Do Large Modern Retailers Pay Premium Wages?

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.

Labor Market Concentration, Earnings, and Inequality

“…Alternatively, if the composition of employers shifts toward larger firms with more established human resources practices as concentration increases, workers in these groups could benefit from institutional safeguards against pay discrimination, large-firm wage premiums, or other differences in business practices between incumbent and entrant firms. There is some evidence of a wage premium associated with modern chain retailers (Cardiff-Hicks et al, 2015). The effects of concentration on percentile earnings ratios for Black workers and women also differ from the aggregate pattern.…”

Middle Managers, Personnel Turnover and Performance: A Long-Term Field Experiment in a Retail Chain

“…In retailing -one of the largest sectors worldwide in terms of employment (Cardiff-Hicks et al 2015, Friebel et al 2017, Hortaçsu and Syverson 2015 -and many other industries, such as call centers, restaurants, and tourism, employees interact frequently with "their" manager. Given limited resources of top managers, it is the middle managers who connect top managers with the operational level, supervisors and workers (Bunderson et al 2016).…”

Informality, Consumption Taxes and Redistribution

“…Traditional retailers can improve food access for poor households due to their numerous locations and smaller bundles (Crush, 2018); but storage limitations in these stores also cause food hazards and low nutrient quality (Hopkins, 2006). Moreover, traditional retail employs 15-20% of the workforce in many developing countries, but modern retailers pay higher wages (Cardiff-Hicks et al, 2014). The lack of consensus is reflected in the ongoing debate over regulating modern retail entry; country policies vary from full liberalization (Latin America) to prohibitive barriers (Southeast Asia).…”