The Relationship between Firm Size and Wages in Utah

Published November 2023

Overview

This research describes the relationship between firm size and wages. In this research, companies are divided between small and large firms. Large firms are those with 250 or more employees. The wages of Utah bachelor's degree, associate degree, and technical certificate graduates from public universities and technical colleges who graduated between 2011 and 2014 (USHE graduates) were observed in the first five years after graduation. Wage, employer, and education data come from the UDRC databases. Employers were matched to the Department of Workforce Services' Quarterly Census of Employment and Wages Firm Find data to determine if an employer was considered large or small.

Summary of Findings

Finding 1: Overall, small and large firms employed a similar percentage of USHE graduates. There are, however, differences in the gender composition of small and large firms.


Finding 2: During the first five years after graduation, there was substantial movement from small to large firms. This movement differed by gender and race/ethnicity.


Finding 3: Among those who are strongly attached to the workforce, wage growth is similar between small and large firms, though wage levels differ between small and large firms and are further impacted by gender and race/ethnicity.


Finding 4: Wages and wage growth are higher consequent to time spent in large firms.


View Glossary of Terms


Detailed Findings

Finding 1: Overall, small and large firms employed a similar percentage of graduates. There are, however, differences in the gender compositions of small and large firms.

On average, large 
firms comprised only 4%
of companies, yet
employed 51% of USHE
graduates.

Overall,
women account
for 53% of all
large firm
employees.

  • In 2011, large firms employed 46% of USHE graduates. By 2019 this number grew to 56%, a 22% increase. During the same period, the percentage of large firms increased by 33%, from 3% to 4%.
  • Of bachelor’s degree earners employed in small firms, 38% were women while 62% were men. This was the most significant difference in gender compositions observed within firms.
  • Women are the majority of employees among all associate degree holders, regardless of firm size. Women account for 57% of large firm employees who hold a technical certificate.
  • Regardless of educational attainment, small and large firms only have minor differences in racial/ethnic composition.
Figure 1.1: This figure displays the share of firms that are considered large or small, and the share of USHE graduates employed by each size of firm.
Figure 1.2: This figure shows the demographic breakdown of USHE graduates employed in large and small firms, by postsecondary award type.

Finding 2: During the first five years after graduation, there was substantial movement from small to large firms. This movement differed by gender and race/ethnicity.

Between
15% and 18%
of USHE graduates
changed firm size
within the first year
after graduation.

Between
10% and 24%
more women than men
were employed in large
firms by the fifth
year after graduation.

  • Regardless of educational attainment, most movement between firm size categories occurred during the first year after graduation. After that, movement between firm size categories decreased with each successive year.
  • Both men and women tended to move to large firms, with the majority of both sexes employed by large firms. Men who earned a certificate were the exception. Most of them (55%) were still employed by small firms by the end of the fifth year after graduation.
  • Black associate degree earners and Native Hawaiian/Pacific Islander certificate earners saw employment in small firms increase by 42%, from 38% to 54%, and by 27%, from 33% to 42%, respectively.
  • Those who were majority employed in small firms during the fifth year after graduation were Black associate degree earners, at 54%. The majority of Native American/Alaska Native certificate earners, 56%, were employed by small firms.
Figure 2.1: The figure below looks at the share of graduates by educational award level who change firm size within each successive year after graduation.
Figure 2.2: This figure shows how the share of graduates employed by large firms changed between one and five years after graduation, by postsecondary award type and demographic group.

Finding 3: Among those who are strongly attached to the workforce, wage growth is similar between small and large firms, though wage levels differ between small and large firms and are further impacted by gender and race/ethnicity.

Wages grew
46%
between the first and
fifth years after
graduation.

Women employed in large
firms made
15%
more in wages than
women in small firms.

