Does the love of money moderate and mediate the income-pay satisfaction relationship?

Journal of Managerial PsychologyEmerald Article: Does the love of money moderate and mediate the income-pay satisfaction relationship?Thomas Li-Ping Tang, Roberto Luna-Arocas, Toto Sutarso, David Shin-Hsiung Tang

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To cite this document: Thomas Li-Ping Tang, Roberto Luna-Arocas, Toto Sutarso, David Shin-Hsiung Tang, (2004),"Does the love of money moderate and mediate the income-pay satisfaction relationship?", Journal of Managerial Psychology, Vol. 19 Iss: 2 pp. 111 - 135

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Does the love of moneymoderate and mediate theincome-pay satisfaction

relationship?Thomas Li-Ping Tang

Middle Tennessee State University, Murfreesboro, Tennessee, USARoberto Luna-Arocas

University of Valencia, Valencia, SpainToto Sutarso

Middle Tennessee State University, Murfreesboro, Tennessee, USA, andDavid Shin-Hsiung Tang

Allied Capital, Washington, DC, USA

Keywords Money, Pay, Job satisfaction, Universities, United States of America, Spain

Abstract This research examines the love of money as a moderator and as a mediator of theself-reported income-pay satisfaction relationship among university professors (lecturers).Hierarchical multiple regression results showed that the interaction effect between self-reportedincome and the love of money on pay satisfaction was significant. For high-love-of-moneyprofessors (lecturers), the relationship between income and pay satisfaction was positive andsignificant, however, for low-love-of-money professors (lecturers), the relationship was notsignificant. High-love-of-money participants had lower pay satisfaction than low-love-of-moneyparticipants when the self-reported income was below $89,139.53. When income was higher than$89,139.53, the pattern of pay satisfaction was reversed. Further, the love of money was amediator of the self-reported income-pay satisfaction relationship. Income increases the love ofmoney that, in turn, is used as a “frame of reference” to evaluate pay satisfaction.

In the wake of global competition, organizations are increasingly interested inreducing labor costs and increasing worker productivity and profits. For thepast two decades, there has been a significant increase of interest in theimportance of money in the USA and around the world (Chiu et al., 2001;Furnham and Argyle, 1998; Mitchell and Mickel, 1999; Rynes and Gerhart,2000; Tang, Kim and Tang, 2000; Tang, Luk and Chiu, 2000; Wernimont andFitzpatrick, 1972). Money is the instrument of commerce and the measure ofvalue (Smith, 1937). Managers use money to attract, retain, and motivateemployees (Maslow, 1954; Milkovich and Newman, 2002). This is an importanttopic for researchers and managers because pay dissatisfaction may lead to

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The authors would like to thank Brian Daughtrey and Emily Thormaehlen for their assistance.

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Received June 2003Revised December 2003Accepted January 2004

Journal of Managerial PsychologyVol. 19 No. 2, 2004

pp. 111-135q Emerald Group Publishing Limited

0268-3946DOI 10.1108/02683940410526091

unionization efforts (The Economist, 1997; Laws and Tang, 1999), employeeturnover (Hom and Griffeth, 1995), and unethical behavior (Tang and Chiu,2003; Tang and Tang, 2003; Tang et al., 2002) that will hurt organizations’bottom line in the competitive market.

The present studyThis study tests the hypotheses that the love of money moderates and mediatesthe relationship between self-reported income and pay satisfaction in a sampleof university professors (lecturers). The rational of this study is providedbelow. First, university professors (lecturers) are not the highest-paidprofession in our society. Their pay is higher than the average citizens in theUSA. The turnover rate of university professors (lecturers) is lower than thegeneral public. After receiving academic tenure, professors (lecturers) usuallystay with the university. Those with a long length of service on the job mayalso experience pay compression. Thus, this particular population may be ofinterests to academic scholars and university administrators.

Second, extent research has failed to include “individual differences” instudying such organizational practices as compensation. The lack of attentionto individual differences in reactions to pay is particularly troubling (Barberand Bretz, 2000). “One construct that should not be overlooked is the meaningof money” (Barber and Bretz, 2000, p. 45). In fact, very little research hasincorporated the meaning and importance of money (the love of money, inparticular) in studying pay satisfaction. The major contribution of this study isthat we will incorporate the love of money (an individual-difference variable, cf.Mitchell and Mickel, 1999) in investigating the “self-reported income-paysatisfaction” relationship.

Third, attitudes will predict behavior effectively when there is a highcorrespondence between the attitude object and the behavioral option (Ajzenand Fishbein, 1977). Income, the love of money, and pay satisfaction are allclosely related to one “specific” domain – money. We expect to find strongrelationships among income, the love of money, and pay satisfaction. One mayask, more specifically, how the love of money relates to the income-paysatisfaction relationship. Our theoretical and empirical contribution of thisstudy is to investigate the love of money as both a moderator and a mediator ofthe income-pay satisfaction relationship. To the best of our knowledge, verylittle research has been done in this area. This study will fill in the void in theliterature. We will review the literature on the love of money as a moderatorfirst.

The love of money as a moderatorIncome and pay satisfactionJob satisfaction is an affective reaction to a job that results from theincumbent’s comparison of actual outcomes with those that are desired

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(expected, deserved, etc.) (Cranny et al., 1992). This study focuses on paysatisfaction and not on job satisfaction. High-income people tend to have a highlevel of pay satisfaction (Pfeffer and Langton, 1993). Many researchers haveexamined pay satisfaction (e.g. Heneman, 1985; Heneman, 1992; Lawler, 1971)and used the pay satisfaction questionnaire (PSQ) (e.g. Blau, 1994). This studyadopts Heneman and Schwab’s (1985) 18-item, four-factor PSQ. The two mostwidely known models of pay satisfaction are the equity model (Adams, 1963)and the discrepancy model (Lawler, 1971). The equity model focuses on thecomparisons between one’s output/input ratio and the ratio of others. Thediscrepancy model examines the comparison between what one receives (i.e.reality) and what one would like to receive (i.e. expectation).

