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

accounted for only 7-23 per cent of the full period shift for women and 20-
27 per cent for men. In terms of distributional shift, the early recession and
subsequent recovery of the 1990s were a period of quite dramatic and likely
historic adjustment.

In an extended version of the current paper (Beach and Finnie, 2001), we
also examine whether these cyclical patterns are statistically significant once
one nets out underlying trends. This is done by running regressions of earn-
ings interval shares (the proportions in expressions (1) - (4)) as dependent
variables on a time trend and the adult male (age 25 and over) unemployment
rate (as a proxy for business-cycle effects). The unemployment rate co-
efficients are referred to as net cyclical effects or net responsiveness to
unemployment changes. Results in Table 4 show that weak labour markets
increase earnings polarization significantly for both men and women with
generally much stronger effects for men than for women (see rows one and
two). Among men, the action driving the greater polarization of earnings
occurs towards the bottom end of the distribution as lower-earnings workers
slip down the distribution. Among women, however, the action occurs
towards the top end of the distribution as higher-earnings women move up
relatively in the distribution. In Table 5, highly significant opposite distribu-
tional shifts for men and women stand out clearly. Weak labour markets shift
the earnings distribution for men down significantly, but the higher un-
employment shifts the women’s distribution up significantly in relative terms
as women’s earnings are relatively less sensitive to weakened labour markets.
Both sets of net cyclical effects mirror the gross results already observed in
the raw data of Tables 2 and 3.

Patterns across Age Groups

The recent literature (e.g., Beaudry and Green, 2000; or Beach and Finnie,
1998) has found considerable differences in earnings experiences for different
age groups in Canada. This is worth exploring further. Table 6 presents
earnings interval shares for each of four age groups, entry workers (age 20-
24), younger (25-34), prime (35-54), and older workers (55-64). To save
clutter, the table focuses on just the 1989-92 recessionary period as well as
mean earnings interval shares (P_i’s) over the full 1982-96 period.

As can be seen from the latter figures, entry workers are concentrated
more towards the lower end of the distribution, and prime age male workers
appear predominantly towards the upper end (since the EI cutoffs are based
on the overall median earnings level). The general cyclical pattern for men as
a whole previously seen in Table 1 (and illustrated in Figure 1) holds

Cyclical Changes in Short-Run Earnings Mobility in Canada

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