Information, Employer Size, Training, and Wage Growth

We posit that larger employers possess greater information than smaller employers about the effects of on-the-job training (OJT) investments on the productivity of their workers. As a result, larger employers pay a greater percentage of OJT costs, and OJT is effectively more firm-specific at larger firms. Supporting our model, we find: (1) the positive effect of productivity growth on wage growth is smaller in larger plants; (2) the adverse effect of minimum wage on wage growth is smaller in larger plants; and (3) the negative effect of initial OJT investments on starting wages is smaller in larger plants.