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May 1982, Vol. 105, No. 5
White-collar pay levels linked
to corporate work force size
Martin E. Personick and Carl B. Barsky
"It may seem paradoxical that buyers of labor with the most monopoly power generally pay the highest rates of wage and benefit compensation." With this provocative thought, Professor Richard Lester in his comprehensive 1967 study invited the next generation of researchers to explore size-of-establishment differences in employee compensation.1 In response, researchers during the past 15 years have "rediscovered" this once-neglected field as fertile ground for debate. While most have argued that big employers pay employees more, other contend that size, per se, is not a determinant of wage levels but rather reflects marked differences in the quality of workers employed by large and small firms. Responding to his own paradox. Lester suggested several reasons a large employer might pay higher wages than other firms, including public opinion, ability to pay, and as compensating differentials for the "impersonal and confining aspects of large establishments.
This article examines the relationship between work force size and pay levels of white-collar employees, using data from the Bureau of Labor Statistics national survey of professional, administrative, technical, and clerical pay (PATC). By using the narrowly defined occupational work levels of the PATC survey, this analysis limits the distorting effects of variations in worker quality on pay levels. The principal findings of the analysis are: pay levels tend to increase with employer work force size but above-average levels are associated only with large firms; and wage premiums attributable to a firm's size are larger for entry level than for experienced professional workersan indication of competition among small and large employers to attract and retain skilled personnel.
This excerpt is from an article published in the May 1982 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 Richard Lester, "Pay Differentials by Size of Establishment," Industrial Relations, October 1967, pp. 57-67.
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