The wage premium at large firms

Do very wealthy CEOs yank potential wage gains away from median-like workers?  The excellent Adam Ozimek writes to me:

You say: 6. If the top earners are screwing over their wage earners in the big companies, by pulling in excess wages, options, and perks, we should observe non-stagnant median pay for people who avoid working in firms with fat cat CEOs.  Or we should observe talented lower-tier workers fleeing the big corporations, to keep their wages up.  Yet no evidence for these predictions is given, nor are the predictions considered.  It is likely that the predictions are false.

And in fact isn't this precisely the opposite of what the evidence on the employer size wage-premium tells us? If large firms were better at keeping wages down, then the employer size wage-premium would be negative, since small firms would pay more for comparable workers. Apparently this has been true for a long time, for instance from this paper

The fact that large employers pay higher wages than small employers has long been recognized as an important component of the variation in worker wages.This phenomenon was first documented by Moore (1911) and later confirmed by King (1923), Mellow (1982), Oi (1983), and Brown and Medoff (1989) among others.

That paper also argues:

Davis and Haltiwanger (1991) show that the gap in real hourly wages between production workers in plants with 20 to 49 employees and production workers in plants with more than 5,000 employees increased by 79% between 1963 and 1986, and that the gap for nonproduction workers in these same plants increased by 49% over this period.

So the firm size premium is growing. This seems inconsistent with their story.

That is all connected to my earlier review of the new Hacker and Pierson book.


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