Large Retailers Provide Higher Wages, More Opportunities than Small Retailers

July 23, 2014

Big-box retailers have been criticized for offering low wages, and many have been concerned that minimum wage retail jobs are growing and replacing American manufacturing work. But a report from Brianna Cardiff-Hicks, Francine Lafontaine and Kathryn Shaw published by the National Bureau of Economic Research shows that the growth of large chains and retailers raises wage rates relative to smaller, mom-and-pop establishments.

The number of "modern retailers" (large firms and chains) in the United States is growing -- a positive development for retail employees:

  • As firms grow in size, wages increase, even after controlling for worker quality and work conditions.
  • Large firms (those with 1,000 or more workers) pay high-school-educated employees 15 percent more than do small firms (those with less than 10 employees). They pay those with at least some college education 25 percent more than small firms.
  • At establishments with 500 or more workers, pay for high-school-educated employees is 26 percent higher than at establishments with less than 10 workers. Employees with at least some college education receive pay that is 36 percent higher at large establishments than at small ones.

That pay premium decreases, though is still present, after controlling for worker quality, indicating that higher quality workers are funneled into larger firms and larger establishments:

  • High-school-educated workers and workers with some college education moving from a small firm to a large firm see an 11 percent pay increase and a 9 percent pay increase, respectively.
  • When moving from a small establishment to a large one, pay rises by 19 percent for high-school-educated workers and by 28 percent for employees with some college education.

Large retailers also offer more opportunities for promotions to supervisory or managerial positions than do mom-and-pop stores, and those promotions also bring higher wages.  Across ability levels, high-school-educated managers earn 23 percent more than non-managers, while college-educated managers earn 21 percent more than non-managers.

The authors write that the results "contradict the image of the retail sector as one comprised of the lowest paying jobs in the economy." Modern retail chains have increased retail wages and given employees more opportunities for promotion (and subsequent wage growth).

Source:  Brianna Cardiff-Hicks, Francine Lafontaine and Kathryn Shaw, "Do Large Modern Retailers Pay Premium Wages?" National Bureau of Economic Research, July 2014.

 

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