2004_JMP Love of Money Moderate & Mediate Income-Pay Satisfaction

Journal of Managerial Psychology 2004, 19 (2) Love of Money-Income-Pay Satisfaction 1

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

The final version of this paper was published in:

Tang, T. L. P., Luna-Arocas, R., Sutarso, T. & Tang, D. S. H. (2004). Does the love of

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

Managerial Psychology, 19(2), 111-135.

Abstract

This research examines the love of money as a moderator and as a mediator of the self-reported

income-pay satisfaction relationship among university professors (lecturers). Hierarchical

multiple regression results showed that the interaction effect between self-reported income and

the Love of Money on pay satisfaction was significant. For high Love of Money professors

(lecturers), the relationship between income and pay satisfaction was positive and significant,

however, for low Love of Money professors (lecturers), the relationship was not significant.

High Love-of-Money participants had lower pay satisfaction than low Love-of-Money

participants 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 a

mediator of the self-reported income-pay satisfaction relationship. Income increases the love of

money that, in turn, is used as a “frame of reference” to evaluate pay satisfaction.

__________

Keywords: Comparison, Cross Cultural, Hierarchical Multiple Regression, Income, Love of

Money, Moderator, Mediator, Pay Satisfaction, University Professors, US and Spain


Does the Love of Money Moderate and Mediate the Income-Pay Satisfaction

Relationship?

In the wake of global competition, organizations are increasingly interested in reducing

labor costs and increasing worker productivity and profits. For the past two decades, there has

been a significant increase of interest in the importance of money in the US and around the world

(Chiu, Luk, & Tang, 2001; Furnham & Argyle, 1998; Mitchell & Mickel, 1999; Rynes, &

Gerhart, 2000; Tang, Kim, & Tang, 2000; Tang, Luk, & Chiu, 2000; Wernimont & Fitzpatrick,

1972). Money is the instrument of commerce and the measure of value (Smith, 1776/1937).

Managers use money to attract, retain, and motivate employees (Maslow, 1954; Milkovich &

Newman, 2002). This is an important topic for researchers and managers because pay

dissatisfaction may lead to unionization efforts (The Economist, 1997; Laws & Tang, 1999),

employee turnover (Hom & Griffeth, 1995), and unethical behavior (Tang & Chiu, 2003; Tang

& Tang, 2003; Tang et al., 2002) that will hurt organizations’ bottom line in the competitive

market.

The Present Study

This study tests the hypotheses that the love of money moderates and mediates the

relationship between self-reported income and pay satisfaction in a sample of university

professors (lecturers). The rational of this study is provided below. First, university professors

(lecturers) are not the highest-paid profession in our society. Their pay is higher than the

average citizens in the US. The turnover rate of university professors (lecturers) is lower than

the general public. After receiving academic tenure, professors (lecturers) usually stay with the

university. Those with a long length of service on the job may also experience pay compression.

Thus, this particular population may be of interests to academic scholars and university

administrators.

Second, extent research has failed to include “individual differences” in studying such

organizational practices as compensation. The lack of attention to individual differences in

reactions to pay is particularly troubling (Barber & Bretz, 2000). “One construct that should not

be overlooked is the meaning of money” (Barber & Bretz, 2000, p. 45). In fact, very little

research has incorporated the meaning and importance of money (the love of money, in

particular) in studying pay satisfaction. The major contribution of this study is that we will

incorporate the love of money (an individual-difference variable, cf. Mitchell & Mickel, 1999) in

investigating the “self-reported income-pay satisfaction” relationship.

Third, attitudes will predict behavior effectively when there is a high correspondence

between the attitude object and the behavioral option (Ajzen & Fishbein, 1977). Income, the

love of money, and pay satisfaction are all closely related to one “specific” domain—money.

We expect to find strong relationships among income, the love of money, and pay satisfaction.

One may ask: More specifically, how does the love of money relate to the income-pay

satisfaction relationship. Our theoretical and empirical contribution of this study is to investigate

the love of money as (1) a moderator and (2) a mediator of the income-pay satisfaction

relationship. To the best of our knowledge, very little research has been done in this area. This

study will fill in the void in the literature. We will review the literature on the love of money as

a moderator first.


Income and Pay Satisfaction

Job satisfaction is an affective reaction to a job that results from the incumbent’s

comparison of actual outcomes with those that are desired (expected, deserved, etc.) (Cranny,

Smith, & Stone, 1992). This study focuses on pay satisfaction and not on job satisfaction. High-

income people tend to have a high level of pay satisfaction (Pfeffer & Langton, 1993). Many

researchers have examined pay satisfaction (e.g., Heneman, 1985; Heneman, 1992; Lawler,

1971) and used the Pay Satisfaction Questionnaire (PSQ) (e.g., Blau, 1994). This study adopts

Heneman and Schwab’s (1985) 18-item-four–factor Pay Satisfaction Questionnaire. The two

most widely known models of pay satisfaction are the equity model (Adams, 1963) and the

discrepancy model (Lawler, 1971). The equity model focuses on the comparisons between one’s

output/input ratio and the ratio of others. The discrepancy 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 the most robust

(though hardly surprising) finding regarding the causes of pay satisfaction. Actual pay level (i.e.,

income) is consistently and positively related to pay satisfaction, although the magnitude of the

relationship varies from study to study, ranging from .13 to .46. The simple pay level-pay

satisfaction correlation is positive (Heneman & Judge, 2000). It makes intuitive sense that the

higher the pay level (income), the higher the pay satisfaction because both pay (income) and pay

satisfaction are dealing with the same domain—one’s pay. There is nothing new here.

