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Long-Run Inequality And Short-Run Instability Of Men'S And Women'S Earnings In Canada

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  • Charles M. Beach
  • Ross Finnie
  • David Gray

Abstract

This paper examines the variability of workers' earnings in Canada over the period 1982-2006. We decompose the total variance of workers' earnings into a 'permanent' component between workers and a 'transitory' earnings instability component over time for given workers. We then investigate the statistical relationships between these components and indicators for the business cycle. The most marked change in earnings variances in Canada since 1982 is the general rise in total earnings variance, which is essentially driven by a quite dramatic rise in long-run earnings inequality. The patterns across age categories of the two variance components are almost opposite. Long-run earnings inequality generally rises with age, but earnings instability is seen to generally decline with age, so that earnings instability is markedly highest among entry age workers. Unemployment rate effects are positive on almost all variance measures, while higher unemployment is associated with widened long-run earnings differentials and greater short-run earnings instability. Copyright 2010 The Authors. Review of Income and Wealth 2010 International Association for Research in Income and Wealth.

Suggested Citation

  • Charles M. Beach & Ross Finnie & David Gray, 2010. "Long-Run Inequality And Short-Run Instability Of Men'S And Women'S Earnings In Canada," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(3), pages 572-596, September.
  • Handle: RePEc:bla:revinw:v:56:y:2010:i:3:p:572-596
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    References listed on IDEAS

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    Cited by:

    1. Abbott, Michael G. & Beach, Charles M., 2011. "Immigrant Earnings Differences Across Admission Categories and Landing Cohorts in Canada," CLSSRN working papers clsrn_admin-2011-20, Vancouver School of Economics, revised 21 Aug 2011.
    2. Cappellari, Lorenzo & Jenkins, Stephen P., 2013. "Earnings and Labour Market Volatility in Britain," IZA Discussion Papers 7491, Institute for the Study of Labor (IZA).
    3. Edward N. Wolff & Ajit Zacharias & Thomas Masterson & Selcuk Eren & Andrew Sharpe & Elspeth Hazell, 2012. "A Comparison of Inequality and Living Standards in Canada and the United States Using an Expanded Measure of Economic Well-Being," Economics Working Paper Archive wp_703, Levy Economics Institute.
    4. Vincenzo Carrieri & Vito Peragine, 2014. "Decomposing inequality 'at work': Cross-country evidence from EU-SILC," Working papers 15, Società Italiana di Economia Pubblica.
    5. B. Cecilia Garcia-Medina & Jean-Francois Wen, "undated". "Income Instability and Fiscal Progression," Working Papers 2015-01, Department of Economics, University of Calgary, revised 12 Jan 2015.
    6. Stephen P. Jenkins, 2011. "Has the Instability of Personal Incomes been Increasing?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 218(1), pages 33-43, October.
    7. Kao-Lee Liaw & Lei Xu, 2013. "Changes in Wage Distributions of Wage Earners in Canada: 2000-2005," Quantitative Studies in Economics and Population Research Reports 451, McMaster University.
    8. Ostrovsky, Yuri, 2012. "The correlation of spouses' permanent and transitory earnings and family earnings inequality in Canada," Labour Economics, Elsevier, vol. 19(5), pages 756-768.

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