2005 - Management Research: From Income To Pay Satisfaction

Management Research 2005, 3(1), 7-26.
The Love of Money and Pay Satisfaction
FROM INCOME TO PAY SATISFACTION:

THE LOVE OF MONEY AND PAY EQUITY COMPARISON AS MEDIATORS AND CULTURE (THE US AND SPAIN) AND GENDER AS MODERATORS
Thomas Li-Ping Tang Roberto Luna-Arocas Toto Sutarso
The final version of this paper was published in: Tang, T. L. P., Luna-Arocas, R. & Sutarso, T. (2005) From income to pay satisfaction: The love of money and pay equity comparison as mediators and culture (The US and Spain) and Gender as Moderators. Management Research, 3(1), 7-26.
ABSTRACT This study examined a mediating model of income and pay satisfaction with a direct path (income pay satisfaction) and an indirect path with two mediators (income the love of money pay equity comparison pay satisfaction). Results of the whole sample showed that the indirect path was significant and the direct path was insignificant. When the indirect path was eliminated, income contributed positively to pay satisfaction. We then tested the model across two moderators: culture (the United States versus Spain) and gender. This study provides the following theoretical and empirical contributions: the direct relationship between income and pay satisfaction depends on the indirect path and the extent to which (1) income enhances the love of money and (2) the love of money is applied to evaluate pay equity comparison satisfaction. If both conditions exist, income leads to pay dissatisfaction. If the second condition does not exist, income does not lead to pay dissatisfaction. Pay satisfaction depends on (1) ones love of money and (2) how one compares. The role of the love of money in pay satisfaction is not universal across cultures and gender. ----------Keywords: Administration, Benefits, Comparison, Direct indirect path, Equity, External, Faculty, Gender, Income, Internal, Love of Money, Mediator and Moderator variables, Motivator, Pay Satisfaction, Raises, Spain, Structural Equation Model (SEM), Success, USA
FROM INCOME TO PAY SATISFACTION: THE LOVE OF MONEY AND PAY EQUITY COMPARISON AS MEDIATORS AND CULTURE (THE US AND SPAIN) AND GENDER AS MODERATORS Money is the instrument of commerce and the measure of value. Managers around the world use money to attract, retain, and motivate employees in organizations (Milkovich & Newman, 2005). The meaning of money, however, is in the eye of the beholder. There is a spirited debate regarding money as a motivator (e.g., Gupta & Shaw, 1998; Locke, Feren, McCaleb, Shaw, & Denny, 1980) or as a hygiene factor (Herzberg, Mausner, & Snyderman, 1959; Kohn, 1998; Pfeffer, 1998)1. Organizations in the world market are increasingly interested in reducing labor costs and increasing worker productivity and profits. Managers and researchers are interested in employee pay satisfaction because pay dissatisfaction has numerous undesirable consequences (Heneman & Judge, 2000: 77) such as turnover, low commitment, and unethical behavior (e.g., Hom & Griffeth, 1995; Tang & Chiu, 2003). The two most widely known models of pay satisfaction are the equity model (Adams, 1963) and the discrepancy model (Lawler, 1971). The equity model suggests that pay satisfaction depends on the comparison of the persons outcome-input ratio to the outcome-input ratio of a comparison other. A greater similarity of the ratios will lead to higher pay satisfaction. The discrepancy model examines the difference between individuals perceptions of the amounts of pay that they should receive and what individuals do receive. A smaller (or larger) discrepancy will lead to higher pay satisfaction (or pay dissatisfaction). In the pay satisfaction literature, one construct that should not be overlooked is the meaning of money (Barber & Bretz, 2000: 45). The meaning of money can be perceived as the frame of reference in which people examine their everyday lives (Tang, 1992). For example, high Love-of-Money employees have high voluntary turnover regardless of their intrinsic job satisfaction. That study reveals the importance of including the love of money in turnover research in that researchers can use the love of money to predict voluntary turnover (Tang, Kim, & Tang, 2000). More recently, Tang, Luna-Arocas, Sutarso, and Tang (2004) have found that the love of money is a moderator and also a mediator of the income-pay satisfaction relationship. Following this rationale, we assert that the objective money (self-reported income), subjective values related to money (i.e., the love of money), and pay equity comparison will play an important role in studying pay satisfaction or dissatisfaction. The topic is ripe for reexamination. This study examines not only the income and pay satisfaction relationship but also the role of two mediators, the love of money and pay equity comparison, in the income-pay satisfaction relationship using a sample of university professors in the US and Spain. Our research questions are listed below: In general, is income related to pay satisfaction? When does income lead to pay satisfaction or dissatisfaction? Why is income not related to pay satisfaction in some situations? Does the love of money enhance our understanding of the income-pay satisfaction (dissatisfaction) relationship? What roles do the two mediators (the love of money and pay equity comparison) play in the income-pay satisfaction relationship? Does the inclusion of the love of money improve beyond the equity comparison? Are there cross culture (the US vs. Spain) and gender (male vs. female) differences in the income-pay satisfaction relationship? THEORY AND HYPOTHESES The major purpose of this study is to propose a model of income and pay satisfaction (or dissatisfaction) based on existing literature that involves two mediators: the love of money (e.g.,
Barber & Bretz, 2000; Tang & Chiu, 2003; Tang et al., 2004) and pay equity comparison (Adams, 1963). More specifically, we will examine a direct path (Income Pay Satisfaction) and an indirect path with two mediators (Income the Love of Money Pay Equity Comparison Pay Satisfaction) simultaneously using structural equation modeling (SEM) (Figure 1). We will compare our model with the equity model (Income Pay Equity Comparison Pay Satisfaction). We, then, test the model across two moderators: culture (the US vs. Spain) and gender (male vs. female). We trust that our model offers contributions beyond existing theories and recent studies in the literature (e.g., Tang & Chiu, 2003; Tang et al., 2004) and provides a much deeper understanding of the income-pay satisfaction relationship. Let us introduce the model first. The direct path (Income Pay Satisfaction, Figure 1, Path 1) has been examined in many studies and is not new. Income can be defined as ones annual salary. Pay satisfaction is multidimensional and can be defined by Pay Level, Raises, Benefits, and Pay Administration (Heneman & Judge, 2000). Pay level refers to the average of the array of rates paid by an employer. Raises typically reflect additional pay offered to employees above and beyond the employees previous pay level. Raises may represent the cost of living adjustment, employee characteristics (e.g., age, performance rating, position in salary grade), and supervisors own salary increase. Benefits are that part of the total compensation package, other than pay for time worked, provided to employees (e.g., life insurance, pension, workers compensation, vacation). Pay administration deals with consistency, communication, and administration of pay policies in an organization. The literature suggests that there is a strong pay level-pay satisfaction relationship (Heneman & Judge, 2000). In this study, we assert that this direct path depends on the indirect path examined in Figure 1. -----------------------------------------------Insert Figure 1 about here -----------------------------------------------Theoretical and empirical contributions. Our first value-added theoretical and empirical contribution is that we examine the direct path (Path 1) (Heneman & Judge, 2000) and the indirect path (Paths 2, 3, and 4) simultaneously using structural equation modeling (SEM). This allows researchers to examine both paths and also the impact of the indirect path on the direct path and vice versa. Researchers can identify what, how, why, and when income causes pay satisfaction (or dissatisfaction) directly or indirectly. Second, the indirect path has four variables (Income the Love of Money Pay Equity Comparison Pay Satisfaction), i.e., two mediators (the Love of Money and Pay Equity Comparison) and three separate paths. Each variable will be defined later. More specifically, the Income to the Love of Money path (Path 2) reflects ones subjective perception of ones objective income. The Love of Money to Pay Equity Comparison path (Path 3) deals with the extent to which ones love of money (i.e., internal and subjective standard) will be used to judge and evaluate Pay Equity Comparison using internal and external referents (cf. Tversky & Kahneman, 1981). Pay Equity Comparison, in turn, will be related to Pay Satisfaction (Path 4). Recently, Tang et al. (2004) have examined the love of money as a mediator of the income-pay satisfaction relationship using the multiple regression approach. They have not examined the love of money as a mediator (i.e., Income the Love of Money Pay Satisfaction) using the structural equation modeling (SEM). Our present study differs from Tang et al.s (2004) study by adding a new variable, the Pay Equity Comparison, to the model as the second mediator of the income-pay satisfaction relationship. Due to the inclusion of this variable,
we can compare our model with the equity model (Paths 5, 4, and 1, without the Love of Money). Tang et al. (2004) performed neither these procedures nor the SEM techniques. Third, we investigate the model across cultures (the US vs. Spain) and gender (males vs. females) simultaneously in two separate Multi-Group Confirmatory Factor Analyses (MGCFAs) and treat culture and gender as two moderators. These additional analyses help researchers identify the boundaries of the model: who (male vs. female), where (the US vs. Spain), and when (i.e., the significance of the indirect path will have an impact on the significance of the direct path in different situations). That is, our model enables us to identify what, how, and why as well as who, where, and when people do (or do not) experience pay satisfaction. The use of SEM does allow us accomplishing all these goals, but multiple regression method (cf. Tang et al., 2004) does not. We assert that the love of money is a deeply-rooted value that will play an important and critical role in forming and judging other work-related attitudes and behaviors. We will introduce the Love of Money first. The Love of Money Definition. The first question a scientific investigator must ask is not How can I measure it? but rather, What is it (Locke, 1969: 334)? Research (e.g., Luna-Arocas & Tang, 2004; Tang & Chiu, 2003; Tang et al., 2004) suggests that the love of money can be defined (1) as a measure of ones values, wants (Locke, 1969), or desires of money (Sloan, 2002) and (2) as the meaning of money (Barber & Bretz, 2000), the importance of money (Mitchell & Mickel, 1999), and ones own personal attitudes toward money, i.e., an individual difference variable. We examine the love of money in the context of the income-pay satisfaction relationship. Why is it relevant? First, the love of money (an unobservable construct) has been used in everyday lay expressions and in popular literature. The love of money is the root of evil. Those who want to be rich are falling into temptation (Tang & Chiu, 2003). Very little empirical research has examined this construct. Second, the adaptation of Euro on January 1, 2002 in 12 European Union (EU) countries (305 million people), the expansion of the EU from 15 to 25 countries in 2004 that creates an economic superpower (415 million people and a 9 trillion dollar economy), the provisions of the North American Free Trade Agreement (NAFTA), Chinas accession to WTO, and other economic developments have integrated the world economy into a single, huge free market economy. These changes enhance the flow of money, human resources, technology, and products and services across borders that, in turn, significantly increase the importance of money in the US and around the world. For example, in 1978, Jurgensen found that men ranked pay the fifth and women ranked pay the seventh in importance, among 10 items. Pay was the most important factor for others. In 1990, among 11 work goals, pay has been ranked the second in importance in the US and Britain and the first in Germany (Harpaz, 1990). Money, in the context of global market, has become more important than ever in attracting, retaining, and motivating employees. We will select the US (North America) and Spain (EU) and examine the cross-cultural differences in the role of money (income) and the love of money in pay satisfaction. What does it mean theoretically and empirically? Tang and Chiu (2003) examine the Love of Money using Factors Rich, Motivator, Important, and Success. Factor Rich (the affective component) reflects that most people want to be rich and have a lot of money. In one study, rich people were seen, in the US at the time, as relatively healthy, happy, and well adjusted, while the poor were seen as maladjusted and unhappy. Rich is better than poor. Factor Motivator (the behavioral component) taps on the notion that money is a motivator (Gupta &
