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Downward nominal wage rigidity in Canada: Evidence from micro‐level data

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  • Dany Brouillette
  • Olena Kostyshyna
  • Natalia Kyui

Abstract

We assess the importance of downward nominal wage rigidity (DNWR) in Canada using employer‐level administrative data from the major wage settlements (MWS) and household‐based survey data from the Survey of Labour Income Dynamics (SLID). MWS data cover large unionized firms in Canada, while SLID is a rich rotating panel representative of the employed population in Canada. Combining both sources of information allows for an extensive analysis of DNWR in the Canadian labour market. We find large shares of wage freezes and smaller shares of wage cuts in both MWS and SLID. Shares of freezes are higher at lower CPI inflation rates, based on provincial data. These observations are consistent with the presence of DNWR. DNWR in Canada appears to be larger than in other countries such as the United States, the United Kingdom and European countries. The incidence of DNWR is heterogeneous across firms’ and workers’ characteristics. Wages report less DNWR over longer horizons. Rigidité à la baisse des salaires nominaux au Canada: résultats à partir d’analyses des données au niveau micro. On évalue l’importance de la rigidité des salaires nominaux à la baisse (RBSN) au Canada en utilisant les données administratives au niveau de l’employeur en provenance des données sur les principaux règlements salariaux (PRS) et les données de l’Enquête sur la dynamique du travail et du revenu (EDTR). Les données de PRS couvrent les grandes firmes syndiquées du Canada alors que les données de EDTR représentent un riche panel rotatif de la population au travail au Canada. En combinant ces deux sources de données, on peut faire une analyse extensive de la RBSN dans le marché du travail canadien. On découvre de grandes fractions de gels de salaires et de petites fractions de coupures de salaires dans à la fois PRS et EDTR. On repère que les fractions de gels de salaires sont plus grandes à des taux d’inflation (CPI) plus bas, sur la base de données provinciales. Ces observations sont consistantes avec la présence de RBSN. La RBSN au Canada semble plus grande que dans d’autres pays comme les États‐Unis, le Royaume‐Uni et les pays européens. L’incidence de la RBSN est hétérogène à travers les groupes d’entreprises et de travailleurs. On détecte moins de RBSN dans les contextes d’horizons temporels plus longs.

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  • Dany Brouillette & Olena Kostyshyna & Natalia Kyui, 2018. "Downward nominal wage rigidity in Canada: Evidence from micro‐level data," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(3), pages 968-1002, August.
    • Handle: RePEc:wly:canjec:v:51:y:2018:i:3:p:968-1002
    DOI: 10.1111/caje.12347
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    Cited by:

    1. Amjad Naveed & Nisar Ahmad & Rayhaneh Esmaeilzadeh & Amber Naz, 2019. "Self-Employment Dynamics of Immigrants and Natives: Individual-level Analysis for the Canadian Labour Market," Sustainability, MDPI, vol. 11(23), pages 1-22, November.
    2. Dany Brouillette & James Ketcheson & Olena Kostyshyna & Jonathan Lachaine, 2017. "Wage Growth in Canada and the United States: Factors Behind Recent Weakness," Staff Analytical Notes 17-8, Bank of Canada.
    3. Joel Wagner, 2018. "Downward nominal wage rigidity in Canada: Evidence against a “greasing effect”," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(3), pages 1003-1028, August.
    4. Dany Brouillette & Natalia Kyui, 2017. "Downward Nominal Wage Rigidity, Inflation and Unemployment: New Evidence Using Micro-Level Data," Staff Analytical Notes 17-6, Bank of Canada.
    5. Joel Wagner, 2018. "Downward nominal wage rigidity in Canada: Evidence against a greasing effect," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 1003-1028, August.
    6. Jean‐François Rouillard, 2023. "Credit Crunch and Downward Nominal Wage Rigidities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 889-914, June.

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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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