Which employer pays best?

It is Labour Day or, to give it its official name: International Workers’ Day. So, all please raise your fists and sing with me: “Arise, ye pris’ners of starvation. Arise, ye wretched of the earth…” No? Ok, maybe not. Well, maybe I can just give some readers evidence-based advice on how to find the best-paying and most stable job. What companies should you try to work for?

LauraYue Li and Hayong Yoon used the data maintained by the US Census Bureau for employment and wage information 1.3 million job moves between 1985 and 2021. They found that the average wage increase for every job change is 20.7% but much higher for low-income workers where the average wage increase is some 42.2%. Meanwhile, wage growth while staying at a company tends to be higher for high-income workers who on average see their wages grow 30.3% in years two to five of their employment in a firm while low-income workers see their wages increase by 15.2% over the same period.

I can already picture readers taking out pen and paper to calculate how their wages compare to these numbers and arranging for an important meeting with their boss if their personal numbers are too low…

But before you get too excited, think about your employer. Not all companies are equally able to pay higher wages (employers, you can thank me later). Larger companies tend to be better for salary progression. A firm with one standard deviation larger balance sheet pays some 8.4% more. However, the effect of firm size is particularly pronounced for low-income jobs and about half for high-skilled, high-income jobs.

For high-income jobs, what is much more important is not the size of the company nor commonly used indicators like share price performance or profitability (at least not very much). Instead, the most important drivers of wages and wage growth are cash holdings and cash flows. A company needs to be cash rich to pay its employees well, so instead of looking at major brands, or recent success, look at how flush they are with cash. This apparently is the secret to financial success for employees. And by the way, the same factors not only determine wage growth but job security. A company that has high cash reserves is significantly less likely to reduce headcount in tough times.

And now, let’s all sing it together…