  • In the first year after graduation, average wages for those who were strongly attached to the workforce and employed by small firms were:
    • $25,681 for certificate recipients
    • $30,969 for associate degree recipients
    • $35,132 for bachelor's degree recipients
    • Wages grew by 41% (to $36,114), 41% ($43,524), and 58% ($55,583), respectively, by the fifth year after graduation.
  • In the first year after graduation, average wages for those who were strongly attached to the workforce and employed by large firms were:
    • $23,765 for certificate recipients
    • $32,538 for associate degree recipients
    • $35,753 for bachelor's degree recipients
    • Wages grew by 44% (to $34,272), 34% ($43,443), and 45% ($51,667), respectively, by the fifth year after graduation.
  • For all levels of educational attainment, women had higher average wages in large firms compared to women employed by small firms. For certificate earners, this was $3,345 more; for associate degree earners, this was $3,090 more; and for bachelor’s degree earners, this was $3,890 more per year.
  • Additionally, Asian certificate and bachelor’s degree earners, Black certificate earners, Hispanic associate and bachelor’s degree earners, Native American/Alaska Native associate degree earners, and white associate degree earners all had higher average wages in large firms than in small firms.
Figure 3.1: This figure shows wage growth between large and small firms in the five years after graduation, by educational attainment level.
Figure 3.2: This figure shows average wages paid by large and small firms, by demographic group and postsecondary award.

Finding 4: Wages and wage growth are higher consequent to time spent in large firms.

Time spent in
large firms was
associated with between
3.9% and 6%
higher wages, depending
on educational attainment.

Average wage growth
in the year of firm size
movement was between
2.6% and 4.5%
higher than for those who
did not change firm size.

  • Years spent in large firms were associated with 3.9%, 4.7%, and 6% higher annual wages for bachelor’s degree, associate degree, and certificate earners, respectively, over years spent in small firms.
  • In practical terms, these differences translate to an additional $1,481, $1,786, and $1,694 per year, respectively (in 2022 dollars).
  • The year of transition to a large firm is associated with 2.6%, 3.4%, and 4.5% more wage growth for bachelor’s degree, associate degree, and certificate earners than for similarly educated individuals who did not change firm size.

Note that results in Finding 4 come from regression modeling, which, aside from controlling for years post-graduation, industry, age, and experience, remove variation in wages between individuals and only measure the variation of wages for a given individual.
Figure 4.1: This figure shows coefficients (with 95% confidence intervals) estimating the relationship between working in a large or small firm and graduates' wages, stratified by award type.

Limitations

  • The firm size category was based only on the firm’s number of employees in Utah. A national or multinational firm may have had fewer than 250 jobs in Utah but more overall. In this case, a large firm would have been erroneously labeled a small firm.
  • Methods used to measure the relationship between firm size and wages do not establish a causal relationship between the two.
  • This study could not consider bonuses, tips, awards, or other benefits which may change the relationship between firm size and overall compensation.
  • The study did not include federal employees, individuals who are self-employed, and those employed by organizations exempt from participation in the Unemployment Insurance tax system.

Conclusion

  • This research shows that large firms are a small minority of firms employing USHE graduates, only 3%- 4%, yet they employed roughly half of all graduates.
  • Employment patterns between small and large firms were not equal when viewed by gender. Large firms had an almost equal distribution of men and women, while small firms employed more men than women.
  • After controlling for various factors among employees, the time spent in large firms was associated with higher pay, $1,481 for bachelor’s degree awardees and $1,694 for certificate earners. The year of transition to a large firm was also associated with higher wage growth than for those who remained in the same sized firm.

Full Report

Learn more about the relationship between firm size and wages

This report follows graduates of the Utah System of Higher Education for five years after graduation, observing their wages and mobility between small and large firms. Firm sizes come from the Department of Workforce Services' Quarterly Census of Employment and Wages, with 250 statewide employees being the dividing line between large and small firms. A "wage premium" associated with employment at large firms is calculated.

Report cover

Glossary

Project
Team

Ari Fenn
Ari Fenn

Assistant Commissioner,
Research
(Report Author)

Zachary Barrus
Zachary Barrus

Assistant Commissioner,
User Experience