The literature suggests that “jobs that provide good income may be satisfying to some

individuals because of the many desirable things that money can buy; others, with fewer material

desires, may not find money particularly satisfying” (Roznowski & Hulin, 1992, p. 149). We

assert that the people have different levels of the love of money. People with high or low love of

money may have different patterns of pay satisfaction. Further, the love of money 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 Attitude

In America, money is how we keep score (Rubenstein, 1981). The importance attached

to money is one’s motive to outperform others (Furnham, Kirkcaldy, & Lynn, 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 as their “frame of reference” in which

they examine their everyday lives (Tang, 1992, p. 201; Tversky & Kahneman, 1981), may have

a significant impact on work-related attitudes (e.g., pay satisfaction)(Lawler, 1971; Opsahl &

Dunnette, 1966) and actual economic behavior (Furnham & Argyle, 1998). To some, money is a

hygiene factor (e.g., Cameron & Pierce, 1994; Herzberg, 1987; Kohn, 1993, Pfeffer, 1998). To

others, money is a motivator (e.g., Gupta & Shaw, 1998). Thereby, money and money attitude

appears to be an important topic for managers and researchers and may have important

implications to behaviors in organizations.

It is beyond the scope of the present paper to discuss all different meanings of money and

measures of money attitudes (see Furnham & Argyle, 1998). Among many perspectives in the

current literature on money, “the one consistent thread in this body of work is the emphasis on its

importance” (Mitchell & Mickel, 1999, p. 569). In the money and individual-difference

measurement literature, Mitchell and Mickel (1999) have considered the Money Ethic Scale

(MES) as one of the most “well-developed” and systematically used measures of money attitude

(p. 571).


Tang and his associates have developed several versions of the Money Ethic Scale (MES)

(e.g., Tang, 1992, 1995; Tang & Chiu, 2003; Tang & Kim, 1999; Tang & Tang, 2002; Tang,

Luna-Arocas, & Whiteside, 1997, 2003; Tang et al., 2002; Tang et al., 2003) according to the

ABC model of attitudes (Ajzen, & Fishbein, 1977). “Money Ethic” is being used similar to other

attitudinal variables in the management literature, e.g., work ethic (Furnham, 1990), leisure ethic

(Crandall & Slivken, 1980), welfare ethic (Furnham, 1983), volunteer ethic, and service ethic

(Tang & Weatherford, 1998). Definition of factors, test-retest reliability, Cronbach’s alpha, the

nomological network of correlations, and validity of the Money Ethic Scale can be found in the

literature (e.g., Furnham & Argyle, 1998; Lim & Teo, 1997; Mitchell & Mickel, 1999; Tang,

1993) and in many languages, e.g., Chinese (Du & Yue, 2002), French (Charles-Pauvers, &

Urbain, 1998; Urbain, 2000), Italian (Tang, 1996), Spanish (Galicia, Zimmerman, Tang, & Luna-

Arocas, 2001; Luna-Arocas, 1998; Luna-Arocas & Tang, 1998; Quintanilla, 1997), Romanian

(Tang & Weatherford, in press), Russian (Fenko, 2000), etc.

The Love of Money

According to Locke (1969), the first question a scientific investigator must ask is not

“How can I measure it?” but rather, “What is it?” (p. 334). So, what is the love 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 “the objective requirements of an organism’s well-being”,

whereas “value” is that which 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 the

object or condition sought, whereas a need does not. Moreover, “values” rather than

expectations determine satisfaction. Locke (1969) did distinguish between (1) the value of

money to a person and (2) the specific amount of pay an employee seeks at a given time on a

given job (p. 327). If one who values money highly and 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. It is very likely that one will soon set a minimal goal level that is higher than

one’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 certain minimum, but further pay increments

might be valued less than, say specific changes in the work content” (Locke, 1969, p. 330).

(Thus, the value of money to a person may also change.)

According to Allan Sloan, News Week’s Wall Street Editor, Americans have always

loved money. De Tocqueville traced love of wealth to the root of all that Americans do. “Greed

– defined as an inordinate desire for wealth – is not good, and it doesn’t drive markets” (Sloan,

2002, emphasis added, p. 37). The real root cause of the corporate scandals and crisis in

confidence in corporations is “the overemphasis American corporations have been forced to

give in recent years to maximizing shareholder value without regard for the effect of their

actions on other stakeholders” (Kochan, 2002, p. 139, emphasis added).

The first author also conducted a pilot survey using the brain mapping technique and

asked 100 undergraduate and 25 graduate MBA students to identify the love of money construct

and write down at least 12 different meanings related to this construct. Students associate the

love of money with greed and consider it as one’s desire or lust for more money and material

possessions. One never has enough money and wants to have more money, become richer and

wealthier than before. One considers money as the most important (i.e., number one) goal in

life. Further, one puts the highest “value” on money that is more important than God, family,

friends, people, or anything else. One will do whatever it takes to make money. One is selfish


and does not help others. To paraphrase Sloan’s (2002) statement: The love of money is an

inordinate desire for money.

The Love of Money Scale (LOMS)

More recently, Tang and his associates have developed the Love of Money Scale

(LOMS) based on the following rationale: First, the inspiration of this study comes from a

“Western religious” expression: The love of money is the root of evil. Those who want to be rich

are falling into temptation (Tang & Chiu, 2003, Tang et al., 2002, 2003). Although the love of

money construct (unobservable) has been used in everyday expression and popular literature,

there is no measurement of the love of money, operationalized empirically, in the management

literature. Second, the love of money construct is a “neglected” area and is an important topic in

management, international business studies, and “management spirituality and religion”, in

particular. It should be noted that Management Spirituality and Religion is a Division within the

Academy of Management in the US. We also assert that it is an important topic in the

management field. Third, the love of money assesses the “meaning” (Barber & Bretz, 2000: 45),

the “importance” of money (Mitchell & Mickel, 1999: 569), and one’s own personal attitudes

toward money, i.e., an individual difference variable (Mitchell & Mickel, 1999).