Shaw, 1998; Kohn, 1993). Regarding improving performance in organizations, no other incentive or motivational technique comes even close to money (Locke et al., 1980: 381). Factor Important (a cognitive component) stresses that money is important (Mitchell & Mickel, 1999). As mentioned, pay has been ranked the second in importance in the US and the UK and the first in Germany (Harpaz, 1990). Factor Success is based on the notion that in America, money is how we keep score and income is used to judge success (Rubenstein, 1981: 34). Some people have an obsession with money as a sign of success (Furnham & Argyle, 1998: 148). Tang and Chiu (2003) found that the love of money is significantly and positively related to unethical behaviors in organizations (i.e., Evil), whereas income (money) is not. Thus, the love of money is the root of evil, but money is not. Tang and his associates (2003) tested a three-factor Love of Money Scale (LOMS) (Rich, Motivator, and Important) and established measurement invariance across 22 out of 26 geopolitical entities in five continents (N = 5,341) with different languages, cultures, and religions. In this study, we will employ Factors Success, Motivator (Tang & Chiu, 2003), and Equity (Luna-Arocas & Tang, 2004). Factor Equity is important to pay satisfaction because the value of a given reward is not absolute but is relative to other rewards with which it is compared (Adams, 1963). What is fair or just is open to interpretation. Factor Equity involves individual equity and internal equity (Milkovich & Newman, 2005). Individual equity refers to the notion that given the same job duties and responsibilities, individuals with higher quality and quantity of performance should be paid more than those without. Not everyone is equally interested in individual equity. Research suggests that males, white-collar employees, high performers, achievement-oriented employees, and those who already work under a merit plan prefer merit pay (Heneman, 1992: 98) because they have the opportunity to make more money in the system. Internal equity deals with the pay dispersion at different levels of the organizations hierarchy. Men with high Love of Money tend to favor equity (pay based on merit) and have a larger top/bottom pay differential in an organizational hierarchy than men with low Love of Money (Tang, Furnham, & Davis, 2000). Women favor equality (equal pay) and have a small pay differential, i.e., a small amount of pay dispersion between managers and employees. The love of money may help us understand, predict, and control pay satisfaction. Pay Equity Comparison Our second mediator assesses the adequacy of their reward through a process of social comparison, i.e., external competitiveness (Milkovich & Newman, 2005). In order to attract, retain, and motivate employees and stay competitive, managers pay their employees more than or equal to their competitors in the labor market. Pay referents (e.g., Bordia & Blau, 1998; Summers & DeNisi, 1990) are defined as someone inside or outside the focal organization. This study examines internal and external referents to evaluate pay fairness. Internal referents are defined as other people within the department and the university. External referents are defined as other people in comparable universities and in the labor market. In the labor market, accounting (management) professors, for example, may use certified public accountant, CPA (human resources manager) in business and industry as external referents. In the US, university presidents and faculty in Research Universities have higher income than those in Doctoral Granting I Institutions and Liberal Arts Colleges (Tang & Tang, 2003). The pay structures are not exactly the same across public institutions and are based on institutional characteristics and market-related variables. The popular press provides many
anecdotal examples of external referents (e.g., Tang, Luk, & Chiu, 2000). The anecdotal examples of Michael Eisner, Bill Gates, and Michael Dell are more salient to some Americans, while the case of Amancio Ortega, Inditex Group, however, will be more salient to some Spanish people. People with low concern for money are less likely to compare themselves with external referents, rich people, in particular. We assert that high Love-of-Money individuals and male employees will be interested in external competitiveness (Heneman, 1992). A Model of Pay Satisfaction Income to Pay Satisfaction. The consistency of the pay level-pay satisfaction relationship is probably the most robust (though hardly surprising) finding regarding the causes of pay satisfaction (Heneman & Judge, 2000: 71). Actual pay level (income) is consistently and positively related to pay satisfaction. The magnitude of the relationship varies from study to study, with correlations ranging from .13 to .46. It makes intuitive sense that the higher the pay level (income), the higher the pay satisfaction. It is easy to understand the relationships of pay level and pay satisfaction because both are dealing with the same domain, i.e., pay. This is not new. Following these suggestions, we will test this robust finding in Hypothesis 1a (Path 1, Income Pay Satisfaction), when the indirect path is not considered in our model. Hypothesis 1a: Income will be positively related to Pay Satisfaction (Path 1 only). In this study, we assert that this direct path depends on the indirect path (see Figure 1). We will defy the widely known facts and examine both the direct path and the indirect path using structural equation modeling (SEM). One of the major advantages of using SEM is that we can examine the direct and the indirect paths simultaneously. The indirect path may alter the strength of the direct path that may create the complete mediation model (the direct path does not exist) or the partial mediation model (both the direct and indirect paths exist). Our theoretical and empirical contributions of this study are related to this mediating effect. Tang and Chiu (2003) have found a significant and negative path between the Love of Money and Pay Satisfaction (-.27) for Hong Kong professionals. That provides some clues for our study. Pay satisfaction depends on (1) ones love of money and (2) how one compares. We assert that the Income to Pay Satisfaction path (the direct path) may be influenced by the indirect path (Income the Love of Money Pay Equity Comparison Pay Satisfaction). If one considers the Love of Money very important and uses the Love of Money as a frame of reference when comparing their pay with the referents, then, the Income to Pay Satisfaction path may be negative. Without comparison, one does not know whether one should be happy or sad. Unfavorable comparisons will make one upset about ones pay. A significant (the Love of Money Pay Equity Comparison) path will lead to a negative direct path (Income Pay Satisfaction). If one does not use the Love of Money as a frame of reference to compare, then, one feels neutral or positive about ones pay. This is the key element of our model. On the basis of the above discussion, the income to pay satisfaction path is quite complex and may depend on the indirect path (discussed below) in our model. Please also see our additional discussion regarding culture and gender. Therefore, we will present our Hypothesis 1b tentatively here. Hypothesis 1b: The Income to Pay Satisfaction relationship (Path 1) depends on the indirect path. Income will not be positively related to Pay Satisfaction, when Paths 2, 3, and 4 are examined simultaneously in the model.
Income to the Love of Money. This path reflects ones subjective evaluation of ones objective income. Some say: Rich or poor is a state of mind and can be perceived from financial and psychological perspectives. Professors do not have the highest value toward money and are financially poor, compared to investment bankers. This may vary from one person to the next. According to needs theories, unsatisfied needs are motivators, but satisfied needs are not (Maslow, 1970). Higher income is related to lower marginal utility of money (Brandstatter & Brandstatter, 1996). The rising tide lifts all boats. Money changes almost everything. As income increases, some people may adjust their standard of living, expectations, tastes/preferences, consumption, and the frame of reference up to a point (Tang 1992; Tversky & Kahneman, 1981). Then, money may decrease its value or utility: Money assumes decreasing importance as a person advanced in the organizational hierarchy (Harpaz, 1990). From a global perspective, as nations get richer, increases in wealth are associated with diminishing increases in well-being (Ahuvia & Friedman, 1998). Within nations, increased income is associated with well-being primarily for the poor; once the poverty threshold is crossed, increased income matters little for happiness (Diener & Oishi, 2000). At the individual level, there is a strong negative path between Income and the Love of Money (-.27) among highly paid Hong Kong professionals whose income (US$47,502) was higher than the GDP per Capita ($25,100) (Tang & Chiu, 2003). They may be rich both financially and psychologically. Satisfied needs (high income) may lead to low love of money (a negative path between the two variables). On the other hand, people who have experienced financial hardship tend to be obsessed with money (Lim & Teo, 1997): The more money they have, the more they want, up to a point. (Laboratory rats and squirrels hoard foods after experiencing hunger because they do not want to be hungry again. Poor children overestimate the size of coins (money). After being poor, they need more money to feel secure.) In a sample of full-time regular employees (not professors) in the US, the Income to the Love of Money path was significant and positive for AfricanAmericans (.34) and females (.40) but insignificant for Caucasians (.02) and males (-.15) (Tang & Tang, 2002). African-Americans ($32,073.15) and women ($32,400.58) tended to have lower income than Caucasians ($37,180.73) and men ($38,287.97), respectively, in that sample. These employees change their jobs 2.65 times in their 14.24-year career. Leavers usually receive pay at the market value on their new jobs and about 20 percent pay increases. It pays to quit. The significant and positive path for African-Americans and females may reveal their significant desire to have more money (due to low income compared to others). They may feel poor financially and psychologically. This creates a positive path. Caucasians and males (financially adequate and psychologically adequate or rich) have an insignificant path in this sample of nonteaching full-time employees. We assert that the sign (positive, neutral (insignificant), or negative) of the path (Income the Love of Money) depends on the specific sample under study, the objective measure of money (self-reported income), and the subjective interpretation (the love of money) of the objective measure (income), and other related demographic variables (e.g., sex and race). It varies from one sample to the next. In this study, we will examine university professors. Professors, in general, are notoriously underpaid in our society compared to other comparable jobs in business and industry (Bok, 1993). Many professors do not change jobs after receiving tenure (i.e., risk averse) that may lead to pay compression (pay lower than the market). If they are underpaid, obsessed with money, and seek job mobility and more money (i.e., poor both financially and psychologically), a positive path may exist. This is similar to African-Americans and females,
