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Do Large Modern Retailers Pay Premium Wages?

Author

Listed:
  • Brianna Cardiff-Hicks
  • Francine Lafontaine
  • Kathryn Shaw

    (Brianna Cardiff-Hicks is an Associate at Cornerstone Research. Francine Lafontaine is the William Davidson Professor of Business Economics and Public Policy in the Ross School of Business, University of Michigan. Kathryn Shaw is the Ernest C. Arbuckle Professor of Economics in the Graduate School of Business, Stanford University.)

Abstract

With malls, franchise strips, and big-box retailers increasingly dotting the landscape, many are concerned that U.S. middle-class jobs in manufacturing are being replaced by minimum-wage jobs in retail. Retail jobs have spread, whereas manufacturing jobs have shrunk in number. The authors show that wage rates in the retail sector rise markedly with firm size and with establishment size. These increases are halved when they control for worker fixed effects, suggesting that better workers are sorted into larger firms. Also, higher-ability workers are promoted to the position of manager, which is associated with higher pay. The authors conclude that the growth in modern retail, characterized by larger chains of larger establishments with more levels of hierarchy, is raising wage rates relative to traditional mom-and-pop retail stores.

Suggested Citation

  • Brianna Cardiff-Hicks & Francine Lafontaine & Kathryn Shaw, 2015. "Do Large Modern Retailers Pay Premium Wages?," ILR Review, Cornell University, ILR School, vol. 68(3), pages 633-665, May.
    • Handle: RePEc:sae:ilrrev:v:68:y:2015:i:3:p:633-665
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    References listed on IDEAS

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    Cited by:

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    2. Jose Joaquin Lopez & Jesica Torres, 2020. "Size-dependent policies, talent misallocation, and the return to skill," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 38, pages 59-93, October.
    3. Guido Friebel & Matthias Heinz & Nikolay Zubanov, 2022. "Middle Managers, Personnel Turnover, and Performance: A Long‐Term Field Experiment in a Retail Chain," Management Science, INFORMS, vol. 68(1), pages 211-229, January.
    4. Kevin Rinz, 2018. "Labor Market Concentration, Earnings Inequality, and Earnings Mobility," CARRA Working Papers 2018-10, Center for Economic Studies, U.S. Census Bureau.
    5. Francine Lafontaine & Kathryn Shaw, 2016. "Serial Entrepreneurship: Learning by Doing?," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 217-254.
    6. Ali Hortaçsu & Chad Syverson, 2015. "The Ongoing Evolution of US Retail: A Format Tug-of-War," Journal of Economic Perspectives, American Economic Association, vol. 29(4), pages 89-112, Fall.
    7. Charles Courtemanche & Art Carden & Xilin Zhou & Murugi Ndirangu, 2019. "Do Walmart Supercenters Improve Food Security?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(2), pages 177-198, June.
    8. Osman, Adam & Speer, Jamin D. & Weaver, Andrew, 2022. "Connections, Referrals, and Hiring Outcomes: Evidence from an Egyptian Establishment Survey," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 342-355.

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    More about this item

    Keywords

    retail wages; firm size effects on wages; modern retail firms; large retail pay;
    All these keywords.

    JEL classification:

    • J00 - Labor and Demographic Economics - - General - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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