Abstract
Previous studies have established that firm size is associated with a wage premium, but the wage premium has declined in recent decades. The authors examine the risk for unemployment by firm size during the initial outbreak of coronavirus disease 2019 in the United States. Using both yearly and state-month variation, the authors find greater excess unemployment among workers in small enterprises than among those in larger firms. The gaps cannot be entirely attributed to the sorting of workers or to industrial context. The firm size advantage is most pronounced in sectors with high remotability but reverses in the sectors most affected by the pandemic. Overall, these findings suggest that firm size is linked to greater job security and that the pandemic may have accelerated prior trends regarding product and labor market concentration. They also point out that the initial policy responses did not provide sufficient protection for workers in small and medium-sized businesses.
Highlights
Half of American workers are employed in small and medium-sized businesses
In this study we examine the connection between firm size and employment security during the pandemic
We find that the surge of unemployment between March and June 2020 was larger among workers in small firms than among those in large enterprises
Summary
Half of American workers are employed in small and medium-sized businesses. A recent estimate indicates that nearly 30 percent of private sector workers are employed by firms with fewer than 50 employees and another quarter by businesses with 50 to 499 employees (Oslund 2019). We find that the surge of unemployment between March and June 2020 was larger among workers in small firms than among those in large enterprises. The firm size advantage was greater in industries with high remotability, but the pattern reversed in industries most affected by the outbreak, such that the smallest businesses retained their workers at slightly higher rates than larger firms.
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