IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Canada and the "OECD Hypothesis": Does Labour Market Inflexibility Explain Canada's High Level of Unemployment?

  • Peter Kuhn

    (McMaster University)

One of the most remarkable features of international economic performance in the last decade has been the employment performance of the United States. While unemployment rates in almost all other developed countries remain high by postwar standards, the U.S. unemployment rate has fallen to levels not seen in decades. Even more spectacular than the decline in unemployment is the increase in the fraction of the U.S. population employed, which has exceeded that in almost all developed countries. A phenomenon of such magnitude of course calls out for an explanation. Probably more than any other single factor, some form of “labour market inflexibility” has recently been blamed for the high unemployment rates outside the United States. In a number of forums, including the policy recommendations of the Organization for Economic Cooperation and Development (OECD), “rigid” labour markets, with considerable government and/or union involvement in wage-setting, and considerable restrictions on firms’ abilities to adjust the size of their work forces, are commonly seen as more prone to unemployment and less conducive to employment growth than more flexible ones. The purpose of this paper is to provide a critical assessment of the popular notion that differences in labour market “flexibility” explain the recent differences in employment and unemployment rates between the U.S. and other developed countries. In addressing this issue I shall focus particular attention on a comparison between two countries, the United States and Canada. On the surface, the recent experience of these two countries would appear to support the hypothesis, with the more “rigid” country --Canada, where unions have much more influence on the wage-setting process and employment protection is stronger-- experiencing much worse unemployment performance since the early 1980's. Indeed the proximity of the countries and their similarity along other dimensions may yield an ideal comparison for assessing the labour market flexibility hypothesis.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/CILN/cilnwp10.pdf
Download Restriction: no

Paper provided by McMaster University in its series Canadian International Labour Network Working Papers with number 10.

as
in new window

Length:
Date of creation:
Handle: RePEc:mcm:cilnwp:10
Contact details of provider: Postal:
1280 Main Street West, Hamilton, Ontario, L8S 4M4

Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.mcmaster.ca/economics/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. repec:pri:indrel:dsp01qf85nb29s is not listed on IDEAS
  2. Giuseppe Bertola, 1991. "Labor Turnover Costs and Average Labor Demand," NBER Working Papers 3866, National Bureau of Economic Research, Inc.
  3. Carmichael, H.L. & Macleod, W.B., 1991. "Multiskilling, Technical Change and the Japanese Firm," Cahiers de recherche 9112, Universite de Montreal, Departement de sciences economiques.
  4. Alan B. Krueger, 1991. "The Evolution of Unjust-Dismissal Legislation in the United States," ILR Review, Cornell University, ILR School, vol. 44(4), pages 644-660, July.
  5. Abowd, John M. & Freeman, Richard B. (ed.), 1991. "Immigration, Trade, and the Labor Market," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226000954.
  6. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1991. "On the Labor Market Effects of Immigration and Trade," NBER Working Papers 3761, National Bureau of Economic Research, Inc.
  7. Paul Swaim & Michael Podgursky, 1990. "Advance Notice and Job Search: The Value of an Early Start," Journal of Human Resources, University of Wisconsin Press, vol. 25(2), pages 147-178.
  8. Patricia M. Anderson, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 1015-1042.
  9. 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, vol. 11(1), pages 40-62, Spring.
  10. John T. Addison & McKinley L. Blackburn, 1994. "The Worker Adjustment and Retraining Notification Act," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 181-190, Winter.
  11. John T. Addison & McKinley L. Blackburn, 1994. "The Worker Adjustment and Retraining Notification Act: Effects on Notice Provision," ILR Review, Cornell University, ILR School, vol. 47(4), pages 650-662, July.
  12. David Card & Richard B. Freeman, 1993. "Introduction to "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States"," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 1-20 National Bureau of Economic Research, Inc.
  13. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  14. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
  15. Gene M. Grossman, 1984. "International Competition and the Unionized Sector," Canadian Journal of Economics, Canadian Economics Association, vol. 17(3), pages 541-556, August.
  16. Kuhn, Peter, 1992. "Mandatory Notice," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 117-137, April.
  17. David Card & Francis Kramarz & Thomas Lemieux, 1995. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Working Papers 734, Princeton University, Department of Economics, Industrial Relations Section..
  18. Burdett, Kenneth & Wright, Randall, 1989. "Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1479-1496, December.
  19. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-957, October.
  20. Jones, Stephen R G & Kuhn, Peter, 1995. "Mandatory Notice and Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 599-622, October.
  21. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
  22. Ruhm, Christopher J, 1992. "Advance Notice and Postdisplacement Joblessness," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 1-32, January.
  23. David Card & Richard B. Freeman, 1993. "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States," NBER Books, National Bureau of Economic Research, Inc, number card93-1, Enero.
  24. Addison, John T & Chilton, John B, 1997. "Nondisclosure as a Contract Remedy: Explaining the Advance-Notice Puzzle," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 143-164, January.
  25. David Blanchflower & L Katz & G Loveman, 1993. "A Comparison of Changes in the Structure of Wages in Four OECD Countries," CEP Discussion Papers dp0144, Centre for Economic Performance, LSE.
  26. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
  27. repec:fth:prinin:355 is not listed on IDEAS
  28. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
  29. Ronald G. Ehrenberg & George H. Jakubson, 1988. "Advance Notice Provisions in Plant Closing Legislation: Do They Matter?," NBER Working Papers 2611, National Bureau of Economic Research, Inc.
  30. Jane Friesen, 1997. "Mandatory Notice and the Jobless Durations of Displaced Workers," ILR Review, Cornell University, ILR School, vol. 50(4), pages 652-666, July.
  31. Peter Kuhn, 1993. "Employment Protection Laws: Policy Issues and Recent Research," Canadian Public Policy, University of Toronto Press, vol. 19(3), pages 279-297, September.
  32. Kuhn, Peter, 1994. "Nonrevelation in Employment Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 261-82, May.
  33. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, Enero.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mcm:cilnwp:10. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.