Friday, January 25, 2019

Small need not be good

In 2015, small enterprises were four times more likely to lay off their workers than large ones. Workers employed by large firms also earned more—on average, 54 percent more than workers at small companies. Companies with more than 500 employees offer 2.5 times more paid leave and insurance benefits and 3.9 times more in retirement benefits than workers at firms with fewer than 100 employees. Large firms are also more likely to be unionized, and they employ a greater share of women and minorities than small firms do.

The economists Lance Taylor and Özlem Ömer illustrate in a recent study, the “stagnant” low-wage sectors—nursing homes, fast food, construction, education and health, business services, transportation and warehousing, maids—are the least concentrated with the lowest profit margins. Concentration per se can’t explain low wages in these industries. Companies in these sectors are usually the ones that complain the most about a $15/hour minimum wage, or the unionization of their work forces, claiming they don’t have the economic resources to pay the kinds of wages and benefits often secured in union-negotiated deals.

An inflation-eroded minimum wage, the absence of unions, replacement of full-time employees by contractors and mass low-wage immigration are better explanations for wage stagnation, and non-enforcement of antitrust remedies is irrelevant to those causes. Wage and labor laws matter. The decades-long sustained attacks on unions have given corporations, both large and small, the power to break the traditional nexus between worker productivity and wage gains. This development has generated a massive shift in income from labor to capital over the past 35 years, irrespective of whether workers are employed by Amazon or mom-and-pop sweatshops. Targeting based on size alone won’t get rid of all of the abuses.

While the image of Steve Jobs and Steve Wozniak beavering away in a garage to create Apple has done much to legitimize this myth, in reality, as Atkinson and Lind document, “the tech revolution owes far more to teams of scientists and engineers working in well-funded corporate labs than to college dropouts tinkering at home.” In support of this proposition, the authors cite the study of professors Anne Marie Knott and Carl Vieregger, which shows that “large firms not only invest more in R&D than small firms, they get more innovation output per dollar invested.”

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