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Understanding the wage patterns of Canadian less skilled workers: the role of implicit contracts

Author

Listed:
  • David A. Green

    (Institute for Fiscal Studies and University of British Colombia)

  • James Townsend

    (Institute for Fiscal Studies)

Abstract

We examine the wage patterns of Canadian less skilled male workers over the last quarter century by organizing workers into job entry cohorts. We find entry wages for successive cohorts declined until 1997, and then began to recover. Wage profiles steepened for cohorts entering after 1997, but not for cohorts entering in the 1980s - a period when start wages were relatively high. We argue that these patterns are consistent with a model of implicit contracts with recontracting in which a worker's current wage is determined by the best labour market conditions experienced during the current job spell.

Suggested Citation

  • David A. Green & James Townsend, 2009. "Understanding the wage patterns of Canadian less skilled workers: the role of implicit contracts," IFS Working Papers W09/22, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:09/22
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    File URL: http://www.ifs.org.uk/wps/wp0922.pdf
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    Citations

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    Cited by:

    1. Kelly Foley & David A. Green & W. Craig Riddell, 2024. "Canadian inequality over the last 40 years: common and contrary variations on universal themes," Fiscal Studies, John Wiley & Sons, vol. 45(2), pages 119-130, June.
    2. David A. Green & Benjamin M. Sand, 2015. "Has the Canadian labour market polarized?," Canadian Journal of Economics, Canadian Economics Association, vol. 48(2), pages 612-646, May.
    3. McDonald, James Ted & Worswick, Christopher, 2013. "Retirement Incomes, Labour Supply and Co-residency Decisions of Older Immigrants in Canada: 1991-2006," CLSSRN working papers clsrn_admin-2013-23, Vancouver School of Economics, revised 29 Apr 2013.
    4. Green, David A. & Worswick, Christopher, 2012. "Immigrant earnings profiles in the presence of human capital investment: Measuring cohort and macro effects," Labour Economics, Elsevier, vol. 19(2), pages 241-259.
    5. Pierre Brochu & Lu Zhou, 2009. "Is job insecurity on the rise? Evidence from Canadian perception data," Canadian Journal of Economics, Canadian Economics Association, vol. 42(4), pages 1305-1325, November.
    6. Green, David & Kesselman, Jonathan Rhys & Tedds, Lindsay M., 2021. "Covering All the Basics: Reforms for a More Just Society," MPRA Paper 105902, University Library of Munich, Germany.
    7. Miles Corak, 2016. "`Inequality is the root of social evil,' or Maybe Not? Two Stories about Inequality and Public Policy," Canadian Public Policy, University of Toronto Press, vol. 42(4), pages 367-414, December.
    8. Bellou, Andriana & Kaymak, Barış, 2012. "Wages, implicit contracts, and the business cycle: Evidence from a European panel," Labour Economics, Elsevier, vol. 19(6), pages 898-907.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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