We document new stylized facts on the occupational mix of businesses in the United States and how their internal organization evolves over their life cycles. Our main empirical finding is that younger businesses have fewer hierarchical layers and lower span of control than comparable older businesses do. Our results suggest that businesses become simultaneously more hierarchical and increase their managerial span of control over their life cycles. We show that this pattern is not entirely driven by selection or differences in size and is pervasive across cohorts and sectors.
…I. Data: We assemble an unique dataset by combining the confidential microdata of the Occupational Employment Statistics (OES) semiannual surveys from November 2002 through May 2017 with the administrative employment and wage records of the Quarterly Census of Employment and Wages (C’S) for private sector establishments from 1992 through the first quarter of 2020. The OES survey provides high-quality information on detailed occupation and wage distributions for a large sample of establishments at one or more times during their life cycles. The COX records contain the geographic location, industry, and quarterly total employment and wages for the near universe of private sector establishments operating in the United States. This combination of data allows us to observe the occupations and wages of workers at least once for about 1.8 million establishments with known ages.
…We summarize the internal organization of establishments using 2 variables that capture the number of hierarchical layers and the span of control. We follow et al 2015 and 2019 in classifying workers into managers, supervisors, and “other workers.” Using this information, we count the number of distinct layers of employment (ranging 1–3) and compute the span of control as the ratio of the number of other workers to the number of managers and supervisors in each establishment.
…One key advantage of our dataset is that it covers cohorts of businesses over an extensive period. In Figure 2 (panel B), we explore the relationship between hierarchical layers and age using repeated cross-sectional variation from surveys pooled separately for 2002–7200915ya and 2010–72017. Our results indicate that recent start-ups have relatively fewer layers, which leads us to conjecture that information and communication technology allow businesses to have relatively flatter structures. We find similar qualitative patterns for the measure of span of control. Another relevant source of heterogeneity is the multiunit status of an establishment. We explore heterogeneity in age fixed-effects between independent establishments and those that are part of multiunit organizations. Both types exhibit a statistically-significant positive association between layers (and span of control) and age.