This paper examines the relationship between employer size and wages, exploring six potential explanations for the positive correlation: hiring higher-quality workers, offering inferior working conditions, using high wages to forestall unionization, having more ability to pay high wages, facing smaller pools of applicants relative to vacancies, and being less able to monitor workers. The authors find some support for the first explanation but conclude that there is still a significant wage premium for those working for large employers. They present stylized facts showing that the size-wage effect is substantial, with the wage gain associated with moving from a large to a small employer being comparable to the gain from moving from a nonunion to a unionized employer. The study also discusses the independent effects of company size and establishment size on pay, and suggests that while a size differential in labor quality can explain about half of the total size-wage differential, the remaining difference is not fully explained by the other factors. The paper concludes by noting that the size-wage differential remains a puzzle and calls for further empirical research to develop a comprehensive theory.This paper examines the relationship between employer size and wages, exploring six potential explanations for the positive correlation: hiring higher-quality workers, offering inferior working conditions, using high wages to forestall unionization, having more ability to pay high wages, facing smaller pools of applicants relative to vacancies, and being less able to monitor workers. The authors find some support for the first explanation but conclude that there is still a significant wage premium for those working for large employers. They present stylized facts showing that the size-wage effect is substantial, with the wage gain associated with moving from a large to a small employer being comparable to the gain from moving from a nonunion to a unionized employer. The study also discusses the independent effects of company size and establishment size on pay, and suggests that while a size differential in labor quality can explain about half of the total size-wage differential, the remaining difference is not fully explained by the other factors. The paper concludes by noting that the size-wage differential remains a puzzle and calls for further empirical research to develop a comprehensive theory.