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Wages: Measurement and Key Drivers

Author

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  • Dany Brouillette
  • Jonathan Lachaine
  • Benoit Vincent

Abstract

Available sources of hourly wage data in Canada sometimes send conflicting signals about wage growth. This note thus has two objectives: first, we develop a wage measure—the wage-common—to better capture the (underlying) wage pressures reflecting the common trend across the available data sources. Second, we re-examine the relationship between wage growth and macro drivers (labour market slack and labour productivity). We conclude that the wage-common is a superior estimate relative to individual sources because of its timeliness, its lower volatility and its good relationships with fundamentals. Our analysis indicates that labour market slack is the main factor still weighing on the wage-common growth in 2017Q3. Lastly, we investigate globalization (measured by wage growth in other advanced economies) as another potential factor behind the absence of wage pressures in Canada and find no evidence beyond what is already explained by the macro drivers.

Suggested Citation

  • Dany Brouillette & Jonathan Lachaine & Benoit Vincent, 2018. "Wages: Measurement and Key Drivers," Staff Analytical Notes 2018-2, Bank of Canada.
    • Handle: RePEc:bca:bocsan:18-2
    DOI: 10.34989/san-2018-2
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    References listed on IDEAS

    as
    1. 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.
    2. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
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    Cited by:

    1. Jonathan Lachaine, 2018. "Applying the Wage-Common to Canadian Provinces," Staff Analytical Notes 2018-16, Bank of Canada.

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    More about this item

    Keywords

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    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • J - Labor and Demographic Economics
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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