Comments on: Why big companies pay better

By: DCeconomist

DCeconomist — Wed, 03 Jun 2009 19:16:32 +0000

This is a common finding with no known explanation – observationally equivilent workers receive a wage premium at larger companies – even within the same industry. It is a stylized fact in search of a good theory to explain it.

As for increased opportunites at small firms – I know of no evidence that wage growth is larger for workers at small firms. It may be the case that workers do prefer the working environment in smaller companies – however, turnover is generally greater at small firms as well. It might be the case that small firms provide workers an opportunity to build skills and experience that they can use to find a better paying job elsewhere.

By: Fang

Fang — Sat, 30 May 2009 09:42:17 +0000

Big companies pay you more, so you have to follow up more game rules in the company. You get paid more, you have less freedom. It’s fair.

By: Laocoon

Laocoon — Sat, 30 May 2009 01:15:56 +0000

Small companies can pay fairly well if you are the owner and bury a lot of expenses in the business, plus use the ability to set aside more in the deferred comp plans. Other than that, for a business of any size, a small firm is not so great. I worked for a number of small firms and the variety was not more wonderful than the lack of benefits, lack of raises (somehow the owners felt your salary came out of their own pocket), and lack of credibility when looking to move to another firm.

For most people, a big company provides more in benefits, especially health care where more is covered, and credibility when switching jobs. Plus you can do your actual job and not have to pitch in and fix the copier or some other menial task because the firm really is that small.

By: Dave

Dave — Tue, 26 May 2009 20:35:45 +0000

I’ll bet you 100 bucks that the difference disappears if you control for public ownership.

Public companies pay better than private ones.
Google “agency costs”

By: Lord

Lord — Tue, 26 May 2009 19:07:53 +0000

The flaw here is the average for a large company includes a lot of vastly overpaid executives at the top. Someone starting out or in middle management could easily find it better at a small company, it is just they have less height to grow.

By: Lord

Lord — Tue, 26 May 2009 19:02:25 +0000

Small companies are more variable though, so some small companies pay very well although most do not.

By: John Caddell

John Caddell — Tue, 26 May 2009 18:18:58 +0000

So, how’s Reuters treatin’ ya?

By: herb

herb — Tue, 26 May 2009 17:38:07 +0000

I think some smaller organizations may be able to pay more because the food chain is smaller. the less blood sucking overhead (employees) between you and the top. The higher the salary.