examined by Tang and Tang (2002). We assert that Americans and male professors may fall into this category. However, if they are relatively satisfied with the teaching profession even if they are underpaid and do not want to change jobs and seek more money (i.e., financially poor but psychologically adequate or rich), then, there is no relationship between the two (cf. Caucasians and males). This argument may be applicable to females and Spanish professors in this study. For specific groups of people in this study, see additional discussion on culture, institutional characteristics, and gender differences. We will offer a general prediction for professors below: Hypothesis 2: Income will be positively related to the Love of Money for professors. The Love of Money to Pay Equity Comparison. Equity theory suggests that satisfaction depends on the comparison of ones output/input ratio with that of others, where the discrepancy model focuses on the difference in pay between expectation and reality (Rice, Phillips, & McFarlin, 1990). We argue that people may use the love of money as their frame of reference in comparing their income with that of others, i.e., the framing effect (Tversky & Kahneman, 1981). On the one hand, if money is not important to them, they will pay very little attention to it. An insignificant path is expected. On the other hand, if money is important to them, they may pay more attention to and are constantly aware of others pay in the society (Pfeffer & Langton, 1993). In general, a positive path is expected. Hypothesis 3: The Love of Money will be positively related to Pay Equity Comparison. Pay Equity Comparison to Pay Satisfaction. Satisfaction with internal and external referents and satisfaction with pay level, raises, benefits, and administration reflect the similar domains of pay satisfaction. Research suggests that pay equity comparison satisfaction predicts pay satisfaction consistently (Tang & Tang, 2002; Tang, Sutarso, Tang, & Luna-Arocas, 2001). A positive association between the two is expected. Hypothesis 4: Pay Equity Comparison will be positively related to Pay Satisfaction. Equity model (without the Love of Money). So far, we have examined our proposed model with a direct path (Income Pay Satisfaction) and an indirect path (Income Love of Money Pay Equity Comparison Pay Satisfaction) that has two mediators. When we remove the Love of Money from the model, it will be the traditional equity model with a direct path (Income Pay Satisfaction) and an indirect path (Income Pay Equity Comparison Pay Satisfaction) that has only one mediator. We assert that our proposed model with the Love of Money will be better than the equity model. We will test the overall model below. Hypothesis 5: Our model involving two mediators will be better than the equity model. We will examine two moderators using the model: culture and gender. We will discuss culture first. MODERATORS Culture (The US vs. Spain) One of the most valuable frameworks regarding national cultures was develop by Geert Hofstede. We assert that two dimensions are related to the Love of Money: (1) IndividualismCollectivism and (2) Masculinity-Femininity. First, for the Individualism-Collectivism dimension, the US ranked the highest (rank = 1, score = 91) on individualism and Spain ranked
15 (score = 62) (Hofstede & Bond, 1988). Individualistic societies emphasize individual freedom. Collectivistic cultures pay attention to interactions with their fellow humans and membership within groups or communities, consider group welfare over their own individual welfare. Second, for the Masculinity-Femininity dimension, the US again ranked higher on masculinity (15, score = 62) than Spain (37-38, score = 42). Masculinity can be defined by the notions of materialism, possession, success, assertiveness, performance, advancement, and quantity of life, whereas femininity emphasizes a concern for others, relationships, service, and quality of life (Hofstede, 1993). Materialism is a devotion to material needs, desires, and the importance a consumer attaches to worldly possessions (Belk, 1985). Low and high materialists are also likely to differ in the meaning money holds for them and in money-related attitudes. Pay level was extremely important to materialists. In this study, we do not measure and examine Individualism and Masculinity directly. Our literature review leads us to expect that some Americans (males in particular, discussed below), in an individualistic and materialistic society, are more obsessed with money (i.e., have higher love of money), may judge everything from the perspectives of money and materialistic values, and have a strong belief regarding individual equity, internal equity, and external competitiveness (i.e., use the love of money as a frame of reference) than their Spanish counterparts. Institutional Characteristics The American system. American professors in a state university have lower pay compared to those in private universities and the market. The Association to Advance Collegiate Schools of Business (AACSB) International provides Salary Survey Inquiry Service Report. It showed the following pay rates for business faculty based on 30 peer institutions with comparable size and mission of the target university in this study: full professors ($73,700), associate professors ($60,700), and assistant professors ($56,700). The average of all AACSB ranks (full, associate, and assistant) was $63,700. In the US, the best predictor of management professors pay is the number of job changes (Gomez-Mejia & Balkin, 1992). However, university professors are less likely to change jobs like these professionals. In industry, for example, the post MBA median salary at Harvard was $160,000 (Merritt, 2000: 79). Compared to $160,000, university facultys pay (available in the library, open to the public) is lower than the market. With few job changes, they experience pay compression. Professors in professional schools (e.g., business school) have higher pay than those in other colleges (e.g., Liberal Arts). The average professor may feel that they are poor financially and psychologically (a positive path for Income the Love of Money). People may have a stronger motivation to compare (a positive path for the Love of Money Pay Equity Comparison) when their pay rates are not the same. This may lead to a negative overall direct path (Income Pay Satisfaction). The Spanish system. In Spain, there are several types of professors. Their titles in Spanish (English), the percentage of faculty in this group, and total annual income (in 2004) are listed below: (1) catedratico (tenured full professor with the highest rank, civil servant), 11 percent of the faculty population, 37,830.22 ($47,666.08, 1 = $1.26), (2) profesor titular de Universidad (tenured full professor normal rank, civil servant), 45 percent, 30,062.06 ($37,878.20), (3) profesor titular de escuela universitaria (full professor normal rank, in threeyear career, mostly without Ph.D., civil servant), 12 percent, 26,461.54 ($33,341.54), (4) professor ayudante de Universidad (full-time assistant professor, not tenured in the 8-year promotion process, not civil servant, contract renewed every two years), 12 percent, 19,493.48 ($24,561.78), and (5) professor asociado (associate professor, part-time professor from business
The Love of Money and Pay Satisfaction 10
and industry, contract renewed every year), 20 percent, pay depends on the number of hours taught. The Ministry of Education has established common pay structures for professors in all public universities in Spain. Professors pay will be almost the same if they have the same rank and merit. The only differences come from civil servants extra courses taught in the university or in postgraduate programs (e.g., MBA). Although they do not have a pay record that is open to the public, faculty can obtain personal salary information via Internet through the human resource department using personal codes. Relatively speaking, Spanish people are less likely to change jobs than their American counterparts. Professors are rewarded according to their ranks and additional merits and are probably not rewarded by changing their jobs. Very likely, compared to American professors, Spanish professors are financially adequate (poor compared to the market but adequate compared to other faculty) and psychologically adequate or rich (also well respected in the society) (an insignificant path for Income the Love of Money). People may have very little motivation to compare when their pay rates are almost the same. Researcher argues that external competitiveness is not relevant for professors in Spanish universities.2 This may lead to two insignificant paths (the Love of Money Pay Equity Comparison, Income Pay Satisfaction). We predict that American faculty will support Hypotheses 1b, 2, 3, and 4. Due to limited research data available for Spanish faculty, we will examine these issues on an exploratory basis and tentatively propose the following: Hypothesis 4 will be supported because Pay Equity Comparison and Pay Satisfaction are measuring the same domainpay satisfaction. Hypotheses 1b, 2, and 3 will not be supported due to Spanish peoples low concerns over Individualism, Masculinity (Hofstede, 1993), and facultys pay stability and security. Gender Differences (Men vs. Women) Women tend to rate social needs as more important than do men, while men tend to consider pay more important than do women (Heneman, 1992). Men ranked pay the fifth and women ranked pay the seventh in importance, among 10 items (Jurgensen, 1978). Women are subjectively satisfied with their pay in spite of objective underpayment, the paradox of the contented female worker (Crosby, 1982). That is, for some of them, they are financially poor but psychologically adequate or rich. Women have lower pay expectations than men; have a tendency to be equally as satisfied as men with lower pay or more satisfied than men with equivalent pay (Sauser & York, 1978). Females have significantly lower career-entry and career peak pay expectations than males (Major & Konar, 1984). Recent research suggests that men are more concerned about equity (merit), whereas women are more concerned about equality (Tang, Furnham, & Davis, 2000). Graham and Welbourne (1999) have found that women reported higher levels of both pay level and pay structure/administration satisfaction than men, in the traditional pay sample. This is true for women at lower salary levels. The paradox does not exist among women and men after gainsharing is introduced. It is plausible that men have higher pay satisfaction because men are more interested in money, equity, merit, and making extra money (e.g., merit pay, Heneman, 1992) in the gainsharing program than women. In summary, most female professors (financially poor but psychologically adequate or rich) are content with their income, are not obsessed with money (an insignificant path for Income the Love of Money), do not compare their pay with others (an insignificant path for the Love of Money Pay Equity Comparison), and are less likely to reveal pay dissatisfaction (a non-negative path for Income Pay Satisfaction). These paths will be significantly different for males. It appears that gender
differences are similar in the US and in Spain. We predict that Hypotheses 1b, 2, 3, and 4 will be supported by male faculty. For female faculty, similar to Spanish faculty, Hypothesis 4 will be supported. METHODS Participants The American sample. A questionnaire was mailed to all full-time faculty members of one public (state) Doctoral Granting I Institution in the southeastern US. Middle Tennessee State University was founded in 1911 and had about 18,500 students and 715 full-time professors (full, associate, assistant professors, tenured or on tenure track) at the time of our data collection. The response rate was 28.95 percent (n = 207). Professors of the state university in the US have lower pay compared to those in private universities and the market. For this present study, average salary figures for both the population of the business faculty ($57,213.37) and our current business sample ($60,392.42) were lower than the average of the AACSB data ($63,700). For the whole sample, the average salary was $48,614.21 (Table 1). These professors have changed jobs 1.24 times in their 21.32-year career. These American professors may have suffered from pay compression (indeed financially poor). Further, male American professors had higher income ($55,460.24) than their female counterparts ($39,348.53) (F (1, 202) = 28.32, p < .001). The Spanish sample. We translated the questionnaire into Spanish using a multi-stage translation-back-translation procedure. University of Valencia in Spain was founded in 1245 and became a recognized public university Estudi General in 1499, comparable to other ancient universities (e.g., Roma, Bolonia, Salamanca, and Lerida). It is the third largest public university in Spain with about 47,000 students and 3,000 professors in three campuses (Technology, Humanities, and Social Sciences). We surveyed a sample of professors in the Social Sciences campus (19,132 students and 1,000 professors). The response rate was 32.5 percent (n = 104 professors) that is similar to the American sample (28.95%). The average annual salary of our Spanish sample (collected in 1997-1998) was $23,173.55. That average was $28,500.58 in 2004, if we aged the data by adding 3 percent for seven years. Spanish professors annual salary in our sample was very similar to the average of these four types of professors annual salary, 28,461.83 (or $35,861.91 in 2004). Spanish professors have changed their jobs .82 times in their 10.41-year career. American professors have changed jobs more often than their Spanish counterparts (F (1, 243) = 4.13, p < .05). These Spanish professors may be paid below the market, compared to professionals in business and industry, but not significantly underpaid (i.e., financially adequate) compared to faculty in other universities in Spain. Male Spanish professors had higher income ($28,780.56) than their female counterparts ($18,368.42) (F (1, 99) = 17.81, p < .001). These two universities are similar (in terms of student and faculty on campus) but not perfectly matched. We do not claim that these two small samples represent the population of professors or the general public of the nation. There is no reason to believe that these two samples are atypical. American professors may experience pay compression (financial hardship), whereas Spanish professors may have similar but weaker experience of pay compression. Results of this study may reflect both the culture (the US vs. Spain) and the institutional characteristics.
