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Why Isn't Productivity More Popular? A Bargaining Power Approach to the Pay/Productivity Linkage in Canada

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  • Mathieu Dufour
  • Ellen Russell

Abstract

Canadian real labour income has increasingly lagged behind productivity growth. This article employs a bargaining power approach to wage determination to explore the hypothesis that some public polices intended to promote productivity growth may have contributed to the erosion of worker bargaining power, thereby reducing workers’ capacity to benefit from productivity growth. We present an econometric analysis of several policies that supports this hypothesis.

Suggested Citation

  • Mathieu Dufour & Ellen Russell, 2015. "Why Isn't Productivity More Popular? A Bargaining Power Approach to the Pay/Productivity Linkage in Canada," International Productivity Monitor, Centre for the Study of Living Standards, vol. 28, pages 47-62, Spring.
    • Handle: RePEc:sls:ipmsls:v:28:y:2015:3
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    File URL: http://www.csls.ca/ipm/28/dufouretal.pdf
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    References listed on IDEAS

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    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Julie Turcotte & Lori Whewell Rennison, 2004. "The Link between Technology Use, Human Capital, Productivity and Wages: Firm-level Evidence," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 25-36, Fall.
    3. Richard G. Anderson, 2007. "How well do wages follow productivity growth?," National Economic Trends, Federal Reserve Bank of St. Louis, issue Mar.
    4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    5. Pierre Fortin, 2001. "Interest Rates, Unemployment and Inflation in the 1990s: The Canadian Experience," The Review of Economic Performance and Social Progress, in: Andrew Sharpe, Executive Director & France St-Hilaire, Vice-President , Research & Keith Banting, Di (ed.), The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s, volume 1, Centre for the Study of Living Standards;The Institutute for Research on Public Policy.
    6. Nicole Fortin & David A. Green & Thomas Lemieux & Kevin Milligan & W. Craig Riddell, 2012. "Canadian Inequality: Recent Developments and Policy Options," Canadian Public Policy, University of Toronto Press, vol. 38(2), pages 121-145, June.
    7. Lars Osberg & Andrew Sharpe, 2011. "Beyond GDP: Measuring Economic Well-Being in Canada and the Provinces, 1981-2010," CSLS Research Reports 2011-11, Centre for the Study of Living Standards.
    8. Don Drummond, 2011. "Confessions of a Serial Productivity Researcher," International Productivity Monitor, Centre for the Study of Living Standards, vol. 22, pages 3-10, Fall.
    9. Barry Bosworth & George L. Perry, 1994. "Productivity and Real Wages: Is There a Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 317-343.
    10. Feldstein, Martin, 2008. "Did wages reflect growth in productivity?," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 591-594.
    11. Rebecca Ann Freeman, 2011. "Accounting for the Self-Employed in Labour Share Estimates: The Case of the United States," OECD Science, Technology and Industry Working Papers 2011/4, OECD Publishing.
    12. Don Drummond, 2006. "The Economists' Manifesto for Curing Ailing Canadian Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 13, pages 21-26, Fall.
    13. Lawrence Mishel & Kar-Fai Gee, 2012. "Why Aren’t Workers Benefiting from Labour Productivity Growth in the United States?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 23, pages 31-43, Spring.
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    Cited by:

    1. James Uguccioni, Andrew Sharpe and Alexander Murray, 2016. "Labour Productivity and the Distribution of Real Earnings in Canada, 1976 to 2014," CSLS Research Reports 2016-15, Centre for the Study of Living Standards.
    2. Kosta Josifidis & Radmila Dragutinović Mitrović & Novica Supić, 2016. "Redistribution and Transmission Mechanisms of Income Inequality – Panel Analysis of the Affluent OECD Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(2), pages 231-258, April.

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    More about this item

    Keywords

    Labour Income; Bargaining Power; Pay/Productivity Linkage; Wages; Income; Public Policy; Canada; Worker Bargaining Power;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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