Crowing apart: The changing firm-size wage premium and its inequality consequences

摘要

There has been a rise in wage inequality in United States for the past few decades. Existing research cites firm size and especially large firms that shape the distribution of wages in a society. This article contends that by differentially rewarding workers beyond their human capital characteristics alone, large U.S. firms have served as a prominent labor-market institution that mitigates wage inequality. The main argument proposed is that by compensating low- and middle-wage workers with a greater wage premium than higher wage workers, large U.S. firms constrained the wage disparities among individuals in the labor market, thereby lowering wage inequality. It also argues that the reasons wage inequality has risen is due to the demise of internal labor markets and the emergence of alternative employment arrangements which impact lower- and middle-wage workers more in comparison to their higher-wage counterparts. The arguments are tested on data collected from the Current Population Survey on firm-size wage premiums that have varied over time and across wage distribution for private-sector workers between 1989 and 2014. Results show large firms impacted overall wage outcomes in two key ways: by raising the average wage and by reducing dispersion. The results were found to be robust against confounding factors such as compositional differences in human capital, tenure, union status and industry of employment as well as in models accounting for unobservable differences among individuals. (95 refs.)