Third Quarter 2021: Higher Wages at Larger Firms, and Small Firm Job Gains

May 9, 2022

Oregon had 1.99 million people working in jobs covered by the state’s unemployment insurance system during the third quarter of 2021. They earned a total of $29.3 billion, with an average wage of about $14,700 per worker for the quarter. The median hourly pay during the quarter was $23.49.

Bigger Wages in Larger Firms

Just about 2% of Oregon’s firms have 100 or more employees. Yet, more than half (56%) of all jobs in third quarter 2021 were at firms with at least 100 employees. One out of every three jobs (33%) in Oregon was with a firm with 500+ employees.

Bigger employers tend to pay higher wages. Firms with 500 or more employees paid a median hourly wage of $27.37 in the third quarter. That’s nearly $4 per hour more than the next-highest median of $23.55, which was also in the next-largest firm size class of 250 to 499 employees. As the firm size class got smaller, so too did the median wage in third quarter 2021, all the way down to firms with five to nine employees. Oregon’s smallest employers stood out as an exception to this trend. The median wage for firms with fewer than five employees was $22.29, about the same as firms with 50 to 99 employees ($22.27).
Median wage gains in the third quarter of 2021 were strong when compared with pre-pandemic pay in the third quarter of 2019. Over the two-year period, real median earnings for all jobs grew by 8.2% in Oregon. Median wage gains were strongest at the largest firms. Between the third quarters of 2019 and 2021, median wages rose by 9.8% at firms with 500 or more employees. Similar to median hourly earnings, inflation-adjusted median wage gains were lower at smaller firms. Still, even in the smallest class sizes, real median wages grew by about 6%.
The larger trends in median wage gains mask some underlying labor market dynamics. It is likely some wage gains during the first half of this two-year period were compositional. Between the third quarters of 2019 and 2020, wage records show 198,000 fewer jobs in Oregon. Lower-earning workers were more likely to lose their jobs across all sectors of the economy during the pandemic recession of spring 2020. While workers who kept jobs did see real gains, the numbers may be exaggerated due to lower-earning workers disproportionately becoming unemployed.
Looking at the real wage gains between the third quarters of 2020 and 2021 shows a different picture of wage growth. Large job gains occurred in Oregon during this period, and wage records show nearly 147,000 (or 7%) more jobs over the year. Some of the compositional effects from the prior year may have reversed, weighing on real median wage gains.

The larger factor pulling down real median wage gains to 1% between the third quarters of 2020 and 2021 was inflation. Of the 147,000 jobs Oregon employers added to their covered payrolls, gains occurred in every wage category except jobs paying less than $15.00. So employment did move up the wage scale between the fall of 2020 and 2021.

Meanwhile, the Consumer Price Index started to rise notably in 2021, topping 5% over the year by the third quarter of 2021. This brought median wage gains into negative territory for firms with five to nine employees, those with 20 to 49 employees, and firms with 50 to 99 employees. Larger firms still had real median wage gains, but they were much smaller than the year before. Interestingly, firms with fewer than five employees had the largest inflation-adjusted median wage gain (+3.5%) between the third quarters of 2020 and 2021.

Job Gains at Smaller Firms

Although smaller firms tend to pay lower median wages than the largest employers, firms with the fewest employees are leading post-pandemic job gains. By the third quarter of 2021, each firm category with less than 20 employees rebounded and gained jobs relative to pre-pandemic levels two years before. The largest gains occurred at firms with fewer than 5 employees (+6.5%). Meanwhile, the largest deficits remained at firms with 250 to 499 employees (-5.8%) and those with 500 or more employees (-4.2%).
Although Oregon experienced tremendous job losses in 2020, one hallmark of the pandemic recession was that relatively few firms were lost. Instead, employers seemed to lay off workers but stay in business. That could move some firms in the wage records into smaller size classes following layoffs, and contributing to aggregate job gains in smaller firms.

Another possibility could be increased startup activity in the wake of the pandemic recession. Research from the St. Louis Federal Reserve shows that startups averaged four employees nationally.

Outsized Job Growth and Pay

Oregon’s large employers make up a small share of all firms. At the same time, they account for a majority of jobs, and the highest median hourly wages paid to workers. Meanwhile, Oregon’s smallest employers, those with fewer than five employees, countered the trend of higher wages in larger firms with their relatively high median wages. The state’s smallest firms also had the largest job gains of any employer size class relative to the pre-pandemic period.