Employer size and compensation: the role of worker characteristics

The substantial effect of employer size on wages, health insurance and pension coverage is examined. Much of the size-related variation in compensation is shown to result from the types of jobs and workers hired by large employers. While firm and establishment size have similar effects on wages, firm-size effects clearly dominate in the provision of fringe benefits, particularly for pensions. Worker and job types explain a larger share of the size-related variation for wages than for health insurance or pension coverage. Possible explanations for these patterns are provided.