Tang et al. (2003) have developed the Love of Money Scale (LOMS) by selecting

specific factors of the Money Ethic Scale that measures the different meanings of money.

Therefore, the Love of Money Scale is only a sub-set of the Money Ethic Scale. For example,

Tang and Tang (2002) have identified 14 factors based on the 58-item Money Ethic Scale.

These 14 factors cover many different meanings of money and are too general for specific

research purposes. It is easier for researchers, managers, and the general public (lay people) to

understand the meaning of the love of money than the Money Ethic endorsement. In one recent

study, Tang et al. (2003) examined the Love of Money Scale (LOMS) based on data from 26

geopolitical entities in five continents (N = 5,341) and established strong configural (factor

structures) and metric (factor loadings) invariance for a 9-item-3-factor LOMS model (Factors

Rich, Motivator, and Important) across 22 geopolitical entities. In similar studies, Tang and his

associates investigated the Love of Money Scale using a 17-item-4-factor model (Factors Rich,

Motivator, Important, and Success) (Tang & Chiu, 2003; Tang et al., 2002). The love of money

is significantly correlated with evil (unethical behaviors in organizations), but money (one’s self-

reported income) is not related to evil. Thus, the love of money is the root of evil, but money

(income) is not (Tang & Chiu, 2003). It can be concluded that the Love of Money Scale has

been very well established.

In this study, we will examine the love of money using the following five factors: Evil

(affective), Motivator, Budget (behavior), Equity, and Success (cognitive) (Tang, Luna-Arocas,

& Whiteside, 1997, 2003) (see the Method section for more details). The love of money

represents the overall score of all five factors (Factor Evil reverse scored). High Love of Money

people tend to think that: money is not Evil; they Budget money carefully; money is a sign of

their Success; money is a Motivator; and they value Equity in organizations. Previous research

suggests that high-income people tend to think that money represents their Achievement and that

money is not Evil (Tang, 1992). Extrinsic job satisfaction is negatively associated with Factor

Evil. Non-professional men had a stronger belief that money represents their Achievement than

professional men (Tang, Singer, & Roberts, 2000).

Research shows that the Love of Money moderates the relationships between intrinsic job

satisfaction and withdrawal cognitions and also between intrinsic job satisfaction and voluntary


turnover in a sample of mental health and mental retardation professionals in the US (Tang, Kim,

& Tang, 2000). High Love-of-Money people quite their jobs voluntarily (pull) regardless of

their intrinsic job satisfaction (push). Just a pull (high Love of Money) is needed to experience

turnover (Tang et al., 2000). Low Love-of-Money employees with low intrinsic job satisfaction

have the lowest voluntary turnover. In that study, the love of money is a moderator (Tang et al.,

2000). It suggests that the intrinsic job satisfaction-turnover relationship is different for high and

low Love-of-Money employees. In this study, we will also treat the love of money as a

moderator of the income-pay satisfaction relationship among university professors (lecturers).

The Love of Money as a Moderator

Rice, Phillips, and McFarlin (1990) have examined the relationship between pay and pay

satisfaction as moderated by pay discrepancies. Our research focuses on the extent to which the

Love of Money help shape employees’ pay expectations and discrepancies. Our review of the

literature leads us to different income-pay satisfaction predictions for high and low Love-of-

Money people: On the one hand, high Love-of-Money people value money and have high “pay

expectation” that may create a large discrepancy between what they receive (reality) and what

they expect to receive (expectation). This may lead to a high level of pay dissatisfaction

according to the discrepancy model (Lawler, 1971). On the other hand, low Love-of-Money

individuals experience a low pay expectation, a low discrepancy between reality and expectation,

and possibly a high level of pay satisfaction. In general, higher pay leads to higher pay

satisfaction. We speculate that for most people in the normal income range, high Love-of-

Money professors (lecturers) will have lower pay satisfaction than their low Love-of-Money

counterparts.

Furthermore, on the one hand, extrinsic rewards undermine intrinsic motivation (Deci,

Koestner, & Ryan, 1999). On the other hand, extrinsic rewards strongly and positively predict

job satisfaction when extrinsic values are high, but less so when extrinsic values are low

(Bateman & Crant, 2003). We assert that the income-pay satisfaction relationship will be

stronger for high rather than low love-of-money individuals. It is reasonable to expect that high

Love-of-Money professors (Lecturers) value money much higher than their low Love-of-Money

counterparts. Therefore, if one’s income increases from low to high, it will have a much stronger

impact on high Love-of-Money individuals’ pay satisfaction than low Love-of-Money

counterparts’. We argue that the slope of the income-pay relationship (regression line) will be

steeper for high Love-of-Money professors (lecturers) than for low Love-of-Money counterparts.

Based on data from 26 geo-political entities, Tang (2003) reported that the two regression

lines for high (top 10% of the sample) and low (bottom 10%) Love-of Money employees crossed

at the 2.01 standard deviation above the mean. The slope of the regression line for the high love-

of-money employees was steeper than that of the low love-of-money counterparts. When income

increased from low to high, high love-of-money employees tended to increase pay satisfaction

more than low love-of-money employees. Thus, money is a motivator for high love-of-money

individuals. Results support the notion that for high love-of-money individuals, income strongly

and positively predicts pay satisfaction (Bateman & Crant, 2003). Thus, extrinsic rewards do

increase extrinsic satisfaction.

