Whom Should I Work For? Firm Characteristics and New Workers' Future Pay

Abstract

This study looks at how a company's financial characteristics before the start of a new worker's employment predict the worker's future salary growth and job stability. Our research focuses on publicly traded U.S. companies and conducts analyses at the worker-job level using wage and employment information obtained from Census Longitudinal Employer-Household Dynamics (LEHD). Our analyses reveal distinct patterns: for low-income workers, firm size emerges as the most influential factor for achieving higher long-term pay and job security. As income level rises, the impact of size declines and middle-and high-income workers increasingly benefit from firms with elevated cash reserves and robust operating cash flows. Strikingly, despite their prominence in equity markets, accrual-based earnings performance and stock returns exhibit limited predictive power regarding workers' long-term pay and employment stability. These findings aid workers in making informed job decisions and contribute to labor economics and accounting fields by assessing the utility of financial information for employment choices.

Keywords: Wages, Firm Financial Performance, Firm Stock Performance, Job Security, Income Levels

JEL Classification: J31, J63, M41, M51