Measures Professors age, sex, current work experience, career experience (in years), and selfreported total annual income (in US$) were obtained. We measure the Love of Money using three factors (Factors Equity, 3 items; Success, 2 items; and Motivator, 2 items) (Luna-Arocas & Tang, 2004) and a five-point Likert scale with disagree strongly (1), neutral (3), and agree strongly (5) as anchors. Pay equity Comparison was measured using a 5-point Likert scale with very dissatisfied (1), neutral (3), and very satisfied (5) as anchors: Internal Referents were measured using (1) colleagues in my department and (2) colleagues in my organization, while External Referents had the following two items: (1) others at comparable organizations and (2) others in the labor market). For pay satisfaction, we adopted the 18-item Pay Satisfaction Questionnaire (PSQ) (Heneman & Schwab, 1985) with very dissatisfied (1), neutral (3), and very satisfied (5) as anchors. Table 1 presents means, standard deviations, and correlations of variables for the US and Spanish samples. Data Analysis It does little good to test a theoretical and conceptual relationship across cultures unless there is confidence that the measures operationalizing the constructs of that relationship exhibit both conceptual and measurement equivalence across the comparison groups (Riordan & Vandenberg, 1994: 645). It is of supreme importance that we examined configural (factor structures) and metric (factor loadings) invariance for all measures across cultures first. Vandenberg and Lance (2000) have provided criteria for using Comparative Fit Index (CFI), Tucker-Lewis Index (TLI) (.90 = the lower bound of a good fit, .95 or higher = excellent fit), Root Mean Square Error of Approximation (RMSEA) (.08 = the upper limit of a good fit, .06 or less = excellent fit), chi-square change (2), and fit indexes change (i.e., = .01 or less: differences between models do not exist). The path from any construct to its measured variable equals the square root of the reliability (Cronbachs ) of the measured variable, while the amount of random error variable is the quantity one minus the reliability for each model. Configural and metric measurement invariance across cultures. For the Love of Money Scale (LOMS), we have achieved configural (factor structures, conceptual) invariance (The US, 2 = 12.56, df = 11, p = .32, TLI = 1.00, CFI = 1.00, RMSEA = .03, and Spain, 2 = 16.66, df = 11, p = .12, TLI = .99, CFI = 1.00, RMSEA = .07) and metric (factor loadings, measurement) invariance using Multi-Group Confirmatory Factor Analysis (MGCFA) based on both the Likelihood Ratio (LR) test or the chi-square change (2 = 5.61, df = 4, p > .05) and fit indexes change (CFI, TLI, and RMSEA = 0) between unconstrained (2 = 29.26, df = 22, p = .14, TLI = 1.00, CFI = 1.00, RMSEA = .03) and constrained model (2 = 34.87, df = 26, p = .11, TLI = 1.00, CFI = 1.00, RMSEA = .03) (Table 2) (Vandenberg & Lance, 2000). We will not repeat similar results for Pay Equity Comparison and Pay Satisfaction Questionnaire (see Table 2). American professors had stronger factor loadings for External Referents (.95 and .93) than Internal Referents (.74 and .82), whereas Spanish professors had stronger factor loadings for Internal Referents (.84 and .84) than External Referents (.79 and .75). Harmans one factor test. Researchers suggest that common method variance is a potential problem in behavioral research (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003: 879). Our data were collected from a single source at one point in time. In order to examine the possible common method variance biases, we conducted Harmans one factor test (e.g., Podsakoff et al., 2003) and examined the unrotated factor solution involving all variables of
interest (29 items) in an exploratory factor analysis (EFA) to determine the number of factors that are necessary to account for the variance in the variables. Our exploratory factor analysis (EFA) results showed seven factors. The amount of variance explained for the seven individual factors (36.11%, 8.50%, 7.18%, 5.43%, 4.76%, 4.01%, and 3.57%, respectively) suggested that no single factor accounted for the majority of the covariance in the independent and criterion variables. We assert that since all three measures are well developed instruments with proven psychometric properties, they are likely resistant to common method variance (e.g., Spector, 1987). Therefore, common method variance was not solely responsible for our findings. RESULTS Multivariate analysis of variance (MANOVA) results (F (3,307) = 16.48, p < .001) showed that American professors had higher interests in Factors Equity (3.66) and Success (2.93) than their Spanish counterparts (3.05, 2.57, respectively). Men scored higher on Factors Equity (3.60) and Success (2.99) than women (3.29, 2.63, respectively) (F (3, 301) = 5.80, p < .001), supporting research findings in the literature. Income was significantly correlated with Pay Level satisfaction for both American (.34) and Spanish (.26) professors, supporting the literature (Heneman & Judge, 2000). Professors had higher satisfaction with two Internal Referents than External Referents in the US (2.94 vs. 2.54) and in Spain (3.04 vs. 2.72, respectively) (p < .001). Step One: The Whole Sample (Our Model vs. The Equity Model) Model 1 (Figure 1) examined all four major variable and all six paths among variables (i.e., the default model). Results of Model 1 showed the following data: 2 = 165.49, df = 36, p < .01, TLI = .98, CFI = .98, RMSEA = .11. We, then, evaluated the relative contributions of Paths 1, 2, 3, and 4 of the model. In Model 2, we set Paths 1, 2, 3, and 4 to zero. When several paths are removed from the model (i.e., set the paths to zero), the new model (Model 2) will have less power to explain the relationships among the variables. If the chi-square value increases significantly relative to the degree of freedom after removing several paths, then, the new model (Model 2) becomes significantly worse than original model (Model 1). We compared Model 2 (2 = 386.53, df = 40, p < .01, TLI = .94, CFI = .96, RMSEA = .17) with Model 1 and found that Model 2 was significantly worse than Model 1 (the default model) (2 = 221.04, df = 4, p < .01), suggesting that Paths 1, 2, 3, and 4 contributed significantly to the model. Next, in order to identify our theoretical model (Model 3), we estimated Paths 1, 2, 3, and 4 and set Paths 5 and 6 to zero. Results suggested that there was a good fit between our Model 3 and our data (2 = 171.62, df = 38, p < .01, TLI = .98, CFI = .98, RMSEA = .11). Further, Model 3 was more parsimonious than Model 1. We now examined the equity model. In Model 4, we set Paths 1, 5, and 4 to zero (2 = 216.32, df = 39, p < .01, TLI = .97, CFI = .98, RMSEA = .11). Model 4 was significantly worse than Model 1 (2 = 50.83, df = 3, p < .00). Thus, Paths 1, 5, and 4 made significant contributions to the model. We then, estimated the paths of the equity model (Model 5) that involved only Paths 1, 5, and 4 (set Paths 2, 3, and 6 to zero). The equity model, Model 5, showed: 2 = 186.44, df = 39, p < .01, TLI = .98, CFI = .98, RMSEA = .11. Next, we compared our theoretical model with the equity model. Our theoretical model (Model 3) was significantly better than the equity model (Model 5) (2 = 186.44 171.62 = 14.82, df = 1, p < .01) and more parsimonious than Model 1. Thus, we adopted Model 3. Hypothesis 5 was supported.
A mediating model. A path is significant (p < .05, .01, .001) when the critical ratio, C.R., is greater than or equal to 1.96, 2.58, 3.50, respectively. Figure 2 shows that the indirect path was significant (Income the Love of Money, path = .41, critical ratio = 4.95, p < .001; the Love of Money Pay Equity Comparison, .29, C.R. = 3.04, p < .01; and Pay Equity Comparison Pay Satisfaction path, .86, C.R. = 14.75, p < .001), whereas the direct path was not significant (Income Pay Satisfaction, .02, C.R. = .41, n.s.). Our results support the complete mediation model (Hypotheses 2, 3, and 4). The direct path (Hypothesis 1b) was not significant due to the combination of two samples and our indirect path. Income explained 16 percent of the Love of Money (i.e., path = .405, .4052 = .16). The Love of Money explained 8 percent of Pay Equity Comparison. Income and Pay Equity Comparison explained 75 percent of pay satisfaction. Both the indirect path (.41 x .29 x .86 = .10) and the direct path (.02) contributed positively to Pay Satisfaction (.10 + .02 = .12). Income to Pay Satisfaction (Path1). We examined specifically the Income to Pay Satisfaction path using the model and the full sample by setting all other paths to zero in a separate analysis. Results suggested that the Income to Pay Satisfaction path was positive and significant (.19, C.R. = 3.06, p < .01) (2 = 395.62, df = 41, p < .01, TLI = .94, CFI = .94, RMSEA = .17). Hypothesis 1a was supported. Our direct path alone, of course, supported the commonly held belief in the literature (Heneman & Judge, 2000). With that said, our model provides additional information beyond the robust pay level-pay satisfaction relationship. Theoretical and empirical contributions. Our model offers the following contributions. First, when we examine only the direct path (Income Pay Satisfaction), income is positively related to pay satisfaction. As suggested in the literature, higher income leads to higher pay satisfaction. Second, when we examine both the direct path and the indirect path simultaneously, then, the direct path is insignificant and the indirect path is significant. In other words, higher income does not lead to higher pay satisfaction directly. Instead, higher income is indirectly related to pay satisfaction through the love of money and pay equity comparison. These results provide the elements and factors (i.e., the what issue) that may cause pay satisfaction or dissatisfaction. If organizations pay employees more money, employees should have higher pay satisfaction. This is not always the case, however. Researchers and managers have long been aware of the fact that pay is a hygiene factor for some (Herzberg et al., 1959). Herzberg pointed out that pay satisfaction goes back to zero and the zero point escalates. We cannot look at the direct income-pay satisfaction relationship alone. When we add the love of money and pay equity comparison to the indirect path of the model, the direct path becomes insignificant. This explains the issue of when income will (or will not) lead to pay satisfaction. Further, the indirect path shows that (1) income enhances the love of money and (2) the love of money is applied to evaluate pay equity comparison satisfaction. If both conditions exist, income does not lead to pay satisfaction, for the whole sample. The income-pay satisfaction relationship depends on (1) ones love of money and (2) how one compares. This is the step-by step process of how and why income does not lead to pay satisfaction. This shows the importance of focusing on employees love of money and their equity comparison when we examine the income-pay satisfaction relationship. Step Two: Culture (the US vs. Spain) as a Moderator We analyzed the same model across culture using American and Spanish data simultaneously in a Multi-Group Confirmatory Factor Analysis (MGCFA) (2 = 223.35, df = 76, p < .01, TLI = .98, CFI = .98, RMSEA = .08) and found that RMSEA had improved from .11