High love-of-money employees had higher pay satisfaction than low love-of-money

counterparts, only if their income was above the 2.01 standard deviation point. Below that

income level, the reverse was true. Thus, it takes a lot of money (z = 2.01) to make high love-of-

money people happy with their pay. The income-pay satisfaction relationship is different for


high and low love-of-money employees. Thus, the love of money moderates the income-pay

satisfaction relationship in that sample.

We predict a significant interaction effect between income and the Love of Money on

pay satisfaction. The relation between income and pay satisfaction changes as a function of the

moderator variable and is related in a nonlinear fashion (James & Brett, 1984). The dependent

variable y (i.e., pay satisfaction) is a probabilistic function of x (income) and z (the Love of

Money). The interaction effect between x and z on y is significant.

Hypothesis 1: The Love of Money will moderate the income-pay satisfaction

relationship. The income-pay satisfaction relationship will be stronger for high Love-of-

Money individuals than for low Love-of-Money individuals.

The Love of Money as a Mediator In this section, we will treat the Love of Money as a mediator of the income-pay

satisfaction relationship (i.e., Income the Love of Money Pay Satisfaction). In general,

research suggests that high-income people have a more positive attitude toward money than low-

income people (Tang, 1992; Tang, Kim, & Tang, 2000). Pay satisfaction is correlated with the

Love of Money Scale (Tang, 1995). Employees with higher income (employed past welfare

recipients, income = $14,540) have more positive attitudes toward money than low income

people (welfare recipients = $4,240; welfare recipients in training programs = $3,720) (Tang &

Smith-Brandon, 2001). There are differences in money attitudes between full-time and part-time

employees (Tang, Kim, & Tang, 2002) because full-time employees usually have higher pay and

more benefits than part-time employees. These studies show that income, the love of money,

and pay satisfaction are all somewhat related but different across demographic variables. More

specifically, in this paper, we will discuss, in greater detail, (1) the income and the Love of

Money relationship (Income the Love of Money) and (2) the Love of Money and pay

satisfaction relationship (the Love of Money Pay Satisfaction).

Income to the Love of Money

We now turn our attention to the possible reciprocal processes of income and money

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 higher

education in the past two decades has been the expectation of “individual economic return”

(Lecht, 1977, p. 25). Bok (1993), former president of Harvard University and dean of the

Harvard Law School, asserts: The lucrative rewards of Wall Street, the elite law firms, and the

medical specialties act as a magnet to deprive poorly paid but vitally important teaching and

public service professions of desperately needed talent. Following Bok’s argument, people with

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 than low Love-of-Money people.

Anecdotal evidence suggests that high Love-of-Money students may major in economics and

work as investment bankers, whereas low Love-of-Money students may major in religion and

work as volunteers for a church-related organization in an Indian reservation.

Income to the Love of Money. The raising tide lifts all the boats. Money changes

everything. As income increases, some people adjust their standard of living, expectations,

tastes/preferences, and consumption accordingly. Spiraling wages motivate people “to seek the

next wage increase” (Herzberg, 1987: 110). Herzberg advises managers: Do not use money as a


reward because pay satisfaction goes back to zero and the zero point escalates, i.e., “the

adaptation process” (Furnham & Argyle, 1998: 271). In order to maintain and enhance their life

style, they need to make more money. Money becomes more important to them than before.

High income may lead to ones’ high materialistic values. For materialistic individuals,

“possessions are believed to provide the greatest sources of satisfaction and dissatisfaction” in

life (Belk, 1985, p. 265). “Low and high materialists are also likely to differ in the meaning

money holds for them and in money-related attitudes” (Richins & Rudmin, 1994, p. 222). Some

Americans are obsessed with money and materialism. Upward adaptation takes place easily.

We assert: The Love of Money to Income process will take significantly longer time and more

effort to accomplish than the Income to the Love of Money process.

In a study of 12 countries using structure equation modeling (SEM), Tang et al. (2002)

have suggested that Income to the Love of Money (Income the Love of Money) path was

positive in one country (Thailand), negative in three countries (Hong Kong, Hungary, and

Oman), and non-significant (neutral) in eight countries (the US, 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. The Income to

the Love of Money path reflects people’s “objective” income (income compared to GDP per

Capita) in nine (9) countries and also “subjective” income (compared to the market) in three (3)

countries. For high-income Hong Kong employees, income reduced the love of money. For

high-income Thai employees, income increased the love of money. The difference between the

Hong Kong Chinese and Thai people is that Thai people have experienced much more significant

changes in economic development than those in Hong Kong in recent years. Therefore, Thai

employees experience the “newness of having money” in the new developing economy (cf. Tang,

Furnham, & Davis, 2000) and want to buy new products and services (e.g., a big house and a

new car).

In a sample of full-time employees in the US, African-Americans and females have lower

income than their Caucasian and male counterparts. Income increased the Love of Money for

African-Americans and females but not for Caucasians and males (Tang & Tang, 2002). On the

basis of the literature, we predict: Income will be positively related to the Love of Money

(Income the Love of Money) because many professors (lecturers) have experienced pay

compression compared to the market.