The consistency of the pay level-pay satisfaction relationship is probably themost robust (though hardly surprising) finding regarding the causes of paysatisfaction. Actual pay level (i.e. income) is consistently and positively relatedto pay satisfaction, although the magnitude of the relationship varies fromstudy to study, ranging from 0.13 to 0.46. The simple pay level-pay satisfactioncorrelation is positive (Heneman and Judge, 2000). It makes intuitive sense thatthe higher the pay level (income), the higher the pay satisfaction because bothpay (income) and pay satisfaction are dealing with the same domain – one’spay. There is nothing new here.

The literature suggests that “jobs that provide good income may besatisfying to some individuals because of the many desirable things thatmoney can buy; others, with fewer material desires, may not find moneyparticularly satisfying” (Roznowski and Hulin, 1992, p. 149). We assert that thepeople have different levels of the love of money. People with high or low loveof money may have different patterns of pay satisfaction. Further, the love ofmoney will play a different role in their income to pay satisfaction relationship.We now turn to money, money attitude, and the love of money.

Money and money attitudeIn America, money is how we keep score (Rubenstein, 1981). The importanceattached to money is one’s motive to outperform others (Furnham et al., 1994).The meaning of money is “in the eye of the beholder” (McClelland, 1967, p. 10).The importance of money, the love of money, in particular, can be perceived astheir “frame of reference” in which they examine their everyday lives (Tang,1992, p. 201; Tversky and Kahneman, 1981), may have a significant impact onwork-related attitudes (e.g. pay satisfaction) (Lawler, 1971; Opsahl andDunnette, 1966) and actual economic behavior (Furnham and Argyle, 1998). Tosome, money is a hygiene factor (e.g. Cameron and Pierce, 1994; Herzberg, 1987;Kohn, 1993, Pfeffer, 1998). To others, money is a motivator (e.g. Gupta andShaw, 1998). Thereby, money and money attitude appears to be an importanttopic for managers and researchers and may have important implications tobehaviors in organizations.

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It is beyond the scope of the present paper to discuss all different meaningsof money and measures of money attitudes (see Furnham and Argyle, 1998).Among many perspectives in the current literature on money, “the oneconsistent thread in this body of work is the emphasis on its importance”(Mitchell and Mickel, 1999, p. 569). In the money and individual-differencemeasurement literature, Mitchell and Mickel (1999, p. 571) have considered themoney ethic scale (MES) as one of the most “well-developed” andsystematically used measures of money attitude.

Tang and his associates have developed several versions of the MES (e.g.Tang, 1992, 1995; Tang and Chiu, 2003; Tang and Kim, 1999; Tang and Tang,2002; Tang, Luna-Arocas and Whiteside, 1997, 2003; Tang et al., 2002, 2003)according to the ABC model of attitudes (Ajzen and Fishbein, 1977). “Moneyethic” is being used similar to other attitudinal variables in the managementliterature, e.g. work ethic (Furnham, 1990), leisure ethic (Crandall and Slivken,1980), welfare ethic (Furnham, 1983), volunteer ethic, and service ethic (Tangand Weatherford, 1998). Definition of factors, test-retest reliability, Cronbach’salpha, the nomological network of correlations, and validity of the MES can befound in the literature (e.g. Furnham and Argyle, 1998; Lim and Teo, 1997;Mitchell and Mickel, 1999; Tang, 1993) and in many languages, e.g. Chinese (Duand Yue, 2002), French (Charles-Pauvers and Urbain, 1998; Urbain, 2000),Italian (Tang, 1996), Spanish (Galicia et al., 2001; Luna-Arocas, 1998;Luna-Arocas and Tang, 1998; Quintanilla, 1997), Romanian (Tang andWeatherford, in press), Russian (Fenko, 2000), etc.

The love of moneyAccording to Locke (1969, p. 334), the first question a scientific investigatormust ask is not “How can I measure it?” but rather, “What is it?”. So, what is thelove of money? We argue that “the love of money” does not represent one’s“needs”, instead it reflects one’s “wants” and “values”. “Need” refers to “theobjective requirements of an organism’s well-being”, whereas “value” is thatwhich a person “actually seeks to gain and/or keep or considers beneficial”(Locke, 1969, p. 318). A value presupposes the awareness, at some level, of theobject or condition sought, whereas a need does not. Moreover, “values” ratherthan expectations determine satisfaction. Locke (1969, p. 327) did distinguishbetween the value of money to a person and the specific amount of pay anemployee seeks at a given time on a given job. If one who values money highlyand who has just received a desired raise, one will be satisfied with one’s pay.However, one will not remain satisfied indefinitely with this amount of pay. Itis very likely that one will soon set a minimal goal level that is higher thanone’s present salary. (Thus, the specific amount of pay may change over time.)Further, “a man might consider pay an important value up to a certainminimum, but further pay increments might be valued less than, say specific

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changes in the work content” (Locke, 1969, p. 330). (Thus, the value of money toa person may also change.)

According to Allan Sloan, News Week’s Wall Street Editor, Americans havealways loved money. De Tocqueville traced love of wealth to the root of all thatAmericans do. “Greed - defined as an inordinate desire for wealth – is not good,and it doesn’t drive markets” (Sloan, 2002, p. 37, emphasis added). The real rootcause of the corporate scandals and crisis in confidence in corporations is “theoveremphasis American corporations have been forced to give in recent yearstomaximizing shareholder valuewithout regard for the effect of their actions onother stakeholders” (Kochan, 2002, p. 139, emphasis added).

The first author also conducted a pilot survey using the brain mappingtechnique and asked 100 undergraduate and 25 graduate MBA students toidentify the love of money construct and write down at least 12 differentmeanings related to this construct. Students associate the love of money withgreed and consider it as one’s desire or lust for more money and materialpossessions. One never has enough money and wants to have more money,become richer and wealthier than before. One considers money as the mostimportant (i.e. number one) goal in life. Further, one puts the highest “value” onmoney that is more important than God, family, friends, people, or anythingelse. One will do whatever it takes to make money. One is selfish and does nothelp others. To paraphrase Sloan’s (2002) statement: the love of money is aninordinate desire for money.

