We analyze the relationship between how long an employer has been in business (firm age) and wages. Using data from special supplements to the Survey Research Center’s monthly Survey of Consumers, we find that firms that have been in business longer pay higher wages (as previous studies found), but when we control for worker characteristics, the relationship becomes insignificant or negative. There is some evidence that the relationship is not monotonic, with wages falling and then rising with years in business. Established employers appear to make greater use of back‐loaded compensation, consistent with their higher probability of remaining in business.

We consider six explanations for the positive relationship between employer size and wages: large employers (1) hire higher-quality workers, (2) offer inferior working conditions, (3) make more use of high wages to forestall unionization, (4) have more ability to pay high wages, (5) face smaller pools of applicants relative to vacancies, and (6) are less able to monitor their workers. We find some support for the first of these, but there remains a significant wage premium for those working for large employers.

The authors consider six explanations for the positive relationship between employer size and wages: large employers (1) hire higher-quality workers, (2) offer inferior working conditions, (3) make more use of high wages to forestall unionization, (4) have more ability to pay high wages, (5) face smaller pools of applicants relative to vacancies, and (6) are less able to monitor their workers. They find some support for the first of these, but there remains a significant wage premium for those working for large employers.

In order to estimate the effects of unions on worker productivity, a Cobb-Douglas production function is modified so that unionization is included as a variable. The resulting functional form is similar to that used to isolate the effect of worker quality in previous studies. Using state by two-digit SIC observations for U.S. manufacturing, unionization is found to have a substantial positive effect on output per worker. However, this result depends on two important assumptions which we cannot verify directly; attempts to relax these assumptions are not conclusive.

In order to estimate the effects of unions on worker productivity, a Cobb-Douglas production function is modified so that unionization is included as a variable. The resulting functional form is similar to that used to isolate the effect of worker quality in previous studies. Using state by two-digit SIC observations for U.S. manufacturing, unionization is found to have a substantial positive effect on output per worker. However, this result depends on two important assumptions which we cannot verify directly; attempts to relax these assumptions are not conclusive.

This study provides direct evidence concerning the relationship between experience and performance among managerial and professional employees doing similar work in two major U. S. corporations. The facts presented indicate that while, within grade levels, there is a strong positive association between experience and relative earnings, there is either no association or a negative association between experience and relative rated performance. If we are correct that the performance ratings given to managerial and professional employees in any grade level adequately reflect those employees' relative productivity in the year of assessment, the results imply that the human capital on-the-job training model cannot explain a substantial part of the observed return to labor market experience.