Rene Morissette

Why Has Inequality in Weekly Earnings Increased in Canada

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 Canadas 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.

Longitudinal Aspects of Earnings Inequality in Canada

In this paper we ask the three following questions : 1) even after controlling for cyclical effects, do new spells of low earnings now last longer than they used to? 2) once a male worker starts a new spell of low earnings, does he receive lower real annual wages now than his counterparts did in the mid-seventies? 3) has long-term inequality in earnings risen in the eighties? The answers to these questions are the following. First, even after taking account of the relatively high unemployment rates observed since the mid-eighties, it was harder for Canadian male workers, especially those aged 18-24, to move out of the bottom of the earnings distribution during the 1985-93 period than during the 1975-84 period. In other terms, new spells of low earnings now last longer for these workers. Second, real annual wages received by young males who went through a new spell of low earnings were significantly lower in 1985-93 than in 1975-84. Third, during the eighties, inequality in earnings cumulated over either six or ten years rose at the same pace as inequality in annual earnings.

The Evolution of Wealth Inequality in Canada, 1984-1999

Using data from the Assets and Debts Survey of 1984 and the Survey of Financial Security of 1999, we document the evolution of wealth inequality in Canada between 1984 and 1999. Our main findings are as follows: 1) wealth inequality has increased between 1984 and 1999, 2) the growth in wealth inequality has been associated with substantial declines in real average and median wealth for young couples with children and recent immigrants, 3) real median wealth and real average wealth rose much more among family units whose major income recipient is a university graduate than among other family units, 4) real median and average wealth fell among family units whose major income recipient is aged 25-34 and increased among those whose major income recipient is aged 55 and over, 5) the aging of the Canadian population over the 1984-1999 period has tended to reduce wealth inequality, 6) diverging changes in permanent income do not explain a substantial portion of the growing gap between low-wealth and high-wealth family units. Factors that may have contributed to rising wealth inequality - which cannot be quantified with existing data sets - include differences in the growth of inheritances, inter vivos transfers, rates of return on savings and number of years worked full-time. In particular, rates of return on savings may have increased more for wealthy family units than for their poorer counterparts as a result of the booming stock market during the 1990s.

Working More? Working Less? What Do Canadian Workers Prefer?

Faced with high unemployment rates, an unequal distribution of worktime, and shifts to temporary, part-time and contract employment, Canadian workers may prefer to change their work hours. Using data from the Survey of Work Arrangements of 1995, we find that two thirds of Canadian workers are satisfied with their work hours. The majority of workers who are not satisfied would prefer more hours for more pay rather than fewer hours for less pay. This finding is robust as it holds for each age group, education level, seniority level, industrial and occupational group. Workers most likely to want more work hours are generally young, have low levels of education, have little seniority, hold temporary jobs, work short hours and are employed in low-skill occupations. Workers who are the most likely to desire a shorter work week are professionals, managers, and natural and social science workers, have high hourly wage rates, possess high levels of education, have long job tenure, occupy permanent jobs and already work long hours. Calculations based on the Survey on Work Reduction of 1985 suggest that if Canadian workers were to voluntarily reduce their work week, the number of work hours available for redistribution would unlikely be sufficient to both eliminate underemployment and reduce unemployment. The potential for work time redistribution, as measured by the propensity to desire fewer hours, appears to be greatest (lowest) in age-education groups with relatively low (high) unemployment rates. This implies that the resulting decrease in unemployment and underemployment could be more pronounced in groups where workers are already relatively successful.

The Returns to Education and the Increasing Wage Gap Between Younger and Older Workers

Using a regression decomposition approach, we find that, during the 1980s, the growth in the relative educational attainment of older workers has contributed to about one-quarter of the increase in the age-wage gap of men and women. During the 1990s, the age-wage gap increased to a much lesser extent. Changing relative educational attainment accounted for a much greater proportion of the much smaller increase in the gap: almost one-half for males and over three-quarters for women. We also find that, during the 1980s, the expected weekly wages associated with all levels of education fell for younger workers, both for men and women (from 2% to 16%, depending upon education level). Older employees, on the other hand, experienced mixed results. Expected weekly wages rose for some older workers and fell for some others.

