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Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France

Listed author(s):
  • David Card

    (Princeton University)

  • Francis Kramarz

    (INSEE)

  • Thomas Lemieux

    (University of Montreal)

According to standard economic models, adverse demand shocks will lead to bigger employment losses if institutional factors like minimum wages and trade unions prevent real wages from falling. Some economists have argued that this insight explains the contrast between the United States, where real wages fell over the 1980s and aggregate employment expanded vigorously, and Europe, where real wages held steady and employment was stagnant. We test the hypothesis by comparing recent changes in wages and employment rates for different age and education groups in the United States, Canada, and France. We argue that the same forces that led to falling real wages for less-skilled workers in the U.S. also affected Canada and France. Consistent with the view that labor market institutions in Canada and France reduce wage flexibility, we find that the relative wages of less-skilled workers fell more slowly in Canada than the U.S. during the 1980s, and did not fall at all in France. Contrary to expectations, however, we find little evidence that wage inflexibilities generated divergent patterns of relative employment growth across the three countries.

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File URL: http://dataspace.princeton.edu/jspui/handle/88435/dsp01qf85nb29s
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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 734.

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Date of creation: Dec 1995
Handle: RePEc:pri:indrel:355
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  1. Borjas, George J & Ramey, Valerie A, 1994. "Time-Series Evidence on the," American Economic Review, American Economic Association, vol. 84(2), pages 10-16, May.
  2. W. Craig Riddell, 1993. "Unionization in Canada and the United States: A Tale of Two Countries," NBER Chapters,in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 109-148 National Bureau of Economic Research, Inc.
  3. Krugman, Paul, 1993. "Inequality and the Political Economy of Eurosclerosis," CEPR Discussion Papers 867, C.E.P.R. Discussion Papers.
  4. Richard B. Freeman & Karen Needels, 1993. "Skill Differentials in Canada in an Era of Rising Labor Market Inequality," NBER Chapters,in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 45-68 National Bureau of Economic Research, Inc.
  5. Robert Z Lawrence, 1994. "Trade, Multinationals and Labour," RBA Annual Conference Volume,in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia.
  6. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-350, April.
  7. Chinhui Juhn, 1992. "Decline of Male Labor Market Participation: The Role of Declining Market Opportunities," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 79-121.
  8. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
  9. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1993. "A Comparison of Changes in the Structure of Wages," NBER Working Papers 4297, National Bureau of Economic Research, Inc.
  10. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
  11. repec:aei:rpbook:52903 is not listed on IDEAS
  12. 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.
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