Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth

Abstract

An employer must choose a procedure for screening job applicants, a rate of hire, a training program for new employees, a criterion for the retention of new employees after observing their on-the-job performance, a compensation package, and a rate of capital investment so as to minimize production costs across time. This paper examines the effects of employer size on these hiring and training decisions when larger employers have greater monitoring costs. A unique data set is employed to estimate the empirical relation among employer size and employer search, training, capital investment, and wages.