowances retain male teachers in rural/remote locations Non-pecuniary effects Non-pecuniary effects Primary schools have lower turnover Primary schools have lower turnover Difficulty keeping less experienced female teachers in rural/remote schools. Difficulty keeping less experienced female teachers in rural/remote schools. Mobility away from small schools/larger classes Mobility away from small schools/larger classes Conclusion Conclusion Pecuniary and non-pecuniary influences on turnover and mobility. Pecuniary and non-pecuniary influences on turnover and mobility. Locality allowances - encouraged some movement to and reduced mobility away from rural/remote schools Locality allowances - encouraged some movement to and reduced mobility away from rural/remote schools


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