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Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France

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  • David Card
  • Francis Kramarz
  • Thomas Lemieux

Abstract

Standard models suggest that adverse labor demand shocks will lead to bigger employment losses if institutional factors like minimum wages and trade unions prevent downward wage adjustments. Some economists have argued that this insight explains the contrast between the United States, where real wages fell over the 1980s and aggregate employment expanded vigorously, and Europe, where real wages were (roughly) constant and employment was stagnant. We test this hypothesis by comparing changes in wages and employment rates over the 1980s for different age and education groups in the United States, Canada, and France. We argue that the same forces that led to falling real wages for less-skilled workers in the U.S. affected similar workers in Canada and France. Consistent with the view that labor market institutions are more rigid in France, and more flexible in the U.S., we find that relative wages of less-skilled workers fell the most in the U.S., fell somewhat less in Canada, and did not fall at all in France. Contrary to expectations, however, we find little evidence that wage inflexibilities generated divergent patterns of relative employment growth across the three countries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5487.

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Date of creation: Mar 1996
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Publication status: published as Canadian Journal of Economics, Vol. 32, no. 4 (August 1999): 843-877.
Handle: RePEc:nbr:nberwo:5487

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  1. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 11(1), pages 40-62, Spring.
  2. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 410-42, June.
  3. Robert Z Lawrence, 1994. "Trade, Multinationals and Labour," RBA Annual Conference Volume, Reserve Bank of Australia, in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia.
  4. Borjas, George J & Ramey, Valerie A, 1994. "Time-Series Evidence on the," American Economic Review, American Economic Association, American Economic Association, vol. 84(2), pages 10-16, May.
  5. W. Craig Riddell, 1993. "Unionization in Canada and the United States: A Tale of Two Countries," NBER Chapters, National Bureau of Economic Research, Inc, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 109-148 National Bureau of Economic Research, Inc.
  6. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 367-97, May.
  7. Richard B. Freeman & Karen Needels, 1991. "Skill Differentials in Canada in an Era of Rising Labor Market Inequality," NBER Working Papers, National Bureau of Economic Research, Inc 3827, National Bureau of Economic Research, Inc.
  8. Krugman, Paul, 1993. "Inequality and the Political Economy of Eurosclerosis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 867, C.E.P.R. Discussion Papers.
  9. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(2), pages 318-50, April.
  10. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1993. "A Comparison of Changes in the Structure of Wages," NBER Working Papers, National Bureau of Economic Research, Inc 4297, National Bureau of Economic Research, Inc.
  11. Juhn, Chinhui, 1992. "Decline of Male Labor Market Participation: The Role of Declining Market Opportunities," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(1), pages 79-121, February.
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