(the whole sample in Step 1) to .08 (Step 2, the upper limit of a good fit). We will present the American and Spanish results below (see Figures 3 and 4). The American professors. Income explained 23 percent of the Love of Money (Figure 3). The Love of Money explained 24 percent of Pay Equity Comparison. Pay Equity Comparison and Income explained 88 percent of Pay Satisfaction. All the paths in our model were significant: Income to the Love of Money (.48, p < .001), the Love of Money to Pay Equity Comparison (.49, p < .001), Pay Equity Comparison to Pay Satisfaction (.96, p < .001), Income to Pay Satisfaction (-.18, p < .001). Income led to high pay dissatisfaction. This finding is different from the general perceptions in the literature (Heneman & Judge, 2000). Structural equation modeling technique (SEM) allows researchers to examine the relationships among all the constructs specified in the structural equation model, i.e., the indirect path and the direct path and the correlations among variables, simultaneously. Money is the instrument of commerce and the measure of value. Value is that which a person actually seeks to gain and/or keep or considers beneficial (Locke, 1969: 318). Moreover, values rather than expectations determine satisfaction (Locke, 1969). The love of money reflects ones deeply-rooted values toward money. When we examine the whole model, income leads to pay dissatisfaction that can be explained by the indirect path: American professors income significantly enhances the importance for the love of money. The more (income) they have, the more they want (the love of money). Professors with the love of money orientation are concerned about money and pay equity comparison. They refer the love of money as a frame of reference to judge pay equity comparison. Pay equity comparison is directly related to pay satisfaction. In short, the love of money (i.e., value) determines (causes) pay dissatisfaction. Results support the indirect path and the direct path (Hypotheses 1b, 2, 3, and 4). Factors Equity (.36), Success (.37), and Motivator (.39) represented the latent construct of the Love of Money. External Referents (.86) and Internal Referents (.82) revealed the construct of Pay Equity Comparison. Satisfactions with Pay Administration (.85), Raises (.78), Pay Level (.75), and Benefits (.74) expressed the construct of Pay Satisfaction. Thus, American people pay less attention to Benefits in organizations. -------------------------------------------------------------------------------Insert Tables 1 and 2 and Figures 2, 3, and 4 about here -------------------------------------------------------------------------------Income to Pay Satisfaction. We performed one additional analysis by examining only the income to pay satisfaction path across countries (and set all other paths to zero) (2 = 469.03, df = 82, p < .01, TLI = .94, CFI = .94, RMSEA = .12). Results suggested that Path 1 (Income Pay Satisfaction) for American professors was in the predicted direction of Hypothesis 1a but not significant (.13, C.R. = 1.78). There was no relationship between income and pay satisfaction. Hypothesis 1a was not supported. Spanish professors. Income explained only 3 percent of the Love of Money that, in turn, explained 2 percent of Pay Equity Comparison (Figure 4). Pay Equity Comparison and Income explained 57 percent of Pay Satisfaction. Results showed: Income to the Love of Money (.18, n.s.), the Love of Money to Pay Equity Comparison (.13, n.s.), and Pay Equity Comparison to Pay Satisfaction (.74, p < .001). Income to Pay Satisfaction path was positive but not significant (.14, n.s.): Income led to mild (insignificant) pay satisfaction. Please recall that income led to significant pay dissatisfaction for American professors. Our cultural differences reflect the
where and who issues of our theoretical model. These results may help us understand the insignificant Path 1 for the whole sample (the US and Spain combined). Factors Motivator (.61), Success (.49), and Equity (.39) represented the latent construct of the Love of Money. External Referents (.65) and Internal Referents (.62) revealed the construct of Pay Equity Comparison. Benefits (.81), Pay Administration (.76), Raises (.73), and Pay Level (.70) expressed the construct of Pay Satisfaction. Results supported Hypothesis 4, as expected. It appears that Factor Motivator is the most important element of the Love of Money Scale for both American and Spanish professors. Regarding Pay Satisfaction, American professors focus on Pay Administration and Raises, whereas Spanish professors are concerned about Benefits and Pay Administration. Income to Pay Satisfaction. Again, the direct relationship between income and pay satisfaction for Spanish professors was in the predicted direction, but not significant (.17, C.R. = 1.57, n.s.) when all other paths were set to zero. Thus, without the indirect path, there was no relationship between income and pay satisfaction for Spanish and American professors. Hypothesis 1a was not supported. Step Three: Gender (Male vs. Female) as a Moderator We analyzed male and female professors simultaneously in a MGCFA (2= 216.37, df = 76, p < .01, TLI = .98, CFI = .98, RMSEA = .08). We will present results regarding male professors first and then female professors in this section. Male professors. Income explained 31 percent of the Love of Money that, in turn, explained 21 percent of Pay Equity Comparison. Pay Equity Comparison and Income explained 78 percent of Pay Satisfaction. All indirect paths were significant (Income the Love of Money, .56, p < .001; the Love of Money Pay Equity Comparison, .46, p < .01; and Pay Equity Comparison Pay Satisfaction, .89, p < .001). The Income to Pay Satisfaction path was not significant (-.03, n.s.). Results supported the indirect path (Hypotheses 2, 3, and 4). Female professors. Income explained 3 percent of the Love of Money that, in turn, explained 7 percent of Pay Equity Comparison. Pay Equity Comparison and Income explained 79 percent of the Pay Satisfaction. Income to the Love of Money path (.18, n.s.), the Love of Money to Pay Equity Comparison path (.26, n.s.), and Income to Pay Satisfaction path (.13, n.s.) all failed to reach significance. The only significant path was the Pay Equity Comparison to Pay Satisfaction path (.87, p < .001). Results supported Hypothesis 4. These gender differences reflect the who aspect of our theoretical model. Step Four: Gender Differences Within the US and Spanish Cultures We analyzed male and female professors simultaneously within each culture in two separate analyses. We will present the US results first. Male vs. female in the US. For male professors in the US (2= 180.66, df = 76, p < .01, TLI = .97, CFI = .98, RMSEA = .08), Income explained 34 percent of their Love of Money that, in turn, explained 50 percent of Pay Equity Comparison. Pay Equity Comparison and Income explained 88 percent of Pay Satisfaction. The indirect path and the direct path were all significant (Hypotheses 1b, 2, 3, and 4). For female professors in the US, Income explained 8 percent of their Love of Money that, in turn, explained 12 percent of Pay Equity Comparison. Pay Equity Comparison and Income explained 93 percent of Pay Satisfaction. Only one path was significant: Pay Equity Comparison to Pay Satisfaction (.97, p < .01) (Hypothesis 4).
Male vs. female in Spain. Spanish data suggested (2= 123.07, df = 76, p < .01, TLI = .98, CFI = .98, RMSEA = .08) that for male Spanish professors, Income explained 36 percent of their Love of Money that, in turn, explained 1 percent of Pay Equity Comparison. Pay Equity Comparison and Income explained 58 percent of Pay Satisfaction. The only two significant paths were Income to the Love of Money (Hypothesis 2) and Pay Equity Comparison to Pay Satisfaction (Hypothesis 4). For female professors in Spain, Income explained 4 percent of their Love of Money that, in turn, explained 7 percent of Pay Equity Comparison. Pay Equity Comparison and Income explained 41 percent of Pay Satisfaction. Again, only one path was significant: Pay Equity Comparison to Pay Satisfaction (.63, p < .01). Hypothesis 4 was supported. Our cultural and gender differences reflect the where and who issues of our theoretical model. Summary. The Income to the Love of Money path is significant for faculty in the US, male faculty in the US, and male faculty in Spain. Income increases mens love of money but not womens, a gender-specific (emic) path. The Love of Money to Pay Equity Comparison path is significant for the US sample, male faculty, and male American professors. This result comes from one source: Male American professors use the Love of Money as a frame of reference in evaluating Pay Equity Comparison, a culture-specific and gender-specific (emic) path. There is one cultural-free and gender-free (etic) path (Pay Equity Comparison Pay Satisfaction). These cross culture (the US vs. Spain) and gender (male vs. female) results provide information regarding the where and who aspects of our model. Income leads to pay dissatisfaction among American professors and male American professors. The two significant paths (Income the Love of Money and the Love of Money Pay Equity Comparison) are the prerequisites for, or harbingers of, pay dissatisfaction. Further, the Love of Money to Pay Equity Comparison path is the most critical one to pay dissatisfaction. When the Love of Money is a mediator of this indirect path, Income leads to Pay Dissatisfaction. For female professors and professors in Spain, Income has no impact on the Love of Money that, in turn, does not influence Pay Equity Comparison. In this case, the Love of Money is not a frame of reference in evaluating pay satisfaction and, thus, is not a mediator. This findings offer clear explanations regarding what, how, why, and the who, where, and when issues of pay satisfaction or dissatisfaction. DISCUSSION In this study, we propose a model of pay satisfaction and test the model using a direct path and an indirect path. Our model with the two mediators (the Love of Money and Pay Equity Comparison) is better than the equity model (with only one mediator, without the Love of Money). When we examine both the direct and the indirect path for the whole sample, the indirect path (Income the Love of Money Pay Equity Comparison Pay Satisfaction) is significant and the direct path is insignificant. When we consider the direct path alone, income is positively related to pay satisfaction. Then, we test the model across two moderators: cultures and gender. The Income to the Love of Money path is significant for Americans but not significant for Spanish counterparts. We speculate that American professors in this sample may have the feeling that they are poor financially and psychologically, whereas Spanish professors are financially and psychologically adequate. Future research needs to test this hypothesis directly. Based on gender within cultures, income does explain mens love of money (the US: 34%; Spain: 36%) more than that of womens (the US: 8%; Spain: 7%). The impact of income on the love of money is very similar for American professors (men: 34%; women: 8%) and for Spanish
