Summary: Constant with financial investigation, the most significant corporations working with Homebase employing computer software post work opportunities with the highest concentrate on hourly wages. Surprisingly, however, I discover that some of the smallest corporations working with Homebase choosing software package — those with just one particular to 4 workforce — are ready to pay out as significantly as 10% bigger than those people with 20-49 personnel, giving them a newfound competitive edge in a tough market for talent.
Employing is top rated of mind these days, as companies of all measurements carry on to contend for staff in a tight labor current market. And, offered that 1 of the most consistent findings in labor economics is the reality that more substantial firms spend larger wages than more compact firms, you’d count on the most significant businesses to have little level of competition in terms of shell out.
Interestingly, in my individual new investigation into Homebase employing facts, I’m locating a astonishing outcome: Organizations with one to four staff members are eager to pay possible workforce 10% more than providers with 20-49 staff — making these companies worthy rivals.
Source: Homebase selecting info (January 2021 – March 2022). Note: Results from regression predicting Ln (concentrate on hourly wage) as a functionality of total number of workforce, point out, thirty day period, 12 months, month*yr, certain business description (e.g., grocery keep, pet store, consulting) and pick position roles (e.g., chef, baker). Controlling for NAICS codes or coarse small business descriptions yield equivalent benefits controlling for MSA, city or zip code as opposed to state yields regular effects, as does estimating products without having controls. Dealing with business worker sizing as a steady variable with a squared-expression yields consistent conclusions. Sturdy, clustered (by institution typical mistake bars. Product F=32.77***, R2 =.22. All total quantity of personnel indicator variables are statistically considerable at p < .05 (two-tailed tests) save for the 100 to 249 indicator variable.
How can the smallest companies offer a higher wage?
One explanation is that the smallest companies generate, on a size-adjusted basis, sufficient revenue to warrant a target wage premium. Looking into sales data for a selected sub-sample of Homebase customers, I can predict the ratio of a company’s monthly revenue to total number of employees — and find that the smallest companies enjoy a productivity advantage. They earn approximately $4,500 more per month per employee than companies with 20 to 49 employees (the baseline category for comparison). Whereas, the largest companies in the Homebase sample have the lowest sales to employee ratio.
Source: Homebase hiring data (January 2021 – March 2022). Note: Results adjust for state, month, year, zip code and NAICS code. Treating business employee size as a continuous variable with a squared-term yields consistent conclusions, as does estimating a fractional logit model. Robust, clustered (by establishment standard error bars. Model F=45.25***, R2 =0.79. All total number of employee indicator variables are statistically significant at p < .05 (two-tailed tests) save for the 10 to 19 indicator variable. Excluding from analysis the companies with the greatest sales (e.g., 75th percentile or above) does not change results, nor does controlling for state or MSA as opposed to zip code. Largest firm category omitted due to sub-sample size considerations.
Do all of the smallest companies offer a higher wage?
My analysis accounts for a host of factors that can explain a higher target wage, including job location, industry, and seasonality. However, there are instances where the smallest companies offer lower target wages than companies with 20 to 49 employees:
- Food & drink: The smallest companies in this category pay approximately 4% less.
- Roles with a target wage of $15 or less: The smallest companies in this category offer a wage deficit of approximately 3.9%.
Researchers often define and measure “large” companies as those with greater than 10,000 workers, and “small” companies as those with 100 or fewer. However, there are considerable operational differences between companies with one to four employees and those with 20, 60, or 100 employees.
Large businesses are often bureaucratic, formal, rigid, and standardized. They tend to be powerful and prestigious, and they have advantages that help them make organizing and operating more efficient and economical. Annual rankings of the best companies to work for are, without fail, lists of some of the largest companies in the country. So, not surprisingly, many of those ranked are also the companies new college graduates aspire and apply to work for.
The smallest businesses are often more collegial, familial, flexible, and authentic. These businesses were responsible for 16.2% of gross job gains in the United States in the second quarter of 2022 — and approximately 64% of job gains at all new firms (as most businesses start out small). On the other hand, most job losses at companies that are closing occur in the smallest of companies.
For many of these very small companies, a job posting using Homebase hiring might be the first hire they make—or the first hire outside of the original circle of “friends and family” involved in the business. Furthermore, the very fact a company is hiring suggests that the company has (projected) demand for its products or services at a level the current employee base cannot comfortably meet. Such growing companies may not be typical of all very small businesses.
Hiring is hard even in the best of times. But in a hot labor market like the US is currently experiencing, hiring can be frustrating and fruitless for all employers — especially, the smallest. Small companies do not have the same brand equity as large companies, which means they often must expend more time, effort, and money reaching — and then educating and convincing — prospective employees their small (but mighty!) businesses are a good place to work.
A higher target wage — made possible by a productivity edge — may put many of the smallest businesses in a better position to compete with larger employers for hourly workers. Of course, it’s important to also consider that employees’ needs and desires in work and a workplace are changing. As pay is only one factor candidates consider when comparing and evaluating competing offers, employers of all sizes must keep abreast of their evolving preferences to compete to attract — and even retain — today’s employees.