Double jeopardy in dual salaries


THE National Academic Staff Association (NASA) at the country’s premier university goes back to when the injustice of dual salaries was first discussed.
As a union, NASA did successfully fight for and win some ground in improved terms and conditions of employment for its membership as well as those in other state institutions of higher learning. Among these was a provision for a gratuity payment. NASA can claim credit for that milestone which is now enjoyed by workers in the public service at large.
However, the issue of dual salaries has remained an elephant in the room for the employer, which in this case is the state through its relevant departments responsible for higher education and the public service.
NASA, it seems, has all but given up the cause; at least that much can be said given that the union has gone quiet about the matter now. Not entirely though.
In 2013, a University of PNG academic, himself directly affected by the matter completed a doctoral thesis on the very subject.
School of Humanities and Social Sciences lecturer, Dr Leo Marai’s thesis was titled Dual Salaries in Papua New Guinea: Exploring their Links to Perceived Workplace Justice, Motivation and Wellbeing, points out, among others what he calls ‘double-demotivation’ in expatriate and local academics or workers in general.
The study explored the concept and practice of dual salaries in Papua New Guinea, where local workers are remunerated less than international workers despite often performing identical jobs and having equivalent human capital (qualifications and experience).

 International study
Marai was in fact part of an international group of academics studying the concept of dual salaries in six economies in the Pacific, Asia and Africa. Countries studied were PNG, Solomon Islands, India, China, Uganda and Malawi.
The disparity in dual salaries was found to be the highest in the two Pacific countries. In Solomon Islands expatriate academics were generally paid roughly nine times more than their local equals while in PNG expatriates earned about eight times what was paid to locals.
The study highlighted what it described as double de-motivation, a hypothesis that dual salaries will de-motivate both locally and internationally-remunerated employees.
There were 200 participants in the study (28 international and 172 local) – workers from 26 different organisations in the sectors of business, education, government and non-government organisations in Papua New Guinea.
Participants responded to an organisational survey, which included reliable multi-item measures of remuneration type, pay comparison, self-assessed ability, remuneration justice, remuneration-related de-motivation, turnover intentions, international mobility cognitions, wellbeing, and occupational closeness. A later workshop conducted with 20 participants from some of the participating organisations considered the findings of the survey, and made practical suggestions about improvements in remuneration and workplace management systems.

Four studies
Four major exploratory studies of the main dataset were undertaken.
Study 1 focused on comparing remuneration groups for differences in work attitudes, whilst controlling for human capital. Locally-remunerated workers (when compared to equivalent workers who were remunerated internationally) were significantly de-motivated, felt a sense of remuneration injustice, more likely to be thinking of turnover and having thoughts about international mobility (going abroad). On average they were de-motivated rather than motivated by remuneration.
“Internationally-remunerated workers meanwhile reported on average that they were “motivated” rather than “de-motivated” by remuneration; although they also had comparatively inflated scores on self-ability compared to their locally-remunerated colleagues, whose human capital was broadly comparable and statistically controlled,” Marai found in his study.
“Participants in the workshop in study one recommended the abolition of dual salaries, replacement by alignment of remuneration based on job performance, localization of jobs to enable local ownership, and creating safety nets for local workers such as a minimum living wage. The recommendations compliment the main findings in this study by addressing dual salaries potent like to work attitudes and wellbeing among workers.”
Study 2 focused firstly on exploring possible mediators between remuneration type (international and local) on the one hand, and remuneration-related motivation on the other.
Study 3 focused on exploring possible links between the variables in Study 2, i.e., remuneration type and attitude variables and wellbeing. Surprisingly, rather than simply being an outcome variable from de-motivation, wellbeing partly mediated significantly between remuneration type (local versus international) and de-motivation.
Low pay hurts wellbeing which then adds to de-motivation, the study found.
Study 4 focused on whether occupational propinquity (closeness) may moderate any of the relationships above. No statistically-significant moderation effects were found between any of these variables.
However occupational propinquity did significantly directly predict both remuneration justice and de-motivation, with greater propinquity being linked to higher levels of injustice and de-motivation. Everyday modern job characteristics that have so far been overlooked in the literature therefore unexpectedly played a contributing role towards double de-motivation.
“The thesis concludes by presenting a new model of dual salaries. It adds to existing knowledge by revealing (a) that remuneration type (local, international) predicted injustice, de-motivation and mobility intentions among local workers; and also double de-motivation among international and locally-remunerated workers in a new country context, (b) that de-motivation mediated between remuneration type and justice, (c) that remuneration type predicted negative wellbeing, (d) that negative wellbeing mediated between remuneration type and de-motivation more than following from de-motivation, and (e) that occupational propinquity added separately and directly to injustice and de-motivation.
“Overall, these findings also imply that the practice of dual salaries is an indecent recipe for work attitudes and wellbeing, impedes collaborative close work partnership for international and local workers, and serve as a micro-barrier to poverty reduction initiatives in Papua New Guinea.”