The love of money scale (LOMS)More recently, Tang and his associates (Tang and Chiu, 2003, Tang et al.,2002, 2003) have developed the LOMS based on the following rationale. First,the inspiration of this study comes from a “Western” and religious expression:“The love of money is the root of evil” (1 Timothy, 6: 10). Those who want tobe “rich” are falling into temptation (1 Timothy, 6: 9). Although the love ofmoney construct (unobservable) has been used in everyday expression andpopular literature, there is no measurement of the love of money,operationalized empirically, in the management literature. Second, the loveof money construct is a “neglected” area and is an important topic inmanagement, international business studies, and “management spiritualityand religion”, in particular. It should be noted that management spiritualityand religion is a SIG within the Academy of Management in the USA. Wealso assert that it is an important topic in the management field. Third, thelove of money assesses the “meaning” (Barber and Bretz, 2000, p. 45), the“importance” of money (Mitchell and Mickel, 1999, p. 569), and one’s ownpersonal attitudes toward money, i.e. an individual difference variable(Mitchell and Mickel, 1999).

Tang et al. (2003) have developed the LOMS by selecting specific factors ofthe MES that measures the different meanings of money. Therefore, the LOMS

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is only a sub-set of the MES. For example, Tang and Tang (2002) haveidentified 14 factors based on the 58-item MES. These 14 factors cover manydifferent meanings of money and are too general for specific research purposes.It is easier for researchers, managers, and the general public (lay people) tounderstand the meaning of the love of money than the money ethicendorsement. In one recent study, Tang et al. (2003) examined the LOMS basedon data from 26 geopolitical entities in five continents (n ¼ 5; 341) andestablished strong configural (factor structures) and metric (factor loadings)invariance for a nine-item, three-factor LOMS model (factors rich, motivator,and important) across 22 geopolitical entities. In similar studies, Tang and hisassociates investigated the LOMS using a 17-item, four-factor model (Factorsrich, motivator, important, and success) (Tang and Chiu, 2003; Tang et al.,2002). The love of money is significantly correlated with evil (unethicalbehaviors in organizations), but money (one’s self-reported income) is notrelated to evil. Thus, the love of money is the root of evil, but money (income) isnot (Tang and Chiu, 2003). It can be concluded that the LOMS has been verywell established.

In this study, we will examine the love of money using the following fivefactors: evil (affective), motivator, budget (behavior), equity, and success(cognitive) (Tang, Luna-Arocas and Whiteside, 1997, 2003) (see the “Method”section for more details). The love of money represents the overall score of allfive factors (factor evil reverse scored). High-love-of-money people tend to thinkthat: money is not evil; they budget money carefully; money is a sign of theirsuccess; money is a motivator; and they value equity in organizations. Previousresearch suggests that high-income people tend to think that money representstheir Achievement and that money is not evil (Tang, 1992). Extrinsic jobsatisfaction is negatively associated with factor evil. Non-professional men hada stronger belief that money represents their achievement than professionalmen (Tang, Singer and Roberts, 2000).

Research shows that the love of money moderates the relationships betweenintrinsic job satisfaction and withdrawal cognitions and also between intrinsicjob satisfaction and voluntary turnover in a sample of mental health andmental retardation professionals in the USA (Tang, Kim and Tang, 2000).High-love-of-money people quit their jobs voluntarily (pull) regardless of theirintrinsic job satisfaction (push). Just a pull (high love of money) is needed toexperience turnover (Tang, Kim and Tang, 2000). Low-love-of-moneyemployees with low intrinsic job satisfaction have the lowest voluntaryturnover. In that study, the love of money is a moderator (Tang, Kim and Tang,2000). It suggests that the intrinsic job satisfaction-turnover relationship isdifferent for high- and low-love-of-money employees. In this study, we will alsotreat the love of money as a moderator of the income-pay satisfactionrelationship among university professors (lecturers).

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The love of money as a moderatorRice et al. (1990) have examined the relationship between pay and paysatisfaction as moderated by pay discrepancies. Our research focuses on theextent to which the love of money helps shape employees’ pay expectations anddiscrepancies. Our review of the literature leads us to different income-paysatisfaction predictions for high- and low-love-of-money people: on the onehand, high-love-of-money people value money and have high “pay expectation”that may create a large discrepancy between what they receive (reality) andwhat they expect to receive (expectation). This may lead to a high level of paydissatisfaction according to the discrepancy model (Lawler, 1971). On the otherhand, low-love-of-money individuals experience a low pay expectation, a lowdiscrepancy between reality and expectation, and possibly a high level of paysatisfaction. In general, higher pay leads to higher pay satisfaction. Wespeculate that for most people in the normal income range, high-love-of-moneyprofessors (lecturers) will have lower pay satisfaction than theirlow-love-of-money counterparts.

Furthermore, on the one hand, extrinsic rewards undermine intrinsicmotivation (Deci et al., 1999). On the other hand, extrinsic rewards strongly andpositively predict job satisfaction when extrinsic values are high, but less sowhen extrinsic values are low (Bateman and Crant, 2003). We assert that theincome-pay satisfaction relationship will be stronger for high- rather thanlow-love-of-money individuals. It is reasonable to expect thathigh-love-of-money professors (lecturers) value money much higher thantheir low-love-of-money counterparts. Therefore, if one’s income increases fromlow to high, it will have a much stronger impact on high-love-of-moneyindividuals’ pay satisfaction than low-love-of-money counterparts’. We arguethat the slope of the income-pay relationship (regression line) will be steeper forhigh-love-of-money professors (lecturers) than for low-love-of-moneycounterparts.

Based on data from 26 geo-political entities, Tang (2003) reported that the tworegression lines for high-love-of money (top 10 percent of the sample) andlow-love-of money (bottom 10 percent) employees crossed at the 2.01 standarddeviation above the mean. The slope of the regression line for thehigh-love-of-money employees was steeper than that of the low-love-of-moneycounterparts. When income increased from low to high, high-love-of-moneyemployees tended to increase pay satisfaction more than low-love-of-moneyemployees. Thus, money is a motivator for high-love-of-money individuals.Results support the notion that for high-love-of-money individuals, incomestrongly and positively predicts pay satisfaction (Bateman and Crant, 2003).Thus, extrinsic rewards do increase extrinsic satisfaction.

