Employer-Employee Relationships: New Approaches to LMX and Psychological Contracts Research (Symposium): Do Economic Factors of a Country Moderate the Relationships between Psychological Contract Breach and Job Attitudes? A Meta-Analysis

There has been a steady growth in psychological contract research in recent years. The majority of these studies have investigated links between psychological contract breach (PCB) and various work outcomes and, to date, only two meta-analyses on PCB and work outcomes have been conducted (Bal et al., 2008; Zhao et al., 2007). These meta–analyses were published about a decade ago and since then economic factors have changed significantly across the world. However, so far, there has been little consideration in the PCB literature on how economic factors affect employees’ experience of their job and organization. As such, there is a need for a new and updated meta-analysis, because A) a decade of PCB research has not yet been meta-analyzed and it is thus unknown what insights have been gained in the past years, and B) the economic situation has not yet been included in prior meta-analyses, and this seems a particular big oversight in light of the financial crisis and subsequent developments. What the previous meta-analyses did show, was that there are various team-and/ or organizational-level factors that can potentially moderate the PCB and the work attitude relationship. Notwithstanding that no meta-analysis has been conducted to investigate country-level moderators, scholars have suggested that contextual factors including the labour markets (Johns, 2006), and that macro-economic environment might influence breach and employees’ experience of them (Rousseau & Schalk, 2000). Thus, the aim of this study is to expand upon prior meta-analyses and investigate the impact of macro-economic factors (at the country level) on the breach and work attitudes relationships (at the individual level). To do so, we will draw on two of the key theories used within PCB research, namely Affective Events Theory (AET; Weiss & Cropanzano, 1996) and Social Exchange Theory (SET; Cropanzano & Mitchell, 2005). Within the field of economics, macro-economic indicators such as a country’s unemployment rate, inflation, and consumer price index are among the most closely watched statistics because they reflect how strong or weak the economy of a country is (Darby, Angelo & Michael, 1989). Unemployment rate is defined as the number of unemployed people as a percentage of the labor force (Statistical bulletin, UK labour market, 2016). Inflation rate measures the increases of general price levels in an economy and consumer price index estimates the price changes in a basket of goods and services representative of consumption expenditure in an economy (Statistical bulletin, UK labour market, 2016). Such indicators tend to fall during economic downturns, such as during the course of an economic recession (Oyesanya, Lopez-Morinigo & Dutta, 2015). Previous studies have shown that the country-level economic factors can impact individual-level human behavior. For example, a stream of psychological studies have shown that economic downturns can impact employee mental health and happiness (Oyesanya et al., 2015; Verick & Islam, 2010). Additionally, previous PCB studies have shown that recession can have an impact on employee PCB and the ways in which employee reacts to breach (Bohle, Bal, Jansen, Leiva & Alonso, 2016; Poisat & Theron, 2014). Thus, building on the more general psychological literature and some specific studies within the field of PCB research, we decided to examine the impact key economic factors on the relation between breach and work attitude (i.e., job satisfaction, commitment, and turnover intentions) relationship. We picked these work attitudes as they were also part of Zhao’s et al. (2007) meta-analysis, so that we can thus compare our new insights versus the older insights. Theory Previous meta-analyses have established a link between breach and attitudes (such as job satisfaction, commitment and turnover intentions) often drawing on AET. This theory states that workplace events can influence emotions at work, which can then influence work attitudes. Recent studies have shown that job satisfaction, organizational commitment and turnover intentions of employees are likely to be affected by economic crisis (Markovits, Boer & Dick, 2014). By extending previous studies, and based on affective events theory and Morrison & Robinson's (1997) model of contract breach, we expect psychological contract breach to be negatively related to job satisfaction and organizational commitment, while being positively related to turnover intentions (Bal et al., 2008; Conway & Briner, 2005; Zhao et al., 2007). Hence, we expect: Hypothesis 1a/b/c: Psychological contract breach is negatively related to (a) job satisfaction and (b) organizational commitment, and positively related to (c) turnover intentions. Moderating Effects of Economic Factors According to classical theory of labor markets, wages of employees are determined by supply of labor and demand for labor, and wage inequalities are influenced by monopsony (Dunlop & Segrave, 2016). According