When Bigger is Better: Differences in the Individual-Level Effect of Firm and Establishment Size

Abstract

Building on previous demonstrations of a linkage between organizational size and individual outcomes, this paper employs a matched employer-employee data set to investigate that relationship. Some portion of the size effect on worker earnings is found to be indirect, as many have assumed, derived either through the organizational consequences of size or the industrial/market consequences of scale. However, the effect is not straightforward. It varies by group (gender, occupation, and industry), is differentially mediated by internal labor markets, literacy requirements, and unionization, differs according to whether firms are singleor multi-establishment, and for individuals as to whether firm size or establishment size is most salient to their earnings. For white-collar workers, firm size is most important, but not primarily due to organizational aspects of size. For blue-collar workers, establishment size is most important, largely due to the organizational concomitants of size. Female clerical workers are found to be a special case, and clear gender differences exist in the effect of size.