professors (men: 36%; women: 7%). It appears that this is a culture-free (etic) path for the present samples in these two cultures. Regarding gender differences (the US and Spain combined), our research supports the notion that females in general have lower love of money (8%) than their male counterparts (31%). Moreover, regarding culture differences, Americans have higher love of money (23%) than their Spanish counterparts (3%). For the whole sample, it makes sense that the impact of income on the love of money is 16 percent due to the different sample size in the US (N = 207) and Spain (N = 104). Future research may test this hypothesis in other professions, organizations, and cultures. The Love of Money to Pay Equity Comparison path is not significant for Spanish professors, but is significant for American professors. Further, this path is significant for only male Americans but not for female Americans. Moreover, the Income to Pay Satisfaction path is not significant for Spanish professors and is negative and significant for American professors, male American professors, in particular. Spanish professors are significantly younger and have lower level of experience (on their jobs and in their careers) and less job changes than their American counterparts. Spanish professors have high job stability and security as civil servants that may have some impacts on their perceptions of their job, their remuneration, and in their pay satisfaction. It is plausible that since faculty pay has been very well established by the Ministry of Education, the Love of Money does not play a role and serve as a frame of reference to evaluate their Pay Equity Comparison in our model (see our discussion on institutional characteristics). It is easy for Spanish professors to know the salary of others in the same category. The Love of Money to Pay Equity Comparison path is not significant for Spanish faculty. Thus, their income does not lead to pay dissatisfaction. For American professors, they do have significant results in both paths. Herzberg claimed that salary has potency as a job dissatisfier (Herzberg et al., 1959). Our results suggest that his claim does apply to American professors, male American professors, in particular, but not to the Spanish sample. Spanish professors may have similar salary information as their American counterparts. Spanish professors do not compare, whereas Americans do. Our model suggests: When the Love of Money to Pay Equity Comparison path is not significant, then, the Income to Pay Satisfaction path is not significant, supporting previous findings (Tang & Tang, 2002). Conclusion A good theory will examine what, how, why, and who, where, and when. What are the causes of pay satisfaction (or dissatisfaction)? How, why, and when (under what condition) do these variables cause pay satisfaction (or dissatisfaction)? Does the model provide the same or different information across culture (where) and gender (who) and conditions (when)? Our model provides the following theoretical and empirical contributions: When we examine only the direct path (Income Pay Satisfaction) for the whole sample, then, income leads significantly to pay satisfaction, supporting the extent literature. We examine both the direct path and the indirect path simultaneously, and test the model across culture, gender, and gender within culture. We find that the direct path depends on the indirect path (Income the Love of Money Pay Equity Comparison Pay Satisfaction) and the extent to which (1) income enhances the love of money and (2) the love of money is applied to evaluate pay equity comparison satisfaction. If both conditions exist, income leads to pay dissatisfaction (a significant and negative path). If the second condition does not exist, income does not lead to pay dissatisfaction. The role of the Love of Money in pay satisfaction is not universal across
cultures and gender. Pay satisfaction depends on (1) ones love of money and (2) how one compares. Our model examines not only what causes pay satisfaction or dissatisfaction but also how and why as well as who, where, and when people do (or do not) experience pay satisfaction, beyond motivator-hygiene theory, equity theory, and discrepancy theory. This paper contributes significantly beyond several recent research papers in the literature (e.g., Luna-Arocas & Tang, 2004; Tang & Chiu, 2003; Tang et al., 2004). Implications In the US, universities (private universities, in particular) set their own tuition (Tang, Tang, & Tang, 2004) and pay their university presidents and professors based on the type of institutions (e.g., Research, Doctorate-Granting Institutions, Liberal-Arts Institutions), size, the supply and demand in the market, reputation rankings in the country, and other factors (Tang & Tang, 2003). The best predictor of American management professors pay is the number of job changes (Gomez-Mejia & Balkin, 1992). Further, the highest correlate of job moves is top-tier publications. Thus, research productivity leads to labor mobility and high income. As we mentioned, no other incentive or motivational technique comes even close to money (Locke et al., 1980). When there is a difference in pay, then, money (or income) will become one of the most salient factors in peoples perceptions. Administrators, faculty, and researchers are increasingly interested in improving scholarship, research productivity, and efficiency in delivering services to university students. When the reward systems (remuneration policies) are related to academic reputation and faculty productivity, it creates different impacts on people: High performers will have the opportunity to make more money and are happier with frequent job changes than low performers. One important implication for prestigious private (or public) universities is that they may use significant amounts of pay to attract top faculty members with top-tier publications and to increase the reputation of the university. External competitiveness allows administrators to attract, retain, and motivate top talents in higher education. It is plausible that those with high Love-of-Money, talents, and research productivity will work hard and identify the opportunities of their next move in their careers. In Spain, since December of 2002, there has been a new "Law for the Organization of Universities" (Ly Organica de Universidades, LOU). That law changes the procedures of obtaining professorship in the promotion process. One of the major purposes of this change is to offer opportunities for candidates of professors in the promotion process to move around among different universities and to solve the past problems. Many professors get promoted to the top rank within the same university without having much or any experience in teaching and research in other universities. These professors may have stayed in the ivory tower for life and lost the contact with the real world of work and professors in other universities. That complacency may kill professors innovation, creativity, and research productivity. The system of higher education in Spain has been fairly consistent and stable for all professors. There has been very little motivation to improve research productivity and compare their pay because the pay is the same in the system. Therefore, external competitiveness for professors in Spanish universities is not relevant in the past. Due to these perceptions, institutional supports to the universities are getting even lower, compared to other countries. For example, recent data reveal that the percentage of GDP per Capita devoted to education in the European Union (EU) in 2000 was 5.4 percent. In Spain, it was lower (4.3%) than the EU figure.
It is plausible that the new law, LOU, may create some changes for Spanish professors in the future. One of the important implications is that researchers and administrators need to investigate the impacts of these changes on professors pay satisfaction, perceptions of the new university systems, and research productivity. Indeed, many universities have problems to retain good students to stay in the systems of higher education and to become professors in Spain because salaries in the market are higher than that in the university. In a recent study, LunaArocas (1999) compares a sample from the general public with a simple from university faculty. Indeed, results of cluster analysis (segmentation) suggest that there are three clusters of professors: (1) Intrinsic Teachers (motivated mainly by intrinsic motivation, 33%), (2) Power and Money Worshipers (30%), and (3) Money Worshipers (37%). In fact, 67 percent of these Spanish professors (Clusters 2 and 3 combined) are really concerned about money and interested in money while doing their work. Spanish professors have the perception that their efforts and talents are not being recognized in the past. Thus, administrators cannot afford to overlook the importance of money attitudes, the Love of Money, and external competition, in particular, in the future. Money does attract top talents to move across borders in the global market of higher education. For the last decade, anecdotal evidences suggest that many English-speaking professors have offered their services in Hong Kong and Singapore, for example. After Hong Kong returned back to China in 1997, some came back to the US recently due to slow economy, faculty salary freeze, and the lack of funding and support in Hong Kong. In Great Britain, historically, funding for most of the universities has come from the states. The lack of funding, however, leads to a decline of quality in higher education. Currently, British universities are 80 million dollars in the red. Tony Blairs Labor Government will impose tuition on public higher education. Under the plan, British students are required to pay the tuition (about $8/week for about 10-15 years, interest free) when they start to earn an income equal to the national average. Under the current crisis of brain drain, many top Cambridge professors quit their jobs and teach in American universities. Some called it the Americanization of the British educational system (NPR news, 2003, December 10). The switch will be easier for British professors than for Spanish professors, due to the common English language. These changes will be an emerging trend around the world. Thus, people do pay attention to external competitiveness, pay equity comparison, and compare their pay with that of others in the market. The love of money is the major cause of voluntary turnover (Tang et al., 2000). It pays to quit. More research is needed in this direction. Limitations Cross-sectional data collected at one time may reflect the artifacts of the common method variance (Podsakoff et al., 2003). We employ the following techniques for controlling common method biases: (1) adopt well developed instruments with proven psychometric properties that are likely to resist the common method biases (e.g., Spector, 1987), (2) protect anonymity (do not write ones name on a survey), and (3) select appropriate scale items. We, further, apply the following statistical remedies in our data analysis regarding the common method biases: (4) Harmans single-factor test (exploratory factor analysis, EFA), (5) confirmatory factor analysis (CFA) for all measures, and (6) configural and metric invariance across cultures. Our results suggest that the method effects were insignificant. We have selected only one public university in each country. These two institutions are not perfectly matched. Our results may reflect not only cultural and economic differences of the
US and Spain but also the characteristics of these two institutions. Our samples (professors) are potentially restricted to individuals who do not have the highest value toward money. Caution is warranted when we examine the gender differences within the cultures due to the small sample size. Factors Equity, Success, and Motivator cover only a small part of the equity concern and the Love of Money and money attitudes. Money may become an escalating moving target. Higher labor rates may lead to lower labor costs due to employees high productivity (Pfeffer, 1998). Individual incentive pay undermines performanceof both the individual and the organization (Pfeffer, 1998). Compensation managers need to pay employees as much as they can so that employees can take their mind off money (Kohn, 1998), balance the intrinsic motivation (the labor-of-love, Amabile, 1998) and extrinsic reward, and create a positive culture in organizations. Pay has substantive and symbolic components. The love of money is dynamic. This study reveals a robust phenomenon regarding the role of the Love of Money in our understanding of pay satisfaction, culture, and gender differences. Future research may want to incorporate additional variables, use longitudinal data, examine people in other professions (e.g., medical doctors, lawyers, professional athletes, CEOs, and investment bankers), and examine the culture-free (etic) and culture-specific (emic) constructs around the world. Footnote: 1According to the motivator-hygiene theory (Herzberg et al., 1959), pay is a hygiene factor. Pay may cause long-term (lasted for years) job dissatisfaction, but only short-term (less than two weeks) job satisfaction. It is the context in which one does ones work. Managers need to pay employees monthly in order to sustain their lives (i.e., personal hygiene, like food, water, air, etc.) and get their minds off pay (Kohn, 1998). The satisfaction of pay goes back to zero at the end of the month. The zero point escalates: one always wants more money. Pay is not a valid contributor to psychological growth (a motivator). People do not work primarily for money (Pfeffer, 1998: 111); they also seek the meaning in life. 2 We would like to thank Reviewers for providing constructive comments regarding this point.
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Money and Pay Satisfaction

