Do Large Modern Retailers Pay Premium Wages?

47 Pages Posted: 24 Jul 2014

See all articles by Brianna Cardiff-Hicks

Brianna Cardiff-Hicks

Stanford Graduate School of Business

Francine Lafontaine

University of Michigan at Ann Arbor - Stephen M. Ross School of Business; University of Michigan at Ann Arbor - Department of Economics

Kathryn L. Shaw

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Date Written: July 2014

Abstract

With malls, franchise strips and big-box retailers increasingly dotting the landscape, there is concern that middle-class jobs in manufacturing in the U.S. are being replaced by minimum wage jobs in retail. Retail jobs have spread, while manufacturing jobs have shrunk in number. In this paper, we characterize the wages that have accompanied the growth in retail. We show that wage rates in the retail sector rise markedly with firm size and with establishment size. These increases are halved when we control for worker fixed effects, suggesting that there is sorting of better workers into larger firms. Also, higher ability workers get promoted to the position of manager, which is associated with higher pay. We conclude that the growth in modern retail, characterized by larger chains of larger establishments with more levels of hierarchy, is raising wage rates relative to traditional mom-and-pop retail stores.

Suggested Citation

Cardiff-Hicks, Brianna and Lafontaine, Francine and Shaw, Kathryn L., Do Large Modern Retailers Pay Premium Wages? (July 2014). NBER Working Paper No. w20313. Available at SSRN: https://ssrn.com/abstract=2471206

Brianna Cardiff-Hicks (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Francine Lafontaine

University of Michigan at Ann Arbor - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109-1234
United States
734-647-4915 (Phone)
734-936-0279 (Fax)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Kathryn L. Shaw

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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