Working in family firms: paid less but more secure? evidence from French matched employer-employee data

We study compensation packages in family and non-family firms. Using French matched employer-employee data, we first show that family firms pay on average lower wages. We find that part of this wage gap is due to low wage workers sorting into family firms and high wage workers sorting into non-family firms. However, we also find evidence that company wage policies differ according to ownership status, so that the same worker is paid differently under family and non-family firm ownership. In addition, we find that family firms are characterized by lower job insecurity, as measured by lower dismissal rates. Family firms also appear to rely less on dismissals - and more on hiring reductions - than non-family firms when they downsize. We show that compensating wage differentials account for a substantial part of the inverse relationship between the family/non-family gaps in wages and job security.