Does moving to another country for work lead to higher pay?

Working abroad can give you invaluable experience, but beware of the costs, write Wharton’s Martine Haas and Matthew Bidwell

This article is republished with permission from Knowledge @ Wharton, the online business journal of the Wharton School at the University of Pennsylvania, which owns the copyright to this content.

The era of globalisation has ushered in a world of new opportunities for business professionals, granting them the chance to work across diverse locations around the globe. Consultants, analysts, and managers, in particular, have often embraced moving to another country, lured by the prospect of exploring new horizons and the novelty that life abroad offers. However, beyond the allure of personal enrichment, does this international mobility translate into financial gain?

A recent study conducted by Wharton professors Martine Haas and Matthew Bidwell, along with Utrecht University’s Giovanna Capponi and London Business School’s Isabel Fernandez-Mateo, delves into the relationship between moving to another country and professionals’ compensation.

When does moving to another country pay off?

Contrary to conventional wisdom, the research demonstrates that the impact of international mobility on pay is not straightforward. Rather, it hinges on the frequency of such moves. The study reveals that individuals who relocate once or twice across countries tend to experience a significant reduction in their pay. However, a distinct turning point emerges with further international relocations, where financial benefits start to accumulate.

Notably, those who have made more than four international moves – which the authors call “superglobals” – witness a substantial boost in their earnings. This finding underscores the notion that sustained global mobility can significantly enhance a worker’s value to employers.

“Moving to another country comes at a price – it’s not always easy to adjust, and your skills are not always transferable to other countries afterwards,” Professor Haas explained. “When you move once or twice, those costs can outweigh the benefits. But for someone who has moved more times, the benefits start to outweigh the costs. You become more flexible and adaptable, and that can put you into a different – and more lucrative – part of the labour market.”

While the study acknowledges that financial compensation is not the sole determinant of job satisfaction, it underscores that it’s a critical incentive. Compensation acts as both a symbol of achievement and a proxy for career success, thereby serving as a key tool for companies to attract and retain top talent. And yet, curiously, prior research has largely overlooked the dynamic relationship between international mobility and long-term earnings, Professor Haas said.

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Global professionals should expect lower pay in early years

The study breaks new ground by showing how both early and later international moves affect pay. Many professionals embarking on international assignments anticipate a progressive increase in their pay, driven by the acquisition of valuable skills and expansive networks. However, the application of these assets in a new context can prove challenging, so employees can struggle to benefit financially from experience gained in different countries.

“When people first move overseas, they face the challenge of adjusting to a new and often different culture – no mean feat – leading to a potential dip in on-the-job performance that may slow their advancement. That can cast a shadow on the expected financial gains,” Professor Haas said.

Moreover, when professionals return to their home countries after global stints, they face another unique set of challenges. “They often feel frustration and disappointment because their international experience is not more highly recognised and valued by employers,” Professor Haas said. “This can lead to disengagement, potentially impacting long-term compensation.”

Furthermore, she added that when people initially move abroad, it could be for reasons other than financial gain. “It’s often for a fun adventure or personal enrichment. So they may choose to take a job that isn’t necessarily better paid, and therefore these early moves are often associated with lower earnings.”

Moving to another country can still benefit your career

On the flip side, working in diverse countries provides workers with a deeper understanding of foreign business practices, political structures, and cultural norms. The exposure to varied professional networks enriches their competencies, fostering adaptability and cross-cultural awareness.

And Professor Haas said the benefits of mobility could disproportionately accrue after making multiple moves, due to the unique and extensive global experience that’s gained. “When you become more flexible, companies may be willing to pay you more because you can adjust more quickly somewhere else,” said Professor Haas. “You also have a track record of success working in multiple markets and may speak several languages – a valuable asset to a multinational organisation.”

She added that the number of people with many global moves is relatively small, raising their value to employers. “It’s a very thin labour market at the high end of international mobility. So if you can show you have a lot of global experience and a track record of success, you can command large salary premiums.”

Contextual factors could also be at play, the study notes. Moves within a single firm often entail a higher degree of continuity in work and organisational culture, minimising the adjustment required. However, moves between different firms, especially across culturally and linguistically disparate countries, can pose more significant challenges, but may also yield greater human capital development – and therefore pay.

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To arrive at their findings, the researchers surveyed 1322 alumni from a prestigious European business school’s MBA program, a demographic well-acquainted with international moves. By combining quantitative data with insightful interviews, the study provides a comprehensive perspective on the complex interplay between international mobility, pay, and career success.