Employment Relations in Dual Labor Markets ("It's Nice Work If You Can Get It")

Abstract

Jobs in big firms command higher wages. I examine four theories that could explain this relation. First, large firms incur higher fixed employment costs including more specific training. Second, monitoring costs are greater in big firms and can be spread by hiring more productive workers. Third, large firms may choose to pay efficiency wages to deter shirking. Finally, large employers organize production around teams and pay higher wages to get workers who comply with the discipline of team production. The dispersion of wages and working conditions in the U.S. labor market reflect the heterogeneity of jobs (employment relations) and individuals.