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Higher earnings in large firms? Employer size-wage relation in the Czech Republic

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  • Diana Bílková

Abstract

Current research is primarily focused on the wage issue in the Czech Republic in relation to the size of the enterprise. This paper examines the development of wage rates in companies classified by the number of employees from the 2008 economic crisis onwards. Since the analysis and estimation of current trends in wage differentiation based exclusively on average and median wages are insufficient, moving from level characteristics to the entire frequency distribution appears justifiable. Wage distribution models based on three-parameter lognormal curves and broken down by the number of company employees were constructed to trace wage developments from the onset of the recession; the starting points of the curves represent the minimum wage in the respective year. The remaining two parameters were estimated utilising the maximum likelihood method. Having applied the curves, the proportions of employees with wages not exceeding a certain threshold were calculated. With the gross monthly wage dependence on the company size having been verified via one-way analysis of variance, the research has confirmed that large foreign firms provide the highest possible paying jobs. The average wage difference between the very large and the smallest organizations was calculated to reach almost 15,500 CZK; average wages in the latter firms representing only 55% of those earned in the former companies. As for the median wage, the difference amounts to almost 14,000 CZK. It has also been proven that an estimated 91.40% of employees in the smallest firms do not achieve the average wage, whereas in large and very large companies this share is estimated at 47.10% and 51.56%, respectively.

Suggested Citation

  • Diana Bílková, 2019. "Higher earnings in large firms? Employer size-wage relation in the Czech Republic," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2019(2), pages 3-20.
    • Handle: RePEc:prg:jnlaop:v:2019:y:2019:i:2:id:618:p:3-20
    DOI: 10.18267/j.aop.618
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    References listed on IDEAS

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    1. Velenchik, Ann D., 1997. "Government intervention, efficiency wages, and the employer size wage effect in Zimbabwe," Journal of Development Economics, Elsevier, vol. 53(2), pages 305-338, August.
    2. Dunne, Timothy & Schmitz, James A, Jr, 1995. "Wages, Employment Structure and Employer Size-Wage Premia: Their Relationship to Advanced-Technology Usage at US Manufacturing Establishments," Economica, London School of Economics and Political Science, vol. 62(245), pages 89-107, February.
    3. Kevin T. Reilly, 1995. "Human Capital and Information: The Employer Size-Wage Effect," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 1-18.
    4. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
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    More about this item

    Keywords

    wage development; company size; Gini coefficient of diversification; wage distribution models; three-parameter lognormal curves; maximum likelihood method;
    All these keywords.

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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