TABLE 1 Means, Standard Deviations, and Correlations of Major Variables
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____________________________________________________________________________________________________________________________ US Spain Variable M SD M SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 ____________________________________________________________________________________________________________________________

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Age 47.19 Sex .57 Experience 11.62 Career 21.32 Income 48,614.21 Equity 3.66 Success 2.93 Motivator 3.55 Internal 2.93 External 2.54 Pay 3.06 Benefits 3.47 Raise 2.78 Administration 2.66 9.69 33.56 9.11 .50 .48 .50 9.97 6.85 7.20 10.41 10.41 8.95 23,293.76 23,173.55 13,653.76 .79 3.05 .80 1.04 2.57 1.05 .86 3.57 .78 1.04 3.05 .93 1.07 2.74 .84 1.09 3.12 .94 .90 2.90 .69 .87 2.67 .63 .76 2.56 .72 31* 83** 95** 74** -13 19 -11 31** 15 33** 39** 20** 14 02 68** 26** 81** 65** -06 08 12 88** 24** 66** 77** -06 23* -12 49** 35** 34** 46** 04 21* 03 04 14* -02 05 27** -04 20* 07 17* -02 12 17* 17* 40** -04 08 -10 -06 -02 14 32** 19** 05 -00 17* 34** 12 16* 13 14 04 05 17* 29** 07 13 09 19** 04 10 21** 34* 19** 05 -03 -05 -08 -05 -00 04 21** 02 09 -05 -10 -07 -02 -01 01 -03 00 02 -07 01 06 08 13 09 11 -07 14 05 11 04 01 -05 -03 -01 12 01 10 17 11 01 24* 05 04 12 01 02 26* 16 05 10 01 14 07 05 06 07 22* 41** 43** 23* 71** 33** 32** 72** 72** 71** 46** 54** 58** 54** 58** 68** 53** 62** 63** 64** 57** 12 -08 17 09 13 06 19 -04 05 15 02 15 15 21* 19 27** 32* 35** 36** 50** 51** 47** 64** 56** 54** 67**
_______________________________________________________________________________________________________________________ Note. N varied between 184 and 209 for the US sample and between 86 and 101 for the Spanish sample. All decimal points for correlations were omitted. Correlations for the US sample were presented at the lower left corner and the Spanish sample at the upper right corner. Sex was a nominal variable, Female = 0, Male = 1. Experience = Years of experience in current organization. Career = Experience in whole career.
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TABLE 2 Results of Configural and Metric Measurement Invariance __________________________________________________________________________________ Lambdas* Item US Spain __________________________________________________________________________________ The Love of Money Scale Factor 1: Equity 1. People on the same job should be paid equally (equality). 2. People on the same job should be paid based on merit (equity). 3. Lower-level job with little responsibility should be paid less. Factor 2: Success 4. Money is a symbol of success. 5. Money represents ones achievement. Factor 3: Motivator 6. Money is a motivator. 7. I am motivated to work hard for money. Note. Item 1 was reverse scored.
.35 .93 .23 .77 .84 .48 .92
.33 .87 .21 .77 .90 .59 .95
Phase 1. Configural invariance (factor structures across cultures) was achieved: The US (2 = 12.56, df = 11, p = .32, TLI = 1.00, CFI = 1.00, RMSEA = .03), Spain (2 = 16.66, df = 11, p = .12, TLI = .99, CFI = 1.00, RMSEA = .07). Phase 2. Metric invariance (factor loadings) was achieved (2 = 5.61, df = 4, p > .05; CFI = .00) between unconstrained (2 = 29.26, df = 22, p = .14, TLI = 1.00, CFI = 1.00, RMSEA = .03) and constrained MGCFA (2= 34.87, df = 26, p = .11, TLI = 1.00, CFI = 1.00, RMSEA = .03). *Lambdas were based on constrained MGCFA. __________________________________________________________________________________ Pay Equity Comparison Factor 1: Internal Referents 1. Compared with colleagues in my department 2. Compared with other colleagues in my organization Factor 2: External Referents 3. Compared with others at other comparable organizations 4. Compared with other colleagues at the labor market
.74 .82 .95 .93
.84 .84 .79 .75
Phase 1. Configural invariance (factor structures across cultures) was achieved: The US (2 = 3.19, df = 1, p = .07, TLI = .99, CFI = 1.00, RMSEA = .10), Spain (2 = 1.53, df = 1, p = .22, TLI = .99, CFI = 1.00, RMSEA = .07). Phase 2. Metric invariance (factor loadings) was not achieved based on 2 = 16.65, df = 2, p < .05, but achieved based on CFI = .01, between unconstrained (2 = 4.72, df = 2, p = .09, TLI = .99, CFI = 1.00, RMSEA = .07) and constrained MGCFA (2= 21.61, df = 4, p = .00, TLI = .97, CFI = .99, RMSEA = .12). __________________________________________________________________________________ TABLE 2
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Results of Configural and Metric Measurement Invariance (Continued) __________________________________________________________________________________ Lambdas Item US Spain __________________________________________________________________________________ Pay Satisfaction Questionnaire Factor 1: Pay Level 1. My takehome pay 2. My current salary 3. My overall level of pay 4. Size of my current salary Factor 2: Benefits 5. My benefit package 6. Amount the organization pays toward my benefits 7. The value of my benefits 8. The number of benefits I receive Factor 3: Raises 9. My most recent raise 10. The raises I have typically received in the past 11. Influence my supervisor has on my pay 12. How my raises are determined Factor 4: Pay Administration 13. The organizations pay structure 14. Information the organization gives about pay issues 15. Pay of other jobs in the organization 16. Consistency of the organizations pay policies 17. Differences in pay among jobs in the organization 18. How the organization administers pay
.89 .95 .96 .97 .86 .85 .93 .91 .67 .74 .57 .61 .79 .71 .54 .72 .78 .63
.85 .93 .94 .92 .61 .79 .88 .72 .47 .60 .46 .46 .82 .72 .50 .77 .78 .82
Phase 1. Configural invariance (factor structures across cultures) was achieved: The US (2 = 303.85, df = 130, p = .00, TLI = .98, CFI = .98, RMSEA = .08), Spain (2 = 278.83, df = 130, p = .00, TLI = .96, CFI = .97, RMSEA = .11). Phase 2. Metric invariance (factor loadings) was achieved (2 = 16.44, df = 14, p > .05; CFI = .01) between unconstrained (2 = 583.12, df = 260, p = .00, TLI = .97, CFI = .98, RMSEA = .06) and constrained MGCFA (2= 599.56, df = 274, p = .00, TLI = .98, CFI = .98, RMSEA = .06). ______________________________________________________________________________
FIGURE 1: A Theoretical Model of Pay Satisfaction
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Hypothesized Model
Equity Success Motivator Internal External
The Love of Money
Path 3
Path 5
Pay Equity Comparison
Path 2
Path 6
Path 4
Income
Path 1
Pay Satisfaction
PSQ Pay
PSQ Benefits
PSQ Raises
PSQ Administration
FIGURE 2: Results of Our Theoretical Model (The Whole Sample)
30
Hypothesized Model
The Whole Sample
e21
.91 .17
e22
.89 .20
e23
.87 .24
e31
.64 .59
Chi-Square = 171.62 df = 38 p = .00 NFI= .98 RFI = .97 IFI = .98 TLI = .98 CFI = .98 e32 RMSEA = .11
.58 .66
MES Equity
.41
MES Success
.45
MES Motivator
.49
Internal
.77
External
.82
.16
e1
.08 .29
The Love of Money

