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Firm Size and Employment during the Pandemic.

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  • 1The University of Texas, Austin, TX, USA.

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Workers in small businesses faced higher unemployment risk during the COVID-19 pandemic. This study reveals firm size impacts job security, potentially accelerating market concentration trends.

Keywords:
COVID-19employmentfirm sizeremotability

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Area of Science:

  • Economics
  • Labor Economics
  • Business Studies

Background:

  • Previous research indicates a wage premium associated with firm size, though this has diminished recently.
  • The initial phase of the coronavirus disease 2019 (COVID-19) pandemic presented unprecedented economic challenges.

Purpose of the Study:

  • To investigate the relationship between firm size and unemployment risk during the early stages of the COVID-19 pandemic in the United States.
  • To determine if firm size influences job security in the face of a major economic shock.

Main Methods:

  • Analysis of unemployment data based on firm size during the initial COVID-19 outbreak.
  • Utilizing both yearly and state-month variations to assess unemployment disparities.
  • Controlling for worker sorting and industrial context to isolate the effect of firm size.

Main Results:

  • Workers in small enterprises experienced significantly higher excess unemployment compared to those in larger firms.
  • The firm size advantage in job security was most evident in sectors with high remote work capability.
  • This advantage reversed in industries most severely impacted by the pandemic's direct effects.

Conclusions:

  • Firm size is demonstrably linked to differential job security, with larger firms offering greater protection.
  • The pandemic appears to have accelerated pre-existing trends toward product and labor market concentration.
  • Initial policy interventions were insufficient in safeguarding employees of small and medium-sized businesses.