The Love of Money to Pay Satisfaction Based on the equity theory (Adams, 1963), pay satisfaction will be evaluated based 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 rewards with which it is compared…satisfaction

with a modal score should be higher when it can be compared to a less favorable

alternative…than when it has only equal comparisons” (Brickman, 1975, p. 191, emphasis

added). What is fair or just is open to interpretation (Greenberg, 1982). We argue that the Love

of Money Scale (Factors Equity and Success, in particular) measures the individual’s own

standards, or “frame of reference” in the process of social comparison (Tversky & Kahneman,

1981). Pay satisfaction is not determined based on people’s absolute income, but rather on their

perception regarding the relative importance 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 are

constantly aware of other people’s pay in the society (Pfeffer & Langton, 1993), other “rich”


people (e.g., Michael Eisner, Bill Gates), in particular. Few people compare themselves with

“the poor”. We predict that the Love of Money will have a significant impact on their total pay

satisfaction.

We treat the Love of Money as a mediator between income and pay satisfaction. A

complete mediation model has the form x m y, where x is the antecedent (income); m is

the mediator (the Love of Money); and y is the consequence (pay satisfaction) (James & Brett,

1984). The following conditions must be met: (1) the independent variable (income) must affect

the mediator (the Love of Money), (2) the independent variable (income) must affect the

dependent variable (pay satisfaction), and (3) the mediator must affect the dependent variable.

When all these conditions are held true, then, the effect of the independent variable on the

dependent variable must be less in the third equation than in the second.

Hypothesis 2: The Love of Money will mediate the income-pay satisfaction relationship.

We will incorporate only a few selected demographic variables. We will discuss them in

the following paragraphs.

Gender. The gender-related wage gap, pay expectations, and the Equal Pay Act have

been widely discussed in the literature (Major & Konar, 1984). Although the size of the gender

gap across different races and years has fluctuated, it has been persistent. Female employees’

pay is about 76.7% of their male counterparts (Adams, 1999). There are significant gender

differences in money attitudes. Women tend to rate social needs (e.g., work with people and

being helpful to others) as more important than do men (Lawler, 1971). Men tend to consider

pay more important than do women. Males and achievement-oriented employees tend to favor

merit pay (Heneman, 1992). Male professors tend to have higher satisfaction with pay than

female professors, whereas female professors tend to have higher satisfaction with co-workers

than male professors (Tang & Talpade, 1999). In general, men tend to value equity, whereas

women tend to value equality (Tang, Furnham, & Davis, 2000).

Length of service and experience. People with long tenure on the job tend to have high

job satisfaction, due to the process of mutual selection and realistic expectations. People with

the necessary knowledge, skills, abilities, and compatible values tend to survive on the job,

whereas those without will be terminated voluntarily or involuntarily (Tang & Frost, 1999).

“Seniority is another potentially legitimate basis for salary allocations” (Pfeffer & Langton,

1993, p. 387).

Job changes. The number of job changes is also a good predictor of pay (Gomez-Mejia

& Balkin, 1992). Leavers tend to have lower pay satisfaction than stayers and receive about 20%

increases in pay on their new jobs. High Love-of-Money employees quit their jobs regardless of

their intrinsic job satisfaction on the job (Tang, Kim, & Tang, 2000). It pays to quit.

Method

Participants

A questionnaire was mailed to a sample of full-time faculty members of two universities

(one with 18,500 students and 715 full-time professors in the US and the other with 20,000

students and 1,000 professors/lecturers in Spain). We obtained usable responses from 311

professors (207, return rate = 28.95% and 104, return rate = 32.5%, respectively). For the first

sample, we have obtained additional demographic variables and official income from the office

of the human resource services of the university. The mean, standard deviation, and correlations

of major variables for the whole sample are presented in Table 1.


Measures

Participants’ sex (female = 0, male = 1, dummy coding), age, and marital status (not

married/single = 0, married = 1) were obtained. Self-reported total annual income (in US$),

length of service in organization (in years), total work experience (in years), and the total number

of job changes (since the highest degree) were measured.

Self-Reported Income. Income distribution of university faculty (Hagedorn, 1996) and

university presidents (Tang, Tang, & Tang, 2000) sometimes does not reflect the normal,

symmetrical, and bell-shaped distribution. A few individuals with extremely high (low) income

levels may cause the whole distribution to become a positively (negatively) skewed distribution.

We found that raw income data were not normally distributed (skewness = 2.692; Kurtosis =

15.416). After a careful examination of our data, we have identified two lowest outliers (part-

time adjunct professors in Spain, the lowest income = US$841) and two highest outliers (over

US$200,000, US professors with employment outside the university). After deleting these four

outliers, the income variable was close to a normal distribution (skewness = .833; Kurtosis =

1.076). These results suggest that log transformation of the income variable is not necessary

after deleting these four outliers. Further, we conducted 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).

The Love of Money Scale. In this study, we employ the 15-item-5-factor Love of Money

Scale (LOMS) (Tang, Luna-Arocas, & Whiteside, 1997, 2003) with strongly disagree (1),

neutral (3), and strongly agree (5) as anchors. We calculated the average score of LOMS by

using 15 items with five items reverse scored (see Appendix 1). The five factors are briefly

presented below: Factor Evil (an affective component) is related to the idea that money may

enhance unethical behaviors (Tang et al., 2002) and that the love of money is the root of evil

(Tang & Chiu, 2003, Tang et al., 2002, 2003). Factor Budget (a behavioral 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, & Davis, 2000). Factor Success

shows that money represents one’s success and achievement. Factor Motivator (a behavioral

component) measures the construct that people are highly motivated by money and that money is

a motivator (Gupta & Shaw, 1998). Factors Equity and Motivator are strongly related to the

social comparison, pay equity comparison, and the thinking process of pay satisfaction.

