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United States Small Business Administration 
Office of Advocacy 
RS 156_______________________________________________________________________________________________







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Purpose

The use of computers by workers is an important element in the
current employment shift toward higher­skill jobs. The extent
of small businesses' participation in this shift, and the wage
benefits by firm size to employees participating in the shift,
are the subjects of investigation in this study.

Many policy­makers believe that the competitive potential
of U.S. businesses - both at home and abroad - will depend on
the ability of firms to incorporate computer­based technologies
and to upgrade the skills of their workers. It is important to
understand how small and large firms have adapted their work places
to the emerging information­based economy and whether they
have realized similar gains in productivity from the use of computers.
Productivity gains from the use of computers is expected to be
best measured by the wage differential of computer users over
other workers in the same industry.

Scope and Methodology

Data for this research became available with the inclusion of
a question on computer use in the Current Population Survey (CPS)
of January 1991. These data were merged with data on firm size
from the March 1991 survey and wage data from the April 1991 survey.
The CPS is a regular survey of households by the Bureau of the
Census and covers over 50,000 households. The survey panel changes
from month to month, so only those households included in the
survey in all three periods could be used. The result was 28,407
observations that matched across all three time periods, or less
than half of the 67,374 individuals reporting on employment in
January 1991. Workers under the age of 16 and over the age of
65 were eliminated from the sample, as well as a few workers with
very low wages. The final sample was 18,009 individuals.

The data permitted further analysis by worker age, education,
sex, job tenure, industry, and occupation. The analysis revealed
the wage returns to computer usage to be robust and nearly constant
across firm sizes, industries, and all of the above worker characteristics.
Computer usage in information­based industries was the highest;
production occupations showed the lowest computer usage by workers.
Growth industries were analyzed separately and revealed higher
computer usage among workers in growing industries.

Highlights

- Small firms were found to be hiring college­educated
workers and creating jobs at the top end of the wage spectrum
in greater proportions than in the past. Among new hires, small
firms employed 58.9 percent of all workers and 54.8 percent of
new hires in the top wage quartile. In the time period covered
in the report, small firms were responsible for the majority of
new hiring at the high end of the wage spectrum. The author states,
"Between 1990 and 1991 most high­wage jobs were being
created by small firms."
- Computer usage was twice as high among employees in the highest
wage quartile compared with those in the lowest quartile. This
relationship held for all firm sizes and lengths of job tenure.
The overall average was 29.6 percent of workers using computers
in the lowest wage quartile and 74.2 percent using computers in
the highest wage quartile. The wage return to computer usage was
present even among new hires in the under 25­employee firm,
where the lowest wage quartile showed 21.6 percent of workers
using computers and the highest wage quartile showed 58 percent
using computers. To the extent that wage is based on the marginal
value of worker product, computers are an important influence
for higher worker productivity in firms of all sizes.
- The highest premium for computer users over nonusers was found
to be in small firms in industries with the highest growth rate,
where a premium of nearly 24.8 percent in wages was observed.
Fast­growing large firms did nearly as well, with an estimated
23.8­percent wage premium for computer users.
- Computer usage was highest in fast­growing firms of more
than 1,000 employees, with 69 percent of employees using computers;
it was lowest in slow growth firms with fewer than 25 employees
where less than 31 percent used computers in their occupation.
The author suggests that the 25­employee level may be a threshold
for the adoption of computer technologies.
- Occupations requiring information processing exhibit computer
usage four times as high as occupations that are mostly production­oriented.
Information­processing occupations show computer usage to
be 71.9 percent for small firms and 81.3 percent for large firms.
- Women use computers at a higher rate than men in firms of
all sizes. More than 50 percent of women in small firms use computers
on the job; the rate for men is below 40 percent.

Ordering Information

The complete report is available from:

National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4650
(703) 487-4639 (TDD)

Order Number: PB95­239984

Cost: A06; A02 Microf.*Last Modified 6-11-01