ME
I. INTRODUCTION
In recent years, remuneration had a warm conversation among researchers. Remuneration is an
attempt to change the payroll system and a calculation based on the difficult of responsibility, risk, scope
of work and others, its can say the remuneration received some sort of reward for performance of a state
apparatus in accordance with the positions and functions held. Remuneration has a goal to improve the
performance of the state apparatus to become more efficient, effective, and more prosperous. The new
remuneration started in 2013 under PP No. 88. While ITS will be start the implementation of
remuneration in 2014. To explain the perception of the remuneration policy that has been applied in an
organization requires research involving variable role in the level of group or activity unit other than the
individual level.
The next problem is remuneration cannot be measured directly, so we need a capable method of
solving these problems. Multilevel Structural Equation Modeling (MSEM) is a method that combines
Structural Equation Modeling (SEM) and multilevel analysis simultaneously [1]. MSEM allows
researchers to simultaneously test and estimate the relationship between exogenous and endogenous with
many indicators in the clustered data where the lower levels will nest in the unit with the higher levels.
The analysis is performed using a two-level structural equation model with latent variables, where the
effectiveness of remuneration in individual are considered as first level units and effectiveness of
remuneration in subject area as second level units. The choice of a two-level analysis is justified to
explain the nested data structure and to analyze in a single statistical model variables measured at
different levels. In this case, individual levels are clustered in subject area and if they share unobserved
factors it may expect related values of the response variables. As a result, observations may not be
independent and identically distributed. In this case, a two level analysis allows to get accurate parameters
and standard errors estimates and to explain the variability associated with each level. The analysis is
limited to only two levels because we consider that the main effects on effectiveness of remuneration in
individual level are exercised by the units to the next higher level.
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A. Model Specification
Let y pij be the pth observed dependent variable, p 1,2,..., P , for individual i , i 1,2,..., N j , in cluster
j 1,2,..., C , where N j is the number of individuals in cluster j . Let xwqij be the qth observed individual
predictor variable, q 1,2,..., Q1 , for individual i in cluster j and xbqj be the qth observed cluster level
predictor variable, q 1,2,..., Q2 , observed for cluster j . To construct the latent variable model by defining
y*pij
an underlying normally distributed latent variable . If the pth variable is normally distributed then
y*pij y pij
. If the pth variable is categorical, for a set of parameters pk [3].
y pij k pk y*pij pk 1
(1)
The two-level model is constructed as [4].
y *pij y wpij ybpj
(2)
where ywpij and ybpj are normally distributed independent latent variables. Two separate latent variable
models are defined for ywpij and ybpj . Suppose that wmij are normally distributed latent variables defined
on the individual level, m 1,2,..., M1 and are normally distributed latent variables defined on the cluster
level, m 1,2,..., M 2 . The vector variables defined as ywij yw1ij , yw2ij ,..., ywPij and similarly ybj , wij ,
bj xwij
, , and xbj . The structural model on the within level is given by (3-4) and on the between level is
given by (5-6).
y wij w wij wij
(3)
wij Bw wij w xwij wij
(4)
ybj b bbj bj
(5)
bj b Bbbj b xbj bj
(6)
where the vector and matrix parameters w , w , Bw , b , b , Bb , b , b as well as the thresholds
parameters are to be estimated. The residual matrices wij , wij , bj and bj are independent and normally
distributed with zero mean. Their respective covariances are denoted by w , w , b and b . In order to
obtain identification, the variance of is fixed at 1 if the pth variable is categorical [4].
B. Sample Estimates
The data is expressed as saturated model. It contains no latent constructs wij or bj , and full
covariance matrices are fitted for the within and the between level variables. The thresholds of categorical
variables have the same construction as in (1) and the underlying latent is defined as in the structural model
specified in (2).
y pij k t pk y*pij t pk 1
(7)
The structural part of the model is defined by
ywij w xwij wij
(8)
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ybj b b xbj bj
(9)
The residual vectors wij and bj are assumed normally distributed with 0 means and covariance matrices
w and b , respectively. For identification purposes, if the pth variable is categorical, the variance of
wpij
is fixed at 1 and the mean parameter pb is fixed at 0.
