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Non-monetary rewards & compensating differentials

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Presentation on theme: "Non-monetary rewards & compensating differentials"— Presentation transcript:

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

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

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

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

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

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

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

8 2. Theory Worker A Wage (Pecuniary) Worker B C Wc S WS Y X Z TC TS
Flexible hours (Non-pecuniary)

9 2. Theory Worker A Wage (Pecuniary) Worker B C Wc S WS Y X Z TC TS
Flexible hours (Non-pecuniary)

10 3. Empirical evidence: School teachers
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? Policy debate: the relative role of pecuniary and non-pecuniary factors Shape the appropriate policy response

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

12 Data Source Use MOHRI (Minimum Obligatory Human Resource Information) for the Australian state of Queensland. Covers whole population of state school teachers (31,000) Quarterly individual level data for 2001 and 2002 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 Stayed Moved 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 , , , ,269

14 Selected Estimates – MNL Logit, Marginal Effects
Males Females (p-val) Turnover Mobility Turnover Mobility_ Pecuniary: Predicted Wage (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-time (0.00) (0.00) (0.00) (0.00) Remote School (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 Non-pecuniary effects Conclusion
Higher wages deter turnover. Locality allowances deter turnover and encourage mobility especially for female teachers Locality allowances retain male teachers in rural/remote locations Non-pecuniary effects Primary schools have lower turnover Difficulty keeping less experienced female teachers in rural/remote schools. Mobility away from small schools/larger classes Conclusion Pecuniary and non-pecuniary influences on turnover and mobility. Locality allowances - encouraged some movement to and reduced mobility away from rural/remote schools

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