Remuneration differences in the emerging economies of China and India

Abstract

Emerging economies by definition tend to be less dependent on expatriate skills and labour than lower-income countries, yet remuneration (pay plus benefits) differences between expatriate and local workers persist in them to some degree. According to relative deprivation theory, economic development paradoxically elevates the salience of relatively small gaps in remuneration. We therefore expected workers to report injustice and demotivation regarding relative remuneration, despite the closing of remuneration gaps between expatriate and local workers due to the economic development of recent years. To explore that possibility, 482 skilled professionals from a variety of sectors and organizations in two emerging economies, India (n = 233, response rate = 54%) and China (n = 249, response rate = 58%), participated in the research. International salaries were greater than local salaries by a factor of 2.73:1 in India and 1.90:1 in China; these mean ratios bordered on intolerable in the India sample and were largely tolerable among the sample from China. In both countries, differently remunerated workers differed in their justice cognitions and their demotivation, with lowered motivation and fewer justice cognitions in the locally salaried, local workers. These differences were however more statistically significant between people working in India than in China. Insofar as the motivational and justice gaps persisted, the findings support relative deprivation theory. Insofar as the same gaps appear to be sharper in the country with the higher-not lower-mean remuneration differential, they do not. An in-country workshop with local experts who interpreted the findings (in India), and content analysis of the participants' recommendations (in China) jointly recommended linking remuneration to (i) workplace performance instead of (ii) economy-of-origin, to help promote (iii) fairness.