High-love-of-money employees had higher pay satisfaction thanlow-love-of-money counterparts, only if their income was above the 2.01standard deviation point. Below that income level, the reverse was true. Thus,

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it takes a lot of money (z ¼ 2:01) to make high-love-of-money people happywith their pay. The income-pay satisfaction relationship is different for high-and low-love-of-money employees. Thus, the love of money moderates theincome-pay satisfaction relationship in that sample.

We predict a significant interaction effect between income and the love ofmoney on pay satisfaction. The relation between income and pay satisfactionchanges as a function of the moderator variable and is related in a nonlinearfashion (James and Brett, 1984). The dependent variable y (i.e. pay satisfaction)is a probabilistic function of x (income) and z (the love of money). Theinteraction effect between x and z on y is significant:

H1. The love of money will moderate the income-pay satisfactionrelationship. The income-pay satisfaction relationship will bestronger for high-love-of-money individuals than forlow-love-of-money individuals.

The love of money as a mediatorIn this section, we will treat the love of money as a mediator of the income-paysatisfaction relationship (i.e. income ! the love of money ! paysatisfaction). In general, research suggests that high-income people have amore positive attitude toward money than low-income people (Tang, 1992;Tang, Kim and Tang, 2000). Pay satisfaction is correlated with the LOMS(Tang, 1995). Employees with higher income (employed past welfare recipients,income ¼ 14; 540) have more positive attitudes toward money than low-incomepeople (welfare recipients ¼ 4; 240; welfare recipients in trainingprograms ¼ 3; 720) (Tang and Smith-Brandon, 2001). There are differencesin money attitudes between full-time and part-time employees (Tang, Kim andTang, 2002) because full-time employees usually have higher pay and morebenefits than part-time employees. These studies show that income, the love ofmoney, and pay satisfaction are all somewhat related but different acrossdemographic variables. More specifically, in this paper, we will discuss, ingreater detail, the income and the love-of-money relationship (income ! thelove of money) and the love-of-money and pay-satisfaction relationship (thelove of money ! pay satisfaction).

Income to the love of moneyWe now turn our attention to the possible reciprocal processes of income andmoney attitude: the love of money to income vs income to the love of money.We will examine the love of money to income process first.

The love of money to income. The primary motivation for going on to highereducation in the past two decades has been the expectation of “individualeconomic return” (Lecht, 1977, p. 25). Bok (1993), former president of HarvardUniversity and dean of the Harvard Law School, asserts: the lucrative rewardsof Wall Street, the elite law firms, and the medical specialties act as a magnet to

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deprive poorly paid but vitally important teaching and public serviceprofessions of desperately needed talent. Following Bok’s argument, peoplewith high love of money will be attracted to enter top money making fields (e.g.business, medicine, and law) and will make more money in these fields thanlow-love-of-money people. Anecdotal evidence suggests thathigh-love-of-money students may major in economics and work asinvestment bankers, whereas low-love-of-money students may major inreligion and work as volunteers for a church-related organization in an Indianreservation.

Income to the love of money. The raising tide lifts all the boats. Moneychanges everything. As income increases, some people adjust their standard ofliving, expectations, tastes/preferences, and consumption accordingly.Spiraling wages motivate people “to seek the next wage increase” (Herzberg,1987, p. 110). Herzberg advises managers: do not use money as a rewardbecause pay satisfaction goes back to zero and the zero point escalates, i.e. “theadaptation process” (Furnham and Argyle, 1998, p. 271). In order to maintainand enhance their life style, they need to make more money. Money becomesmore important to them than before. High income may lead to ones’ highmaterialistic values. For materialistic individuals, “possessions are believed toprovide the greatest sources of satisfaction and dissatisfaction” in life (Belk,1985, p. 265). “Low and high materialists are also likely to differ in the meaningmoney holds for them and in money-related attitudes” (Richins and Rudmin,1994, p. 222). Some Americans are obsessed with money and materialism.Upward adaptation takes place easily. We assert: the love-of-money-to-incomeprocess will take significantly longer time and more effort to accomplish thanthe income-to-the-love-of-money process.

In a study of 12 countries using structure equation modeling (SEM), Tanget al. (2002) have suggested that Income to the love of money (income ! thelove of money) path was positive in one country (Thailand), negative in threecountries (Hong Kong, Hungary, and Oman), and non-significant (neutral) ineight countries (the USA, Belgium, Macedonia, Malta, Philippines, Singapore,South Africa, and Taiwan) (Tang et al., 2002). Rich or poor is a state of mind.People may be financially poor but psychologically rich and vice versa. Theincome to the love of money path reflects people’s “objective” income (incomecompared to GDP per capita) in nine countries and also “subjective” income(compared to the market) in three countries. For high-income Hong Kongemployees, income reduced the love of money. For high-income Thaiemployees, income increased the love of money. The difference between theHong Kong Chinese and Thai people is that Thai people have experiencedmuch more significant changes in economic development than those in HongKong in recent years. Therefore, Thai employees experience the “newness ofhaving money” in the new developing economy (see Tang, Furnham and Davis,

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2000) and want to buy new products and services (e.g. a big house and a newcar).

In a sample of full-time employees in the USA, African-Americans andfemales have lower income than their Caucasian and male counterparts. Incomeincreased the love of money for African-Americans and females but not forCaucasians and males (Tang and Tang, 2002). On the basis of the literature, wepredict: income will be positively related to the love of money (income ! thelove of money) because many professors (lecturers) have experienced paycompression compared to the market.

The love of money to pay satisfactionBased on the equity theory (Adams, 1963), pay satisfaction will be evaluatedbased on the adequacy of their rewards through a process of social comparison.“The value of a given reward is not absolute, but is relative to other rewardswith which it is compared . . . satisfaction with a modal score should be higherwhen it can be compared to a less favorable alternative . . . than when it hasonly equal comparisons” (Brickman, 1975, p. 191, emphasis added). What is fairor just is open to interpretation (Greenberg, 1982). We argue that the LOMS(factors equity and success, in particular) measures the individual’s ownstandards, or “frame of reference” in the process of social comparison (Tverskyand Kahneman, 1981). Pay satisfaction is not determined based on people’sabsolute income, but rather on their perception regarding the relativeimportance of money. Professors’ income will enhance the love of money that,in turn, will serve as a “frame of reference” to determine their pay satisfaction.High-love-of-money professors (lecturers) may pay more attention to and areconstantly aware of other people’s pay in the society (Pfeffer and Langton,1993), other “rich” people (e.g. Michael Eisner, Bill Gates), in particular. Fewpeople compare themselves with “the poor”. We predict that the love of moneywill have a significant impact on their total pay satisfaction.