Confirmatory Factor Analysis (CFA) results show that there was a good fit between the 15-item-

5-factor Love of Money model and our data (χ2 = 169.42, df = 87, p = .00, TLI = .99, CFI = .99).

Pay Satisfaction Questionnaire. We included the 18-item-4-factor Pay Satisfaction

Questionnaire (PSQ) (Heneman & Schwab, 1985) using a five-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 = .94).

Results

The Love of Money as a Moderator

We controlled demographic variables (i.e., sex, age, and marital status) and work-related

variables in organizations (length of service, total work experience, and the number of job

changes) in Steps 1 and 2, respectively, in a hierarchical multiple regression analysis (see Table

2, Part A). Variables in Step 1 and Step 2 were not significantly related to pay satisfaction.


Self-reported income, the Love of Money (LOMS), and the product of the two (Income x

the Love of Money) were entered in Steps 3, 4, and 5, respectively. The third and the fourth

variables produced the equivalent of two main effects, whereas the fifth step produced the

equivalent of the interaction effect in the analysis of variance. Step 3 showed that self-reported

income explained 3.8% of variance in pay satisfaction (F change (1, 215) = 8.66, p < .004),

supporting the notion that income is related to pay satisfaction. Step 4 revealed that the Love of

Money explained 4.5% of variance in pay satisfaction (F change (1, 214) = 10.73, p < .001).

Thus, the love of money is related to pay satisfaction, after controlling income.

The major focus of this study is to ascertain the unique contributions of the interaction

effects between self-reported income (x) and the Love of Money (z) on pay satisfaction (y). The

interaction effect was significant (R2 change = .018, F change (1, 213) = 4.39, p = .037). (In

Step 5, deleting the two lowest outliers (R2 change = .017, F change (1, 212) = 4.08, p = .045), or

all four outliers (R2 change = .017, F change (1, 210) = 3.97, p = .048) offered similar results)

The significant interaction effect on pay satisfaction was further investigated by

examining the differences between those employees with high or low Love of Money. High and

low Love of Money groups were created based on a median split of their average Love of Money

scores. We calculated and plotted separate regression lines for the high and low Love of Money

groups (Figure 1). Low Love of Money professors had a positive but non-significant

relationship between self-reported income and pay satisfaction (beta = .11, t = 1.26, p = .21).

However, high Love of Money professors had a positive and significant relationship (beta = .17,

t = 1.92, p = .05). The Love of Money moderates the self-reported income-pay satisfaction

relationship. Hypothesis 1 was supported.

----------------------------------------------------------------

Insert Tables 1, and 2 and Figure 1 about here

-----------------------------------------------------------------

The regression lines for high Love of Money participants and low Love of Money

participants can be expressed as follows:

y1 = 2.9186 + .000002674 * x1 (Low Love of Money) (1)

y2 = 2.5353 + .000007014 * x2 (High Love of Money) (2)

We identified x and y by solving the above two formulas. The high 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 than low Love-

of- Money participants when the self-reported income was below $89,139.53 (Figure 1). When

self-reported income was higher than $89,139.53, the pattern of pay satisfaction for these high

and low Love-of-Money groups was reversed. That is, high Love-of-Money professors

(lecturers) had higher pay satisfaction than their low Love-of-Money counterparts. There were

eight high Love-of-Money professors and one low Love-of-Money professor with income higher

than $89,139.53. Moreover, the average income for high Love-of-Money professors

($45,779.68) was higher than that of low Love-of-Money professors ($34,607.06) (F (1, 287) =

16.75, p = .000, eta squared = .055, observed power = .983). Most high Love-of-Money

professors (lecturers) have high income but low pay satisfaction when the income level was

lower than $89,139.53. Higher than that point, high Love-of-Money professors may have higher


pay satisfaction, whereas low Love-of-Money professors may have lower pay satisfaction. The

Love of Money is a moderator.

The Love of Money as a Mediator

To investigate the Love of Money as a mediator, we employed the three-step procedure

mentioned earlier in three hierarchical multiple regression analyses, controlling sex, age, and

marital status in Step 1 and length of job, total work experience, and the number of job changes

in Step 2 (see Table 2, Part B). First, income did affect the Love of Money (mediator) (F =

10.46, p = .001) (the top part of Table 2, Part B). Second, income did affect pay satisfaction (F =

8.59, p = .004) (the middle part of Table 2, Part B). Third, the Love of Money did affect pay

satisfaction (F = 14.87, p = .000). Finally, when all these conditions are held true, then, the

effect of the independent variable (income) on the dependent variable (pay satisfaction) must be

less in the third equation (R2

Change = .020, F = 4.73, p = .031) than in the second (R2 Change =

.038, F = 8.59, p = .004). Our results met all these requirements. The Love of Money is a

mediator between income and pay satisfaction. (Again, when the lowest two outliers were

deleted in the data analyses, we found similar results: the effect of income on pay satisfaction

was less in the third equation (R2

Change = .019, F = 4.52, p = .035) than in the second (R2

Change = .037, F = 8.40, p = .004). This was also true when all four outliers were deleted: the

effect of income on pay satisfaction was less in the third equation (R2

Change = .012, F = 2.87, p

= .092) than in the second (R2 Change = .030, F = 6.76, p = .010).) Thus, the Love of Money is

both a moderator and a mediator. Hypothesis 2 was supported.

Discussion

Results of this study show two key points. First, the Love of Money is a moderator for

the self-reported income and pay satisfaction relationship. Second, the Love of Money is a

mediator for the self-reported income and pay satisfaction relationship (i.e., Income the Love

of Money Pay Satisfaction).

