Reproductive skew theory has not heretofore formally addressed one of the most important questions in evolutionary biology: How can whole-life sterile castes evolve? We construct a transactional skew model investigating under what conditions a subordinate in a multimember group is favored to develop into a morphologically specialized worker caste. Our model demonstrates that, contrary to former expectations, the ecological and genetic conditions favoring caste differentiation are far more restrictive than those favoring high skew. Caste differentiation cannot be selected in saturated, symmetrical relatedness groups unless the genetic relatedness among group members is extremely high. In contrast, it can be selected in the saturated, asymmetrical relatedness (parent-offspring) groups with complete skew. If we also consider the future reproduction of subordinates, caste differentiation is possible only after the group size reaches a certain critical point. Most importantly, caste differentiation in a parent-offspring group increases its saturated group size. The positive feedback between group size and the degree of caste differentiation can continue in principle until completely sterile worker castes emerge. Thus, at least in the case of parent-offspring groups, group size but not the degree of reproductive skew may be a better index of the level of social complexity. A scheme for the evolution of sterile worker castes that integrates the role of group size into the framework of reproductive skew theory is proposed.