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The Evolution of the Productivity-Median Wage Gap in Canada, 1976-2019

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  • Andrew Sharpe
  • James Ashwell

Abstract

The median wage is a key metric to assess developments in the standard of living of the population. Productivity gains are passed on to workers as real wage gains. But in recent decades the proportion of labour productivity gains that are being passed on to the typical or median worker has fallen in many advanced countries, a process known as decoupling. The article uses an accounting framework developed by the Centre for the Study of Living Standards to quantify the importance of the factors affecting the relationship between productivity and real median wages. It presents results for the 1976-2019 period in Canada. A key finding is that the annual gap between labour productivity growth and real hourly median wage growth fell from 1.36 percentage points per year in 1976-2000 to 0.46 points in 2000-2019. This was due to slower growth in wage inequality, the end of the decline of the labour share and an improvement in workers terms of trade. Productivity growth was relatively stable between periods. In the 1976-2000 period, the bargaining power of workers fell dramatically due to high unemployment, falling unionization rates and a rising import share. After 2000, these trends reversed or stabilized, improving the bargaining power of workers.

Suggested Citation

  • Andrew Sharpe & James Ashwell, 2021. "The Evolution of the Productivity-Median Wage Gap in Canada, 1976-2019," International Productivity Monitor, Centre for the Study of Living Standards, vol. 41, pages 98-117, Fall.
    • Handle: RePEc:sls:ipmsls:v:41:y:2021:4
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    File URL: http://www.csls.ca/ipm/41/IPM_41_Sharpe.pdf
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    References listed on IDEAS

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    1. David M. Williams, 2021. "Pay and Productivity in Canada: Growing Together, Only Slower than Ever," International Productivity Monitor, Centre for the Study of Living Standards, vol. 40, pages 3-26, Spring.
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    6. James Ashwell, 2021. "A Strengthening Position at the Bargaining Table? Understanding the Productivity-Median Wage Gap in Canada, 1976-2019," CSLS Research Reports 2021-09, Centre for the Study of Living Standards.
    7. Claudia Goldin & Lawrence F. Katz, 2007. "The Race between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005," NBER Working Papers 12984, National Bureau of Economic Research, Inc.
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    10. Lawrence Mishel & Josh Bivens, 2021. "The Productivity-Median Compensation Gap in the United States: The Contribution of Increased Wage Inequality and the Role of Policy Choices," International Productivity Monitor, Centre for the Study of Living Standards, vol. 41, pages 61-97, Fall.
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    1. Jacob Greenspon & Anna Stansbury & Lawrence H. Summers, 2021. "Productivity and Pay in the United States and Canada," International Productivity Monitor, Centre for the Study of Living Standards, vol. 41, pages 3-30, Fall.

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