We treat the love of money as a mediator between income and paysatisfaction. A complete mediation model has the form x!m! y, where x isthe antecedent (income); m is the mediator (the love of money); and y is theconsequence (pay satisfaction) (James and Brett, 1984). The followingconditions must be met:

. the independent variable (income) must affect the mediator (the love ofmoney);

. the independent variable (income) must affect the dependent variable (paysatisfaction); and

. the mediator must affect the dependent variable.

When all these conditions are held true, then,the effect of the independentvariable on the dependent variable must be less in the third equation than inthe second:

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H2. The love of money will mediate the income-pay satisfactionrelationship.

We will incorporate only a few selected demographic variables. We will discussthem in the following paragraphs.

Gender. The gender-related wage gap, pay expectations, and the Equal PayAct have been widely discussed in the literature (Major and Konar, 1984).Although the size of the gender gap across different races and years hasfluctuated, it has been persistent. Female employees’ pay is about 76.7 percentof their male counterparts (Adams, 1999). There are significant genderdifferences in money attitudes. Women tend to rate social needs (e.g. work withpeople and being helpful to others) as more important than do men (Lawler,1971). Men tend to consider pay more important than do women. Males andachievement-oriented employees tend to favor merit pay (Heneman, 1992). Maleprofessors tend to have higher satisfaction with pay than female professors,whereas female professors tend to have higher satisfaction with co-workersthan male professors (Tang and Talpade, 1999). In general, men tend to valueequity, whereas women tend to value equality (Tang, Furnham and Davis,2000).

Length of service and experience. People with long tenure on the job tend tohave high job satisfaction, due to the process of mutual selection and realisticexpectations. People with the necessary knowledge, skills, abilities, andcompatible values tend to survive on the job, whereas those without will beterminated voluntarily or involuntarily (Tang and Frost, 1999). “Seniority isanother potentially legitimate basis for salary allocations” (Pfeffer andLangton, 1993, p. 387).

Job changes. The number of job changes is also a good predictor of pay(Gomez-Mejia and Balkin, 1992). Leavers tend to have lower pay satisfactionthan stayers and receive about 20 percent increases in pay on their new jobs.High-love-of-money employees quit their jobs regardless of their intrinsic jobsatisfaction on the job (Tang, Kim and Tang, 2000). It pays to quit.

MethodParticipantsA questionnaire was mailed to a sample of full-time faculty members of twouniversities (one with 18,500 students and 715 full-time professors in the USAand the other with 20,000 students and 1,000 professors/lecturers in Spain). Weobtained usable responses from 311 professors (207, return rate ¼ 28:95percent and 104, return rate ¼ 32:5 percent, respectively). For the first sample,we have obtained additional demographic variables and official income fromthe office of the human resource services of the university. The mean, standarddeviation, and correlations of major variables for the whole sample arepresented in Table I.

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MeasuresParticipants’ sex (female ¼ 0, male ¼ 1, dummy coding), age, and maritalstatus (not married/single ¼ 0, married ¼ 1) were obtained. Self-reported totalannual income (in US$), length of service in organization (in years), total workexperience (in years), and the total number of job changes (since the highestdegree) were measured.

Self-reported income. Income distribution of university faculty (Hagedorn,1996) and university presidents (Tang, Tang and Tang, 2000) sometimes doesnot reflect the normal, symmetrical, and bell-shaped distribution. A fewindividuals with extremely high (low) income levels may cause the wholedistribution to become a positively (negatively) skewed distribution. We foundthat raw income data were not normally distributed (skewness ¼ 2:692;Kurtosis ¼ 15:416). After a careful examination of our data, we have identifiedtwo lowest outliers (part-time adjunct professors in Spain, the lowestincome ¼ US841) and two highest outliers (over US$200,000, US professorswith employment outside the university). After deleting these four outliers, theincome variable was close to a normal distribution (skewness ¼ 0:833;Kurtosis ¼ 1:076). These results suggest that log transformation of the incomevariable is not necessary after deleting these four outliers. Further, weconducted three sets of data analyses using:

(1) the full data set;

(2) the data set without the two lowest outliers; and

(3) the data set without the four outliers (see “Results” section).

The LOMS. In this study, we employ the 15-item, five-factor LOMS (Tang,Luna-Arocas and Whiteside, 1997, 2003) with strongly disagree (1), neutral (3),and strongly agree (5) as anchors. We calculated the average score of LOMS byusing 15 items with five items reverse scored (see the Appendix). The fivefactors are briefly presented here. Factor evil (an affective component) is related

Variable M SD 2 3 4 5 6 7 8 9

1. Age 43.49 11.06 35* 30* 63* 69* 91* 17* 17* 092. Sex 0.55 0.50 17* 35* 28* 29* 10* 17* 2043. Marital 0.70 0.46 23* 16* 27* 12* 06 2004. Income 42,238.52 24,794.35 41* 62* 20* 31* 20*5. Length 10.34 9.43 71* 211* 06 026. Experience 18.05 10.73 21* 19* 107. Job changes 1.17 1.53 19* 2008. LOMS 3.31 20.43 26*9. Satisfaction 2.91 0.73

Notes: All decimal points for correlations were omitted. Sex and marital were nominal data anddummy coding was used. Sex: female ¼ 0, male ¼ 1. Marital status: single ¼ 0, married ¼ 1.Length: length of experience for the current job. Experience: total work experience

Table I.Mean, standarddeviation, andcorrelations of majorvariables

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to the idea that money may enhance unethical behaviors (Tang et al., 2002) andthat the love of money is the root of evil (Timothy, 6: 10). Factor budget (abehavioral component) deals with how people budget and use their money.Factor equity (a cognitive factor) is related to people’s belief in equity (i.e.individual equity, and internal equity, Heneman, 1992) and not “equality” or“egalitarian” in an organization (Tang, Furnham and Davis, 2000). Factorsuccess shows that money represents one’s success and achievement. Factormotivator (a behavioral component) measures the construct that people arehighly motivated by money and that money is a motivator (Gupta and Shaw,1998). Factors equity and motivator are strongly related to the socialcomparison, pay equity comparison, and the thinking process of paysatisfaction. Confirmatory factor analysis (CFA) results show that there was agood fit between the 15-item, five-factor love-of-money model and our data(x2 ¼ 169:42, df ¼ 87, p ¼ 0:00, TLI ¼ 0:99, CFI ¼ 0:99).

