The Employer Size-Wage Effect

We consider six explanations for the positive relationship between employer size and wages -- large employers (1) hire higher quality workers; (2) offer inferior working conditions; (3) make more use of high wages to forestall unionization; (4) have more ability to pay high wages; (5) face smaller pools of applicants relative to vacancies; (6) are less able to monitor their workers. We find some support for the first of these, but there remains a significant wage premium for those working for large employers.