The parameters in (8) and (9) are estimated in two stages. The first stage is for the estimation of
t
univariate parameters: the between means bp , the thresholds pk , the coefficients wpq and bpq , and
the diagonal elements of the residual covariance matrix, wpp and bpp . At the second stage, the
covariances of residuals, that is, the off-diagonal elements of w and b are estimated with bivariate
likelihood methods, given the univariate estimates [4].
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t *pk w pk b
(25)
Finally the standardized estimates are united as * in the same order as the unrestricted estimates in s .
The weighted fit function is the following
F s * W 1 s * T (26)
Minimizing the fit function with respect to the parameters of model (1-6) is the last stage of the estimation
process. The weighted least square estimates are the parameter estimates that minimize F [3].
Meanwhile the observed explanatory variables are % of respondent who have latest educational
background under diploma as x1 and % of respondent who a man as x2. The variables from y1 to y15 are
evaluated on a 5 ordered points scale ranging from 1 = "strongly disagree" to 5 = "strongly agree".
Moreover note that the latent variable "Effectiveness of remuneration" is the only variable measured for the
first level units and for the second level units (subject area). The hypothesized relationship between the
latent variable effectiveness of remuneration, the observed indicators (measurement model), and other
latent variables is defined by Figure 1.
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latent factors are measured by the observed variables. The multilevel structural model contains the
relationships between the latent factors [6]. The analysis is performed using a two-level structural equation
model with latent variables, where the effectiveness of remuneration in individual are considered as first
level units and effectiveness of remuneration in subject area as second level units.
The analysis is estimated using software Mplus 7.11 developed by Muthen, using the limited-
information weighted least squares estimator indicated with "WLSMV". The analysis of the two-level data
structure is firstly performed computing the intraclass correlation coefficient (ICC) for each indicator of the
endogenous latent variable the effectiveness of remuneration. The ICC values for these 3 indicators ranged
from 0.000 to 0.107. The results show a small level of association of the observed responses within each
subject area. As a consequence, the proportion of variability due to the cluster level is very low.
The next step is analysis of the measurement model to specifies how the latent factor are measured by
the observed variables. The measurement models show that the endogenous latent variable effectiveness of
remuneration well measured by their respective indicators, for individual level. But in the higher level it
seem that effectiveness of remuneration have a weak measured by their respective indicators. The
measurement models seem significant also for the other latent variables, performance, motivation,
characteristic of subject area and training transfer.
Within (Individual)
In the third step, multilevel structural model was estimated both within (first) and between (second)
level. The relationship between the latent variable at first level unit show that performance have a
significant and positive direct effect on the endogenous latent variable, the effectiveness of remuneration.
The direct effect of motivation and characteristic of subject area on effectiveness of remuneration is
significant and positive. While the direct effect of training transfer on effectiveness of remuneration have a
weak relationship and negative direct effect. As a result motivation and characteristics of subject area exert
an indirect effect on the external effectiveness trough the performance. The indirect effect of the motivation
on the effectiveness of remuneration is given by the product of the direct effects of the motivation on the
performance and of the performance on the effectiveness of remuneration. Similarly, the indirect effect of
the characteristic of subject area and training transfer on the effectiveness of remuneration. The analysis of
the effects of the explanatory variables on the latent variable the effectiveness of remuneration in second
level unit (subject area unit) have a weak influence and positive direct effect.
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The last step, multilevel structural equation modeling must be evaluating with goodness of fit (fit
indices). The model fit indices are acceptable. The MSEM fitted the data reasonably well with, CFI=
1,000, TLI= 1,009, and especially RMSEA= 0,000. The fit indices at this step show that hypothesis model
has substantially stronger fit. The result of relationships is depicted graphically which distinguishes the
within groups model (level 1), represented in the lower area of the diagram, from the between groups
model (level 2), represented in the upper area of the diagram (Figure 1). The significant or strong
relationships are represented with bold arrows (p<0.10). Weak relationships are represented with gray
arrows.
ACKNOWLEDGMENT
This research paper is made possible through the help and support from everyone. Specially thanks to
all the employment in ITS Surabaya for the cooperation regarding research data.
REFERENCES
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