First, for the Love of Money as a moderator, professors (lecturers) with high and low

Love of Money display different patterns of pay satisfaction. The income-pay satisfaction

relationship is significant and positive for high Love-of-Money professors but not for low Love-

of-Money professors. High and low Love-of-Money professors (lecturers) do have the exact

same level 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 annual income of $89,139.53, high Love-of-

Money professors have lower pay satisfaction than their low Love-of-Money counterparts.

When income is higher than $89,139.53, the reverse is true. Only eight high Love-of-Money

professors (lecturers) and one low Love-of-Money professor (lecturer) have income higher than

$89,139.53.

High Love-of-Money professors may have high “pay expectation”, a large discrepancy

between what they receive (reality) and what they expect to receive (expectation), and a high

level of pay dissatisfaction (Lawler, 1971). Thus, most high Love-of-Money professors may feel

that they never have enough money and that they have low pay satisfaction. However, for the

same amount of increase in pay (from low to high income), high Love-of-Money individuals will

have significantly higher amount of increase in pay satisfaction than low Love-of-Money

individuals. For high Love-of-Money professors (lecturers), higher income does lead to higher


pay satisfaction. These results seem to support the notion that extrinsic reward enhances

extrinsic satisfaction, for individuals who value extrinsic rewards.

For low Love-of-Money individuals, income is less important. Due to their low pay

expectation, a low discrepancy between reality and expectation may exist that may lead to a high

level of pay satisfaction. For low Love-of-Money professors (lecturers) as a whole, the income-

pay satisfaction relationship is weak. The key implication for compensation managers is that the

same amount of pay increases will not make high and low Love-of-Money professors equally

happy. High Love-of- Money individuals are motivated by money and are particularly interested

in equity and not equality.

We use the figure of $89,139.53 and the self-reported income as reference points to

calculate the pay differentials (cf. Tang, Luk, & Chiu, 2000). In order to make high and low

Love of Money professors equally happy with their pay (i.e., pay satisfaction = 3.16), we need to

increase high Love-of-Money professors’ average pay by 1.95 times ($89,139.53/$45,779.68)

and to increase low 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). There is a high price

for achieving pay satisfaction. The Love of Money is a strong moderator in the income-pay

satisfaction relationship.

Second, the Love of Money is a mediator: x (income) m (the Love of Money) y

(pay satisfaction). Professors’ income has an impact on their Love of Money that, in turn, has an

impact on their pay satisfaction. The Love of Money may not have the temporal and cross-

situational stability because it may be influenced by one’s income. As income increases, some

professors in the present study may quickly adjust their standard of living, expectations, and also

their “frame of reference” in evaluating their daily events in organizations. As lower needs are

satisfied, most people’s higher needs are becoming very important. One’s income can satisfy

many needs. As one changes taste and increases consumption, more money is needed. Money

can surely represent one’s success. To some, money is a motivator. However, this may not

apply to all professors (lecturers).

Non-professional men had a stronger belief that money represents their achievement than

professional men (Tang, Singer, & Roberts, 2000). For those non-professional men with a high

love of money, it will take a large amount of money or pay increase to make them happy. These

people may desire to have a union to represent them and gain more money. In that study,

money-related issue and job insecurity tended to be two of the main reasons for the union

certification election of that bargaining unit (i.e., the non-professional personnel). However,

union was defeated in a 4 to 1 margin because money was not the number one concern for

everyone. As many of the basic needs are satisfied in the workplace, people are moving toward

the satisfaction of higher-order needs and quality of life related issues, according to Maslow’s

theory of need hierarchy (1954).

Income does change professors’ Love of Money that, in turn, has an impact on pay

satisfaction. Since we have collected only cross-sectional data, the strong cause-and-effect

relationship cannot be fully established. Results of this study (university professors/lecturers

with higher income) are more robust than that in Tang, Kim, and Tang’s (2000) study (mental

health and mental retardation professions). These income measures were not examined by Tang

et al. (2000).

Pay level was extremely important to materialists. People do change their attitude

depending on their employment status and the amount of money they have in the society. One

important implication is that the compensation systems in organizations need to signal the


importance of equity in rewarding employees in the US. The use of monetary rewards can be

very costly and expensive. 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 our sample have 10.34 years of teaching

experience at the current university, 18.05 years of total work experience, and have changed jobs

only 1.17 times. They have experienced pay compression and are extremely interested in

external equity in the labor market. University administrators need to pay attention to external

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 distribution moved away

from low-skill fields (e.g., education and social science) and toward high skill fields (e.g.,

business and engineering) (U.S. Department of Education, 1989). The proportion of males

(females) graduating in education and social science fell from 27% (42%) to 18% (27%), and the

proportion of males (females) graduating in business and engineering increased from 34% (9%)

to 49% (27%). Student career decisions are strongly related to inter-occupational differences in

tuition and expected incomes (Sloan, 1971). People attending high-skill fields (e.g., business)

expect to yield a greater economic payoff in the labor market.

Evidence suggests that there are major differences in salaries and salary progression

related to the field of study, with professional fields (e.g., business) often paid more. Thus, high

Love-of-Money individuals may select fields with higher salaries and even changing fields. For

example, psychologists may switch to business disciplines. High Love-of-Money professors

(lecturers) enter into such positions, start at higher salaries, and receive more rapid increases than

the low Love-of-Money professors (lecturers) in less lucrative fields. However, once in the high-

paying fields (e.g., business), people adjust their expectation quickly and find themselves under

paid in that new field. As we mentioned earlier, do not use money as a reward because pay

satisfaction goes back to zero and the zero point escalates (Herzberg, 1987). This is “the

adaptation process” (Furnham & Argyle, 1998: 271).