Computers, Fax Machines and Wages in Canada: What Really Matters?

Controlling for observable worker attributes, we find that computer use is associated with a wage premium of at most 14%. Following Dinardo and Pischke (1997), we examine the wage premium associated with other tools used on the job. While these authors find a significant wage premium for the use of pencils or for sitting down while working, we find a substantial and robust wage premium for the use of a fax machine. Using a variety of reasonable specifications of wage equations including both a computer use indicator and a fax use indicator, we consistently find a stronger effect for fax machines than for computers. Along with Dinardo and Pischke (1997), we argue that workers who use computers earn more than other employees not because of their computing skills per se, but rather because they have more other unobserved skills - innate or learned through school - than other employees.

The Evolution of Wealth Inequality in Canada

Using data from the Assets and Debts Survey of 1984 and the Survey of Financial Security of 1999, we document the evolution of wealth inequality in Canada between 1984 and 1999. Our main findings are as follows: 1) Wealth inequality has increased between 1984 and 1999; 2) the growth in wealth inequality has been associated with substantial declines in real average and median wealth for recent immigrants and young couples with children; 3) real median wealth and real average wealth rose much more among families whose major income recipient is a university graduate than among other families; 4) real median and average wealth fell among families whose major income recipient is aged 25-34 and increased among those whose major income recipient is aged 55 and over; 5) the aging of the Canadian population over the 1984-1999 period has tended to reduce wealth inequality; 6) changes in permanent income do not explain a substantial portion of the growing gap between low-wealth and high-wealth families. Factors that may have contributed to rising wealth inequality - which cannot be quantified with existing data sets - include differences in the growth of inheritances, inter vivos transfers, rates of return on savings and number of years worked full-time. In particular, rates of return on savings may have increased more for wealthy family units than for their poorer counterparts as a result of the booming stock market during the 1990s.

Workers Laid-Off During the Last Three Recessions: Who Were They, and How Did They Fare?

Over the last three decades, Canada has experienced three recessions: one that started during the early 1980s; a second that began during the early 1990s; and the most recent one, which led to employment declines starting in October 2008. For each recession, this study: a) examines which workers were laid-off; b) quantifies layoff rates; and c) assesses the proportion of workers that found a job shortly after being laid-off. The layoff concept used includes temporary layoffs as well as permanent layoffs.

How Have the Risk of Layoff and Earnings Losses of Laid-Off Workers Evolved Since the Late 1970s in Canada?

This study examines how the risk of job loss and the short-term earnings losses of laid-off workers evolved between the late 1970s and the mid-2000s.

Wage Growth Over the Past 30 Years: Changing Wages by Age and Education

This article in the Economic Insights series examines two questions: (1) Which groups of Canadian workers have experienced stronger real wage growth over the past three decades?; and (2) To what extent do individuals’ acquisition of education, general work experience, and seniority within firms, as well as their movements into higher-wage or lower-wage occupations and industries, account for differences in real wage growth observed across groups of workers? This article uses data from various Statistics Canada surveys and focuses on the real (hourly or weekly) wages earned by full-time workers. It is based on research carried out at Statistics Canada aimed at providing information on how wage rates of Canadian workers have changed over the past three decades. Wages are expressed in 2010 dollars. Since the early 1980s, real wages of various groups of workers have grown at markedly different rates in Canada and in many industrialized Western countries. Technological changes, growth in international trade, institutional factors (e.g., de-unionization, changes in minimum wages, and changes in the incidence of pay-for-performance), movements in group-specific labour supplies, and changes in social norms have been cited as potential drivers of this differential wage growth. To help shed some light on this matter, the article examines how real wages of Canadian workers evolved across age groups and education levels from 1981 to 2011.