Pay satisfaction questionnaire. We included the 18-item, four-factor paysatisfaction questionnaire (PSQ) (Heneman and Schwab, 1985) using afive-point Likert scale with very dissatisfied (1), neutral (3), and very satisfied(5) as anchors. We calculated the average score using 18 items of the PSQ(alpha ¼ 0:94).

ResultsThe love of money as a moderatorWe controlled demographic variables (i.e. sex, age, and marital status) andwork-related variables in organizations (length of service, total workexperience, and the number of job changes) in steps 1 and 2, respectively, ina hierarchical multiple regression analysis (see Table II). Variables in step 1and step 2 were not significantly related to pay satisfaction.

Self-reported income, the LOMS, and the product of the two (income £ thelove of money) were entered in steps 3, 4, and 5, respectively. The third and thefourth variables produced the equivalent of two main effects, whereas the fifthstep produced the equivalent of the interaction effect in the analysis ofvariance. Step 3 showed that self-reported income explained 3.8 percent ofvariance in pay satisfaction (F change ð1; 215Þ ¼ 8:66, p , 0:004), supportingthe notion that income is related to pay satisfaction. Step 4 revealed that thelove of money explained 4.5 percent of variance in pay satisfaction (F change

Independent variable R R 2 R 2 change F change df p

1. Sex, age, marital status 0.119 0.014 0.014 1.05 3, 219 0.3712. Length, experience, jobs 0.151 0.023 0.008 0.62 3, 216 0.6003. Income (x) 0.246 0.061 0.038 8.66 1, 215 0.0044. LOMS (z) 0.325 0.105 0.045 10.73 1, 214 0.0015. Income * LOMS (x � z) 0.351 0.123 0.018 4.39 1, 213 0.037

Table II.The love of money (z) as

a moderator for theself-reported income

(x)-pay satisfaction (y)relationship using

independent variablesto predict dependent

variable – paysatisfaction (y)

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ð1; 214Þ ¼ 10:73, p , 0:001). Thus, the love of money is related to paysatisfaction, after controlling income.

The major focus of this study is to ascertain the unique contributions of theinteraction effects between self-reported income (x) and the love of money (z) onpay satisfaction (y). The interaction effect was significant (R 2 change ¼ 0:018,F change ð1; 213Þ ¼ 4:39, p ¼ 0:037). (In step 5, deleting the two lowest outliers(R 2 change ¼ 0:017, F change ð1; 212Þ ¼ 4:08, p ¼ 0:045), or all four outliers(R 2 change ¼ 0:017, F change ð1; 210Þ ¼ 3:97, p ¼ 0:048) offered similarresults.)

The significant interaction effect on pay satisfaction was furtherinvestigated by examining the differences between those employees withhigh or low love of money. High- and low-love-of-money groups were createdbased on a median split of their average love-of-money scores. We calculatedand plotted separate regression lines for the high- and low-love-of-moneygroups (Figure 1). Low-love-of-money professors had a positive butnon-significant relationship between self-reported income and paysatisfaction (beta ¼ 0:11, t ¼ 1:26, p ¼ 0:21). However, high-love-of-moneyprofessors had a positive and significant relationship (beta ¼ 0:17, t ¼ 1:92,p ¼ 0:05). The love-of-money moderates the self-reported income-paysatisfaction relationship. H1 was supported.

The regression lines for high-love-of-money participants andlow-love-of-money participants can be expressed as follows:

Figure 1.The interaction effect ofself-reported income andthe love of money on paysatisfaction

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y1 ¼ 2:9186þ 0:000002674 � x1 ðlow love of moneyÞ; ð1Þ

y2 ¼ 2:5353þ 0:000007014 � x2 ðhigh love of moneyÞ: ð2Þ

We identified x and y by solving the above two formulas. Thehigh-love-of-money and low-love-of-money regression lines intersected at$89,139.53 (self-reported income) and at 3.16 (pay satisfaction).High-love-of-money participants had lower pay satisfaction thanlow-love-of-money participants when the self-reported income was below$89,139.53 (Figure 1).When self-reported incomewas higher than $89,139.53, thepattern of pay satisfaction for these high- and low-love-of-money groups wasreversed. That is, high-love-of-money professors (lecturers) had higher paysatisfaction than their low-love-of-money counterparts. There were eighthigh-love-of-money professors and one low-love-of-money professor withincome higher than $89,139.53. Moreover, the average income forhigh-love-of-money professors ($45,779.68) was higher than that oflow-love-of-money professors ($34,607.06) (F ð1; 287Þ ¼ 16:75, p ¼ 0:000,h2 ¼ 0:055, observed power ¼ 0:983). Most high-love-of-money professors(lecturers) have high income but low pay satisfaction when the income level waslower than $89,139.53. Higher than that point, high-love-of-money professorsmay have higher pay satisfaction, whereas low-love-of-money professors mayhave lower pay satisfaction. The love of money is a moderator.