Background to the research
The thesis explored the concept and practice of dual salaries, in which expatriate and local labour-forces, often equally skilled and experienced, receive different compensation packages, often when performing the same or similar jobs.
There was also other commentaries on the matter which Marai cites in his work. The original rationale for dual salaries originated in colonial days (Ritako, 2012; Payani, 2000).
Then, it was argued by Ila’ava (1999) that salaries and benefits should reflect the level of “development” in a country, as well as its respective labour market norms and rates. Because “developing” countries, and their labour-forces, were less “developed” than those from “developed” economies, where expatriate labour originated, it was presumed by Australian Government that compensation should reflect that gap (Ritako, 2012).
However, even if this argument was valid in the 1960s 70s and 80s, in the 1990s there were calls for dual salaries to be retired (Ila’ava, 1999).
“Dual salaries” does not concern salary or pay alone but includes other benefits allocated formally to workers by organisations, which together is termed “remuneration” in this thesis. Dual salaries and remuneration are used interchangeably throughout the thesis.
“Going into the new millennium, lower-income countries had invested heavily in educated and trained workforces, and their workforces were often equally or more experienced and qualified than their international colleagues. This is the argument advanced by Ila’ava (1999), in the context of Papua New Guinea (PNG). Dual salaries have been official policy in PNG since before Independence in 1975. Yet, is the policy sustainable today, especially at the everyday level of worker motivation?
“Professional workforces are crucial for development. Yet double de-motivation means that (1) the locally paid workers may lose motivation to work, whilst (2) expatriate workers, remunerated internationally, may develop some inflated, possibly implicit opinions of their own ability, and thereby also work less harder than would otherwise be the case without dual remuneration packages (MacLachlan & Carr, 2005). Such losses of motivation may furthermore harm the quality of teamwork between differently remunerated groups and the individuals who comprise them.”
In the government sector, a review by Payani (2000) is critical of the public service in PNG. The report identifies a number of human problems that impede development. These include: a persistence of the colonial legacy (e.g., continuous use of pre-independence government policies); politicalisation of the bureaucracy (e.g., politicians making administrative decisions instead of bureaucrats); bureaucratic corruption (e.g., people stealing the government’s money); “wantokism” (i.e., offering jobs to close friends, relatives or one from the same ethnic group by local workers); and the dual salary system (defined by Payani as problematic in the sense of locals being paid less compared to expatriate counterparts of same human capital and in the same job).

Hard to understand
Payani further argues that, “many qualified Papua New Guineans find it hard to understand why less qualified expatriate officers are paid more and enjoy better conditions of living. There have been arguments that many expatriate officers do not possess the qualifications and experiences they claim.”
In the oil and gas industries, a survey by Hays Recruiting Experts in Oil and Gas (2012) reported that expatriates working in this sector in PNG are the highest paid in the world (US$189, 900), whereas Papua New Guinea nationals in this field, are paid the lowest out of the 53 countries surveyed, with an average of US$29, 600, in comparison. In his critical review of labour laws in PNG, Imbun (2006) reported that low employment and poor wages for local workers in various areas could be significant impediments in fulfilling the objectives of accelerated economic growth and social development. This thesis starts to explore that theoretical possibility empirically.
“Dual salaries seem to be at odds with decent work practices, but its continuous practice by organisations may rest on the assumption that it is fostering work motivation among differently compensated workers, as Tournament Theory suggests (p. 2). However, there is no actual research work in PNG to demonstrate the validity of the motivating and de-motivating aspects of dual salaries on workers across organisatons.
“Therefore, this thesis empirically explores the links among dual salaries and remuneration justice, motivation, mobility and workers’ wellbeing (as an indicator of decent work) across various organisations in one low-income economy – PNG – whilst at the same time exploring dual salaries’ links to these attitudes and its perceived closeness or distance from each other.
“One social interaction variable that has not been given much attention in the research on dual salaries links to work attitude variables is “propinquity”. This is a factor that has been left out of all research on dual salaries to-date, and yet which applies heavily in the modern workplace, and in rural/remote settings like work in PNG, is employees’ distance from each other.”

No follow up to policy submission
A policy submission based on this study was present by the Department of Higher Education, Research, Science and Technology (DHERST) in 2015 to the National Executive Council (NEC). According to the special NEC decision on the matter, dated July 16, 2015, the council:
1. Noted the content of the policy submission (No 54/2015);
2. Noted that there are substantial personnel and financial implications involved with the intentions of the submission; and
3. Approved to defer the submission pending consultations with the Department of Personnel Management and the Salaries and Conditions Monitoring Committee (SCMC).
Marai and his colleagues at the university are now and again seeing their colleagues leave for greener pastures due partly to the de-motivation from the dual salaries system.

  • Next week: UPNG – where to in the next 55 years?

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