Large Firms in Northwest Oregon Tend to Pay MoreFebruary 24, 2021 Most people expect wages to vary by industry; manufacturing jobs generally pay more than jobs in leisure and hospitality. (If you didn’t expect that, then you need to read our articles more often.) Wages also vary by the size of firms within an industry, sometimes in surprising ways.
The general trend is for larger firms to pay higher wages than smaller firms. Larger firms often achieve economies of scale that result in higher profits – so they can afford to pay higher wages. But why would they want to? There are many theoretical and practical reasons: large firms may be hiring more productive workers, they may be paying high wages to create barriers to entering the industry for small firms, large firms may have higher hiring costs and therefore have more incentive to reduce their turnover, or they may have a unionized workforce that has bargained for higher wages.
Wages for different industries and size of firms is given in the table. The data are from firms in Northwest Oregon – Benton, Clatsop, Columbia, Lincoln and Tillamook counties.
Most industries do follow the trend of larger firms paying higher wages, and the differences can be dramatic. Large manufacturers pay about $31,000 more per year than mid-sized ones. In the health care and social assistance industry large firms pay more than $41,000 more per year than mid-sized firms.
But health care and social assistance is also one of the industries that provides an exception to the rule of larger firms paying higher wages; small firms pay about $4,500 more per year than mid-sized firms. Other rule-breaking industries are administrative, support, waste management and remediation services; arts, entertainment, and recreation; private educational services; and transportation and warehousing.
Sometimes the wage distribution for these industries that are exceptions to the rule can be explained by having a particular mix of occupations that varies by firm size. In health care, for example, small firms may be physicians’ offices (with nurses and doctors), mid-size firms may be nursing homes (with CNAs and unlicensed care providers) and larger firms may be hospitals (with doctors, nurses and other specialists).