IDEAS home Printed from https://ideas.repec.org/p/stc/stcp3e/2006268e.html
   My bibliography  Save this paper

The Impact of Macroeconomic Conditions on the Instability and Long-Run Inequality of Workers' Earnings in Canada

Author

Listed:
  • Beach, Charles M.
  • Finnie, Ross
  • Gray, David

Abstract

This paper examines the variability of workers' earnings in Canada over the period 1982-1997 and how earnings variability has varied in terms of the unemployment rate and real gross domestic product (GDP) growth over this period. Using a large panel of tax file data, we decompose total variation in earnings across workers and time into a long-run inequality component between workers and an average earnings instability component over time for workers. The analysis is done for men and women and for both long-run participants and a broad coverage of workers. We find an increase in earnings variability between 1982-1989 and 1990-1997 that is largely confined to men and largely driven by widening long-run earnings inequality. Second, the pattern of unemployment rate and GDP growth rate effects on these variance components is not consistent with conventional explanations of cyclical effects on earnings inequality and is suggestive of an alternative paradigm of how economic growth over this period widens long-run earnings inequality. Third, when the unemployment rate and GDP growth rate effects are considered jointly, macroeconomic improvement is found to reduce the overall variability of earnings as the reduction in earnings instability outweighs the general widening of long-run earnings inequality.

Suggested Citation

  • Beach, Charles M. & Finnie, Ross & Gray, David, 2006. "The Impact of Macroeconomic Conditions on the Instability and Long-Run Inequality of Workers' Earnings in Canada," Analytical Studies Branch Research Paper Series 2006268e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:2006268e
    as

    Download full text from publisher

    File URL: http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=11F0019M2006268&ObjType=46&lang=en&limit=0
    Download Restriction: no

    References listed on IDEAS

    as
    1. R. Moffitt & P. Gottschalk, "undated". "Trends in the covariance structure of earnings in the United States: 1969-1987," Institute for Research on Poverty Discussion Papers 1001-93, University of Wisconsin Institute for Research on Poverty.
    2. Lillard, Lee A & Weiss, Yoram, 1979. "Components of Variation in Panel Earnings Data: American Scientists, 1960-70," Econometrica, Econometric Society, vol. 47(2), pages 437-454, March.
    3. Charles Beach & Ross Finnie, 2004. "A longitudinal analysis of earnings change in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 219-240, February.
    4. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-375, April.
    5. Bartel, Ann P & Lach, Saul & Sicherman, Nachum, 2005. "Outsourcing and Technological Change," CEPR Discussion Papers 5082, C.E.P.R. Discussion Papers.
    6. Charles M. Beach & Ross Finnie & David Gray, 2003. "Earnings Variability and Earnings Instability of Women and Men in Canada: How Do the 1990s Compare to the 1980s?," Canadian Public Policy, University of Toronto Press, vol. 29(s1), pages 41-64, January.
    7. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-445, March.
    8. Osberg, Lars & Sharpe, Andrew, 2002. "An Index of Economic Well-Being for Selected OECD Countries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(3), pages 291-316, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Charles Beach & Ross Finnie & David Gray, 2006. "Long-Run Inequality and Annual Instability of Men's and Women's Earnings in Canada," Working Papers 1116, Queen's University, Department of Economics.

    More about this item

    Keywords

    Income; pensions; spending and wealth; Labour; Low income and inequality; Wages; salaries and other earnings; Work transitions and life stages;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:stc:stcp3e:2006268e. 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: (Mark Brown). General contact details of provider: http://edirc.repec.org/data/stagvca.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.