Big Firms Create Big Inequality

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The authors find that the relationship between the growth in the size of companies and the level of inequality holds across the rich world. They looked at data from 1981 to 2010 on wages and the size of largest firms for 15 countries in the OECD, a club mostly of rich countries. The relationship between rising levels of income inequality and the size of firms was strong.
This effect is particularly noticeable in America and Britain, where firms have grown rapidly in recent decades. In America, for instance, the number of workers employed by the country’s 100 biggest firms rose by 53% between 1986 and 2010; in Britain the equivalent figure is 43.5%. On the other hand, in places where the size of firms has not changed much, such as Sweden, or where it has shrunk, such as Denmark, wage inequality has grown much less. Part of what is perceived as a global trend towards greater disparity in wages may actually be the result of the biggest firms employing a greater share of workers.


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