Employer Dominance and Worker Earnings in Finance*

Wenting Ma

The Review of Corporate Finance Studies, 2024, vol. 13, issue 4, 1030-1079

Abstract: A few large firms in the U.S. financial system achieve substantial economic gains. Their dominance sets them apart while also raising concerns about the suppression of worker earnings. Utilizing administrative data, this study reveals that the largest financial firms pay workers an average of 30.2% more than their smallest counterparts, significantly exceeding the 7.9% disparity in nonfinance sectors. This positive size-earnings relationship is consistently more pronounced in finance, even during the 2008 crisis or compared to the high-tech sector. Evidence suggests that large financial firms’ excessive gains, coupled with their workers’ sought-after skills, explain this distinct relationship. (JEL G20, J31, J42, L11, L12, L13)

Date: 2024
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