Why has inequality in weekly earnings increased in Canada?
by René Morissette
Business and Labour Market Analysis Division
Analytical Studies Branch research paper series, No. 080
Inequality in weekly earnings increased in the eighties in Canada.
The growth in inequality occurred in conjunction with three facts. First,
real hourly wages of young workers dropped more than 10%. Second, the
percentage of employees working 35-40 hours per week in their main job
fell and the fraction of employees working 50 hours or more per week
rose. Third, there was a growing tendency for highly paid workers to
work long workweeks. We argue that any set of explanations of the increase
in weekly earnings inequality must reconcile these three facts.
Sectoral changes in the distribution of employment by industry and
union status explain roughly 30% of the rise in inequality. The reduction
in real minimum wages and the decline of average firm size explain very
little of the growth in age-earnings differentials. Skill-biased technological
change could have increased both the dispersion of hourly wages and
the dispersion of weekly hours of work and thus, is consistent a priori
with the movements observed.
Yet other factors may have played an equally important – if not more
important – role. The growth in competitive pressures, possible shifts
in the bargaining power (between firms and labour) towards firms, the
greater locational mobility of firms, the increase in Canada's openness
to international trade, the rise in fixed costs of labour and possibly
in training costs may be major factors behind the growth in weekly earnings
inequality in Canada.
View the full publication.
You need to use the free Adobe Reader to view PDF documents. To view (open) these files, simply click on the link. To download (save) them, right-click on the link. Note that if you are using Internet Explorer or AOL, PDF documents sometimes do not open properly. See Troubleshooting PDFs. PDF documents may not be accessible by some devices. For more information, visit the Adobe website or contact us for assistance.