The love of money as a mediatorTo investigate the love of money as a mediator, we employed the three-stepprocedure mentioned earlier in three hierarchical multiple regression analyses,controlling sex, age, and marital status in step 1 and length of job, total work

Independent variable R R 2 R 2 change F change df p

Using independent variables to predict mediator – the love of money (m)1. Sex, age, marital status 0.218 0.048 0.048 4.05 3, 243 0.0082. Length, experience, jobs 0.262 0.069 0.021 1.80 3, 240 0.1473. Income (x) 0.328 0.108 0.039 10.46 1, 239 0.001

Using independent variables to predict dependent variable – pay satisfaction (y)1. Sex, age, marital status 0.116 0.014 0.014 1.00 3, 219 0.3922. Length, experience, jobs 0.148 0.022 0.008 0.61 3, 216 0.6093. Income (x) 0.244 0.059 0.038 8.59 1, 215 0.004

Using independent variables and mediator to predict dependent variable – pay satisfaction (y)1. Sex, age, marital status 0.116 0.014 0.014 1.00 3, 219 0.3922. Length, experience, jobs 0.148 0.022 0.008 0.61 3, 216 0.6093. LOMS (B) (z) 0.292 0.085 0.063 14.86 1, 215 0.0004. Income (x) 0.324 0.105 0.020 4.73 1, 214 0.031

Table III.The love of money (m)as a mediator for theself-reported income

(x)-pay satisfaction (y)relationship

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experience, and the number of job changes in step 2 (see Table III). First, incomedid affect the love of money (mediator) (F ¼ 10:46, p ¼ 0:001) (the top part ofTable III). Second, income did affect pay satisfaction (F ¼ 8:59, p ¼ 0:004) (themiddle part of Table III). Third, the love of money did affect pay satisfaction(F ¼ 14:87, p ¼ 0:000). Finally, when all these conditions are held true, then, theeffect of the independent variable (income) on the dependent variable (paysatisfaction) must be less in the third equation (R 2 change ¼ 0:020, F ¼ 4:73,p ¼ 0:031) than in the second (R 2 change ¼ 0:038, F ¼ 8:59, p ¼ 0:004). Ourresults met all these requirements. The love of money is a mediator betweenincome and pay satisfaction. Again, when the lowest two outlierswere deleted inthe data analyses, we found similar results: the effect of income on paysatisfaction was less in the third equation (R 2 change ¼ 0:019, F ¼ 4:52,p ¼ 0:035) than in the second (R 2 change ¼ 0:037, F ¼ 8:40, p ¼ 0:004). Thiswas also true when all four outliers were deleted: the effect of income on paysatisfaction was less in the third equation (R 2 change ¼ 0:012, F ¼ 2:87,p ¼ 0:092) than in the second (R 2 change ¼ 0:030, F ¼ 6:76, p ¼ 0:010). Thus,the love of money is both a moderator and a mediator. H2 was supported.

DiscussionResults of this study show two key points. First, the love of money is amoderator for the self-reported income and pay satisfaction relationship.Second, the love of money is a mediator for the self-reported income and paysatisfaction relationship (i.e. income! the love of money ! pay satisfaction).

First, for the love of money as a moderator, professors (lecturers) with highand low love of money display different patterns of pay satisfaction. Theincome-pay satisfaction relationship is significant and positive forhigh-love-of-money professors but not for low-love-of-money professors.High- and low-love-of-money professors (lecturers) do have the exact samelevel of pay satisfaction (3.16), when their annual income is at $89,139.53.High-love-of-money professors (lecturers) have higher income ($45,779.68)than low-love-of-money professors ($34,607.06). Before reaching the annualincome of $89,139.53, high-love-of-money professors have lower paysatisfaction than their low-love-of-money counterparts. When income ishigher than $89,139.53, the reverse is true. Only eight high-love-of-moneyprofessors (lecturers) and one low-love-of-money professor (lecturer) haveincome higher than $89,139.53.

High-love-of-money professors may have high “pay expectation”, a largediscrepancy between what they receive (reality) and what they expect toreceive (expectation), and a high level of pay dissatisfaction (Lawler, 1971).Thus, most high-love-of-money professors may feel that they never haveenough money and that they have low pay satisfaction. However, for the sameamount of increase in pay (from low to high income), high-love-of-moneyindividuals will have significantly higher amount of increase in pay

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satisfaction than low-love-of-money individuals. For high-love-of-moneyprofessors (lecturers), higher income does lead to higher pay satisfaction.These results seem to support the notion that extrinsic reward enhancesextrinsic satisfaction, for individuals who value extrinsic rewards.

For low-love-of-money individuals, income is less important. Due to theirlow pay expectation, a low discrepancy between reality and expectation mayexist that may lead to a high level of pay satisfaction. For low-love-of-moneyprofessors (lecturers) as a whole, the income-pay satisfaction relationship isweak. The key implication for compensation managers is that the same amountof pay increases will not make high- and low-love-of-money professors equallyhappy. High-love-of-money individuals are motivated by money and areparticularly interested in equity and not equality.

We use the figure of $89,139.53 and the self-reported income as referencepoints to calculate the pay differentials (cf Tang, Luk and Chiu, 2000). In orderto make high- and low-love-of-money professors equally happy with their pay(i.e. pay satisfaction ¼ 3:16), we need to increase high-love-of-moneyprofessors’ average pay by 1.95 times ($89,139.53/$45,779.68) and to increaselow-love-of-money professors’ average pay by 2.58 times($89,139.53/$34,607.06) in order to achieve this result (i.e. $89,139.53). Thereis a high price for achieving pay satisfaction. The love of money is a strongmoderator in the income-pay satisfaction relationship.

Second, the love of money is a mediator: x (income) ! m (the love ofmoney) ! y (pay satisfaction). Professors’ income has an impact on their loveof money that, in turn, has an impact on their pay satisfaction. The love ofmoney may not have the temporal and cross-situational stability because itmay be influenced by one’s income. As income increases, some professors inthe present study may quickly adjust their standard of living, expectations, andalso their “frame of reference” in evaluating their daily events in organizations.As lower needs are satisfied, most people’s higher needs are becoming veryimportant. One’s income can satisfy many needs. As one changes taste andincreases consumption, more money is needed. Money can surely representone’s success. To some, money is a motivator. However, this may not apply toall professors (lecturers).

Non-professional men had a stronger belief that money represents theirachievement than professional men (Tang, Singer and Roberts, 2000). For thosenon-professional men with a high love of money, it will take a large amount ofmoney or pay increase to make them happy. These people may desire to have aunion to represent them and gain more money. In that study, money-relatedissue and job insecurity tended to be two of the main reasons for the unioncertification election of that bargaining unit (i.e. the non-professionalpersonnel). However, union was defeated in a four to one margin becausemoney was not the number one concern for everyone. As many of the basicneeds are satisfied in the workplace, people are moving toward the satisfaction

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of higher-order needs and quality of life related issues, according to Maslow’s(1954) theory-of-need hierarchy.