Tang, Sutarso, Tang, and Luna-Arocas (2001) found that there were significant

differences in self-reported income based on academic discipline. Faculty self-reported income

can be arranged from the lowest to the highest based on college affiliation as follows: College of

Liberal Arts ($42,774.60), faculty in the University Library ($44,287.91), College of Basic and

Applied Sciences ($44,566.55), College of Education ($48,517.17), College of Mass

Communication ($48,861.54), and College of Business (US$70,099.08). Professors in the

College of Business made more money than did professors in other Colleges except Mass

Communication. Based on university personnel record (HR), professors’ actual average income

(the population) and the official income of our US sample, by college, are presented below:

College of Basic & Applied Sciences: 43,630.75 (our present sample: 44,344.40), College of

Business: 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 appears that our sample was a good

representation of the population. We did not have additional 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 = 23) had a larger difference

between self-reported income and official income (10,139.04) than other professors combined (n


= 163) ($3,330.03). These discrepancies may reflect extra income, consulting, speech, and

services provided to business and community, and others. In a study involving the use of

structure equation modeling, results suggested that experience (regression weight, lambda = .53),

academic discipline (.33), and sex (male, .25) explained 53% of variance for income. Income

(.71), academic discipline (.30), academic tenure (-.23), and job changes (.20) explained 82% of

the variance for the Love of Money. Thus, academic discipline is both related to income and the

Love of Money for university professors (lecturers) (Tang et al., 2001). In summary, the Love of

Money leads to choice of field that leads to different experiences in salary progression that leads

to differences in pay satisfaction.

Finally, we acknowledge that all self-reported measures were taken at one time from one

source. Results may reflect the artifacts of the common method variance. The present study

reveals a “robust” phenomenon in that the Love of Money is a mediator and a moderator of the

income-pay satisfaction relationship. More research is needed to explore the antecedents and

different situational variables of the Love of Money and to examine longitudinal data and

replicate these findings in different samples, occupations, and cultures to enhance our

understanding regarding the psychology of money.


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Table 1

Mean, Standard Deviation, and Correlations of Major Variables

_____________________________________________________________________________

_

Variable M SD 2 3 4 5 6 7 8 9

_____________________________________________________________________________

_

1. Age 43.49 11.06 35* 30* 63* 69* 91* 17* 17* 09

2. Sex .55 .50 17* 35* 28* 29* 10* 17* -04

3. Marital .70 .46 23* 16* 27* 12* 06 -00

4. Income 42238.52 24794.35 41* 62* 20* 31* 20*

5. Length 10.34 9.43 71* -11* 06 02

6. Experience 18.05 10.73 21* 19* 10

7. Job Changes 1.17 1.53 19* -00

8. LOMS 3.31 .43 26*

9. Satisfaction 2.91 .73

_____________________________________________________________________________

_

Note. All decimal points for correlations were omitted. Sex and Marital

were nominal data and dummy coding was used. Sex: Female = 0, Male = 1;

Marital Status: Single = 0, Married = 1. Length: Length of experience for

the current job; Experience: Total work experience. LOMS = the Love of Money

Scale.


Table 2

The Love of Money as a Moderator and a Mediator _____________________________________________________________________________

_

Independent

Variable R R2 R

2 Change F Change df p

_____________________________________________________________________________

_

Part A: The Love of Money (z) as a Moderator for the Self-Reported Income (x)- Pay

Satisfaction (y) Relationship

Using Independent Variables to Predict Dependent Variable—Pay Satisfaction (y)

1. Sex, Age, Marital Status .119 .014 .014 1.05 3, 219 .371

2. Length, Experience, Jobs .151 .023 .008 .62 3, 216 .600

3. Income (x) .246 .061 .038 8.66 1, 215 .004

4. LOMS (z) .325 .105 .045 10.73 1, 214 .001

5. Income * LOMS (x * z) .351 .123 .018 4.39 1, 213 .037

______________________________________________________________________________

Independent

Variable R R2 R

2 Change F Change df p

_____________________________________________________________________________

_

Part B: The Love of Money (m) as a Mediator for the Self-Reported Income (x)-Pay

Satisfaction (y) Relationship

I. Using Independent Variables to Predict Mediator—The Love of Money (m)


2. Length, Experience, Jobs .262 .069 .021 1.80 3, 240 .147

3. Income (x) .328 .108 .039 10.46 1, 239 .001

______________________________________________________________________________

II. Using Independent Variables to Predict Dependent Variable—Pay Satisfaction (y)



3. Income (x) .244 .059 .038 8.59 1, 215 .004

______________________________________________________________________________

III. Using Independent Variables and Mediator to Predict Dependent Variable—Pay Satisfaction

(y)



3. LOMS (B) (z) .292 .085 .063 14.86 1, 215 .000

4. Income (x) .324 .105 .020 4.73 1, 214 .031

______________________________________________________________________________


Figure 1.

The Interaction Effect of Self-Reported Income and the Love of Money on Pay Satisfaction

Self-Reported Income

212000.0841.00

Pa

y S

atisfa

ction

4.5

4.0

3.5

3.0

2.5

2.0

Low LOMS

High LOMS


Appendix 1

The 15-Item Love of Money Scale

______________________________________________________________________________

Factor 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 reverse

scored.

Documents

2004_JMP Love of Money Moderate & Mediate Income-Pay Satisfaction