to the theory of monopsony, when unemployment is high, firms are gaining more monopsony power, and thus, someone who has been unsuccessful in finding a job in tough labor market is likely to accept reduced wages (Meager & Speckesser, 2011). This illustrates that the behavior of workers can be adjusted to economic market situations such as rise in inflation (Brunner & Meltzer, 1988). We therefore argue that psychological contrasts might similarly be affected by economic market situations. This line of reasoning fits SET theorizing that social settings shapes exchange relations (Cropanzano & Mitchell, 2005). Accordingly, we expect that during an economic downturn, employees will perceive that finding alternative employment is difficult based on available environmental and social clues, and it is likely that, they will become more tolerant towards accepting breaches. Thus we propose to test the following hypothesis: Hypotheses 2a/b/c: The Economic Status of a country (i.e., a) its unemployment rate, b) its inflation rate, and c) its CPI, moderates the relationships between psychological contract breach and work attitudes such that the relationship between breach and work attitudes will be weaker when economic unemployment rate is higher. Methods Multiple search strategies were adopted to identify PCB studies between 1980-2016, including related concepts such as psychological contract violation and fulfillment. Using specially developed inclusion criteria, we retrieved a final set of 160 published scholarly work or articles. We tested the first hypothesis using the formulas of Hunter & Schmidt (2004). The second set of hypothesis was tested using Weigted Least Square estimation (Wright & Bonett, 2002), and by applying Fisher Z-transformation. Results The first hypothesis was that PCB relates negatively to job satisfaction, organizational commitment, and turnover intentions. As shown in table 1, PCB was significantly related to job satisfaction (rho=-.37, 95%CI=-.49 to -.38), organizational commitment (rho=-.35, 95%CI=-.39 to -.33), and positively to turnover intentions (rho=.34, 95%CI=.29 to .39). As can be seen in Table 1, our 95%CI’s were similar to, but narrower and thus more precise, than the 95%CI’s reported in the last meta-analysis of Zhao et al. (2007). Strength wise, the relationships between PCB and commitment and turnover intentions remain similar to Zhao et al. (2007). However, the strength between PCB and job satisfaction has lowered (rho=-.37) in comparison to the findings (rho=-.54). We also tested the correlations of our study with that of Zhao et al. (2007). We did that by testing if weighted effect sizes of the two studies differed significantly by using Fisher’s (1925) r-to-z transformation, by following the procedures that are suggested by Diedenhof and Musch (2015). Findings reveal that the correlations are equal for the relationship between breach and turnover intentions (z=-1.557, p-value=0.119) but not equal for the relationship between breach and job satisfaction (z=20.160, p-value=0.000) and breach and organizational commitment (z=3.266, p-value=0.000). Overall, our results support Hypothesis 1a,b,c. Tables 2, 3, and 4 show the results of the moderated meta-analytic regression analyses. The results show that economic indicators (unemployment rate, inflation rate and consumer price index) did not moderate the relation between breach and commitment. More specifically, economic unemployment rate (b=.08, p<.05), inflation rate (b=.45, p<.05), and consumer price index (b=.44, p<.05) all moderated between PCB and job satisfaction. As predicted by Hypothesis 2, relationships between PCB and job satisfaction became less negative under conditions of high rate of unemployment, inflation, and consumer price index. The results also indicate that economic unemployment rate (b=.26, p<.05), inflation rate (b=.12, p<.05), and consumer price index (b=.25, p<.05) made the positive relationships between PCB and breach even more positive. Hence, overall we find support for Hypothesis 2, in particular for 2a and 2c. Discussion Our results show that psychological contract breach is related strongly to job attitudes (i.e. job satisfaction, organizational commitment and turnover intentions). These results are in line with the meta-analysis of Zhao et al. (2007), yet since we could include more studies are 95%CI are narrower and therefore more specific. Based on theory of monopsony, we expected that the positive relationship between PCB and job satisfaction and PCB and commitment, as well as the negative relationship between PCB and turnover intentions, to be moderated by a country's employment rate, inflation, and consumer price index. Our results showed that this is the case, as job satisfaction, commitment, and turnover intentions are less likely to be affected by PCB when there is higher employment rate, inflation and consumer price index. In conclusion, our study contributes to contemporary knowledge by a) meta-analyzing recent PCB and work attitudes research and thereby enhancing the decade old insights provide by Zhao et al. (2007) and B) by being the first to test if economic factors might shape the effects of PCB on work attitudes.