Income does change professors’ love of money that, in turn, has an impact onpay satisfaction. Since we have collected only cross-sectional data, the strongcause-and-effect relationship cannot be fully established. Results of this study(university professors/lecturers with higher income) are more robust than thatin Tang, Kim and Tang’s (2000) study (mental health and mental retardationprofessions). These income measures were not examined by Tang, Kim andTang (2000).

Pay level was extremely important to materialists. People do change theirattitude depending on their employment status and the amount of money theyhave in the society. One important implication is that the compensationsystems in organizations need to signal the importance of equity in rewardingemployees in the USA. The use of monetary rewards can be very costly andexpensive. Performance-based reward programs, cafeteria style benefits,non-tangible rewards such as desirable and challenging tasks, achievement,and recognition should be used in the systems. Professors (lecturers) in oursample have 10.34 years of teaching experience at the current university, 18.05years of total work experience, and have changed jobs only 1.17 times. Theyhave experienced pay compression and are extremely interested in externalequity in the labor market. University administrators need to pay attention toexternal competitiveness in the market of higher education in order to attract,retain, and motivate professors (lecturers).

Between mid-1970s and mid-1980s, college students’ major distributionmoved away from low-skill fields (e.g. education and social science) and towardhigh skill fields (e.g. business and engineering) (US Department of Education,1989). The proportion of males (females) graduating in education and socialscience fell from 27 percent (42 percent) to 18 percent (27 percent), and theproportion of males (females) graduating in business and engineering increasedfrom 34 percent (9 percent) to 49 percent (27 percent). Student career decisionsare strongly related to inter-occupational differences in tuition and expectedincomes (Sloan, 1971). People attending high-skill fields (e.g. business) expect toyield a greater economic payoff in the labor market.

Evidence suggests that there are major differences in salaries and salaryprogression related to the field of study, with professional fields (e.g. business)often paid more. Thus, high-love-of-money individuals may select fields withhigher salaries and even changing fields. For example, psychologists mayswitch to business disciplines. High-love-of-money professors (lecturers) enterinto such positions, start at higher salaries, and receive more rapid increasesthan the low-love-of-money professors (lecturers) in less lucrative fields.However, once in the high-paying fields (e.g. business), people adjust theirexpectation quickly and find themselves under paid in that new field. As wementioned earlier, do not use money as a reward because pay satisfaction goes

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back to zero and the zero point escalates (Herzberg, 1987). This is “theadaptation process” (Furnham and Argyle, 1998, p. 271).

Tang, Sutarso, Tang and Luna-Arocas (2001) found that there weresignificant differences in self-reported income based on academic discipline.Faculty self-reported income can be arranged from the lowest to the highestbased on college affiliation as follows: College of Liberal Arts ($42,774.60),faculty in the University Library ($44,287.91), College of Basic and AppliedSciences ($44,566.55), College of Education ($48,517.17), College of MassCommunication ($48,861.54), and College of Business (US$70,099.08).Professors in the College of Business made more money than did professorsin other Colleges except Mass Communication. Based on university personnelrecord (HR), professors’ actual average income (the population) and the officialincome of our US sample, by college, are presented below: College of Basic andApplied Sciences: 43,630.75 (our present sample: 44,344.40), College ofBusiness: 57,213.37 (60,392.42), College of Education: 41,058.22 (42,609.37),College of Liberal Arts: 40,123.10 (39,880.11), College of Mass Communication:42,481.44 (44,704.60), and University Library: 41,804.35 (41,711.41). It appearsthat our sample was a good representation of the population. We did not haveadditional information, however, for the second sample.

Self-reported income was higher than official income: 2,718.75 (Liberal Arts),1,561.95 (Other), 6,398.27 (Education), 1,016.79 (Basic and Applied Sciences),4,620.85 (Mass Communication), and 10,139.04 (Business). Business professors(n ¼ 23) had a larger difference between self-reported income and officialincome (10,139.04) than other professors combined (n ¼ 163) ($3,330.03). Thesediscrepancies may reflect extra income, consulting, speech, and servicesprovided to business and community, and others. In a study involving the useof SEM, results suggested that experience (regression weight, lambda ¼ 0:53),academic discipline (0.33), and sex (male, 0.25) explained 53 percent of variancefor income. Income (0.71), academic discipline (0.30), academic tenure (20.23),and job changes (0.20) explained 82 percent of the variance for the love ofmoney. Thus, academic discipline is both related to income and the love ofmoney for university professors (lecturers) (Tang et al., 2001). In summary, thelove of money leads to choice of field that leads to different experiences insalary progression that leads to differences in pay satisfaction.

Finally, we acknowledge that all self-reported measures were taken at onetime from one source. Results may reflect the artifacts of the common methodvariance. The present study reveals a “robust” phenomenon in that the love ofmoney is a mediator and a moderator of the income-pay satisfactionrelationship. More research is needed to explore the antecedents and differentsituational variables of the love of money and to examine longitudinal data andreplicate these findings in different samples, occupations, and cultures toenhance our understanding regarding the psychology of money.

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Appendix. The 15-item LOMSFactor 1: budget

1. I budget my money very well.

2. I use my money very carefully.

3. I pay my bills immediately to avoid interest or penalties.

4. I do financial planning for the future.

Factor 2: evil

5. Money undermines one’s ethical norms and standards of conduct.

6. People perform unethical acts to maximize their monetary gains.

7. Money is evil.

8. Money (the love of money) is the root of all evil.

Factor 3: equity

9. People on the same job should be paid equally (equality).

10. People on the same job should be paid based on merit (equity).

11. Lower-level job with little responsibility should be paid less.

Factor 4: success

12. Money is a symbol of success.

13. Money represents one’s achievement.

Factor 5: motivator

14. Money is a motivator.

15. I am motivated to work hard for money.

Note: the total score was calculated by adding all items with the items 5, 6, 7, 8, and 9 reversescored.

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