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Wage Growth in Canada and the United States: Factors Behind Recent Weakness

Author

Listed:
  • Dany Brouillette
  • James Ketcheson
  • Olena Kostyshyna
  • Jonathan Lachaine

Abstract

This note examines the relatively subdued pace of wage growth in Canada since the commodity price decline in 2014 and assesses whether the weakness is attributable to cyclical (e.g., labour market slack) or structural factors (e.g., resource reallocation and demographic change). Our analysis indicates that ongoing labour market slack and, to a lesser extent, weak labour productivity growth appear to be key factors weighing on wage growth since 2014 in Canada. The decline in commodity prices may also be a key factor that contributed to subdued Canadian wage growth. A comparative analysis of US wage growth is also conducted. In the United States, weak labour productivity growth is a key macro factor weighing on wage growth, but labour market slack is no longer a material drag.

Suggested Citation

  • 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.
    • Handle: RePEc:bca:bocsan:17-8
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    References listed on IDEAS

    as
    1. Dany Brouillette & Olena Kostyshyna & Natalia Kyui, 2018. "Downward nominal wage rigidity in Canada: Evidence from micro-level data," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 968-1002, August.
    2. 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.
    3. James Bishop & Natasha Cassidy, 2017. "Insights into Low Wage Growth in Australia," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 13-20, March.
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    Citations

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    Cited by:

    1. Guyonne Kalb & Jordy Meekes, 2019. "Wage Growth Distribution and Decline among Individuals: 2001-2017," RBA Annual Conference Papers acp2019-03, Reserve Bank of Australia, revised Jul 2019.
    2. Olena Kostyshyna & Etienne Lalé, 2022. "On the evolution of multiple jobholding in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 1095-1134, May.
    3. Guyonne Kalb & Jordy Meekes, 2021. "Wage Growth Distribution and Changes over Time: 2001–2018," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(1), pages 76-93, March.
    4. Valerie Preston & John Shields & Marshia Akbar, 2022. "Migration and Resilience in Urban Canada: Why Social Resilience, Why Now?," Journal of International Migration and Integration, Springer, vol. 23(3), pages 1421-1441, September.
    5. Renaud St-Cyr, 2018. "Non-linéarité de la courbe de Phillips : un survol de la littérature," Staff Analytical Notes 2018-3, Bank of Canada.
    6. Dany Brouillette & Madigan Dockrill & Helen Lao & Laurence Savoie-Chabot, 2018. "Bending the Curves: Wages and Inflation," Staff Analytical Notes 2018-15, Bank of Canada.
    7. Geoff Weir, 2018. "Wage Growth Puzzles and Technology," RBA Research Discussion Papers rdp2018-10, Reserve Bank of Australia.
    8. Sanjana Bhatnagar & Anne-Katherine Cormier & Kristina Hess & Patrisha de Leon-Manlagnit & Elise Martin & Vikram Rai & Renaud St-Cyr & Subrata Sarker, 2017. "Low Inflation in Advanced Economies: Facts and Drivers," Staff Analytical Notes 17-16, Bank of Canada.
    9. Dany Brouillette & Jonathan Lachaine & Benoit Vincent, 2018. "Wages: Measurement and Key Drivers," Staff Analytical Notes 2018-2, Bank of Canada.

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    More about this item

    Keywords

    Labour markets; Recent economic and financial developments;

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J - Labor and Demographic Economics
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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