Jamaica: Employer size and worker remuneration in the private sector

Abstract

Evidence suggests that labour markets do not clear as posited by conventional microeconomics. The enduring inter-industry wage differentials (IIWD) and employer-size wage differentials (ESWD) present a challenge. Data from the Jamaican private sector reveal that eswd could be the impetus for IIWD. After accounting for labour quality and other characteristics, employers with 10 to 49 employees and 50 or more employees pay estimated premiums of 14.3% and 22.9%, respectively. After estimating the differences in tenure profiles, the premium associated with the largest employer size was reduced to 15.9%, while the premium associated with establishments of 10 to 49 workers was unchanged. Notwithstanding the partial explanation provided by tenure profile differences, the bulk of the ESWD appears to be explained by other theoretical constructs.