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