.41 .02

.86
e2
.75
Income
1.00 1.00
Total Pay Satisfaction

.73 .53 .73 .53 .76 .58
e3
.82 .68
Reported Income
PSQ Pay
.69
PSQ Benefits
.69
PSQ Raises
.65
PSQ Administration
.57
e11
e41
e42
e43
e44

FIGURE 3: Results of the American Sample
31
Hypothesized Model
The American Faculty
e21
.93 .13
e22
.93 .14
e23
.92 .15
e31
.57 .68
.51 .74
MES Equity
.36
MES MES Success Motivator

.37 .39
Internal
.82
External
.86
.23
e1
.24 .49
The Love of Money

.48 -.18

.96
e2
.88
Income
1.00 1.00
Pay Satisfaction
.75 .56 .74 .55 .78 .60
e3
.85 .72
Reported Income
PSQ Pay
.66
PSQ Benefits
.67
PSQ Raises
.63
PSQ Administration
.53
e11
e41
e42
e43
e44
FIGURE 4: Results of the Spanish Sample
32
Hypothesized Model
The Spanish Faculty
e21
.92 .15
e22
.87 .24
e23
.80 .37
e31
.78 .38
.76 .42
MES Equity
.39
MES MES Success Motivator

.49 .61
Internal
.62
External
.65
.03
e1
.02 .13
The Love of Money

.18 .14

.74
e2
.57
Income
1.00 1.00
Pay Satisfaction
.70 .50 .81 .66 .73 .53
e3
.76 .57
Reported Income
PSQ Pay
.71
PSQ Benefits
.58
PSQ Raises
.69
PSQ Administration
.65
e11
e41
e42
e43
e44

2005 - Management Research: From Income To Pay Satisfaction

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Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

FROM INCOME TO PAY SATISFACTION:

Thomas Li-Ping Tang Roberto Luna-Arocas Toto Sutarso

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction

Management Research 2005, 3(1), 7-26.

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Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 11

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 12

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 13

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 14

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 15

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 16

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 17

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 18

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 19

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 20

Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 21

Management Research 2005, 3(1), 7-26.

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Management Research 2005, 3(1), 7-26.

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Management Research 2005, 3(1), 7-26.

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Management Research 2005, 3(1), 7-26.

The Love of Money and Pay Satisfaction 25

Money and Pay Satisfaction

Money and Pay Satisfaction

.35 .93 .23 .77 .84 .48 .92

.33 .87 .21 .77 .90 .59 .95

.74 .82 .95 .93

.84 .84 .79 .75

Money and Pay Satisfaction

FIGURE 1: A Theoretical Model of Pay Satisfaction

Money and Pay Satisfaction

The Love of Money

Pay Equity Comparison