Cyclical Changes in Short-Run Earnings Mobility in Canada, 1982-1996

Cyclical Changes in Short-Run Earnings

Mobility in Canada, 1982 to 1996

Charles M. Beach and Ross Finnie¹

Introduction

This paper uses longitudinal income tax-based data for Canada to examine the
cyclical pattern of changes in the earnings distribution and earnings mobility in
Canada over the period 1982 to 1996, an interval that includes considerable
variation in labour market conditions. Numerous recent studies have noted
increasing degrees of inequality and polarization of workers’ earnings,
especially for men; broad distributional shifts in earnings, especially for
women; and changing degrees of earnings mobility for both men and women
in Canada over the 1980s and up to the middle 1990s (Picot, 1997; Beach
and Slotsve, 1996; Beach and Finnie, 1998). Here we want to focus on the
cyclical pattern in these changes.

This paper examines basic evidence on how polarization, distributional
shifts and measures of the short-run mobility of workers’ earnings vary over
the business cycle. This can be viewed as updating the C.D. Howe study by
Beach and Slotsve (1996), but with much more extensive data and with a
data set that has an explicit longitudinal dimension — indeed the LAD file on
which this study is based was pioneered by the former Economic Council of
Canada of which David Slater was the chair for a number of years. As one

This research was made possible by the Applied Research Branch of Human
Resources Development Canada. The Small Area and Administrative Data Division of
Statistics Canada provided access to the LAD data upon which the study is based. The
authors also gratefully acknowledge a Social Sciences and Humanities Research Council
Research Grant which was critical in earlier stages of the research with the LAD data. Roger
Sceviour provided excellent computing assistance.

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