Why do big companies pay more than small companies?


Because they have to. Working conditions at big companies are worse:

Using a Spanish survey, this paper investigates the relationship between firm size and working conditions, and whether firm size differences in workers’ job satisfaction can be accounted for by differences in their work environment. The results indicate that: (1) workers in larger firms have a significantly lower level of autonomy and, in general, face worse working conditions; (2) working in large firms has no statistically significant effect on job satisfaction after controlling for working conditions; and (3) no systematic differences exist in worker mobility across firm-size categories. We conclude that observed wage differentials by firm size are utility-equalizing, so they are due to differences in working conditions.

Source: “Does size matter? The influence of firm size on working conditions and job satisfaction” from Institute for Social and Economic Research, Working Paper No. 2008-30 September 2008

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