This paper examines the positive relationship between employer size and wages, considering six possible explanations: (1) large employers hire higher quality workers; (2) offer inferior working conditions; (3) use high wages to prevent unionization; (4) have more ability to pay high wages; (5) face smaller applicant pools relative to vacancies; (6) are less able to monitor workers. While some support is found for the first explanation, a significant wage premium for workers at large employers remains. The size-wage differential is a key feature of labor markets. Unlike the union-wage differential, it exists without an obvious agent. The evidence shows a large size-wage effect: moving from an employer one standard deviation below average to one standard deviation above average is associated with a wage gain similar to moving from nonunion to unionized employers. Company size and establishment size have independent effects on pay. While a size differential in labor quality can explain about half of the total size-wage differential, the other three factors explain little of the remainder. The residual size-wage effect is large, making the question of why size matters for wages more perplexing. Additional hypotheses about the origins of employer size-pay differentials are presented. The neoclassical explanation of compensating differentials suggests that larger employers pay more due to differences in worker quality or working conditions. However, evidence suggests that working conditions do not fully explain the size-wage differential. Institutional explanations suggest that large nonunion employers act as if they were unionized to avoid unionization. This leads to higher wages, better benefits, and improved working conditions. However, the size-wage relationship remains strong even within the union sector. Product-market power explanations suggest that larger employers may share excess profits with workers. However, this does not fully explain the size-wage differential. The evidence suggests that the size-wage differential is not fully explained by any single factor. The size-wage effect is large and persistent, and the reasons for it remain unclear. The paper concludes that the size-wage differential is both significant and widespread, and the analysis leaves us unable to fully explain it.This paper examines the positive relationship between employer size and wages, considering six possible explanations: (1) large employers hire higher quality workers; (2) offer inferior working conditions; (3) use high wages to prevent unionization; (4) have more ability to pay high wages; (5) face smaller applicant pools relative to vacancies; (6) are less able to monitor workers. While some support is found for the first explanation, a significant wage premium for workers at large employers remains. The size-wage differential is a key feature of labor markets. Unlike the union-wage differential, it exists without an obvious agent. The evidence shows a large size-wage effect: moving from an employer one standard deviation below average to one standard deviation above average is associated with a wage gain similar to moving from nonunion to unionized employers. Company size and establishment size have independent effects on pay. While a size differential in labor quality can explain about half of the total size-wage differential, the other three factors explain little of the remainder. The residual size-wage effect is large, making the question of why size matters for wages more perplexing. Additional hypotheses about the origins of employer size-pay differentials are presented. The neoclassical explanation of compensating differentials suggests that larger employers pay more due to differences in worker quality or working conditions. However, evidence suggests that working conditions do not fully explain the size-wage differential. Institutional explanations suggest that large nonunion employers act as if they were unionized to avoid unionization. This leads to higher wages, better benefits, and improved working conditions. However, the size-wage relationship remains strong even within the union sector. Product-market power explanations suggest that larger employers may share excess profits with workers. However, this does not fully explain the size-wage differential. The evidence suggests that the size-wage differential is not fully explained by any single factor. The size-wage effect is large and persistent, and the reasons for it remain unclear. The paper concludes that the size-wage differential is both significant and widespread, and the analysis leaves us unable to fully explain it.