one year to the next than are low earners to continue at their low earnings
levels. High earners thus have much greater year-to-year stability of earnings
than do low earners on average.
Note also that the transition matrices are not symmetric. The elements
below the principal diagonal are typically larger than the corresponding
elements above, indicating that the probabilities of moving up the earnings
distribution are generally greater than the probabilities of moving down. Also,
the probability of moving up generally declines as one moves from lower
earnings levels to higher ones, while the probability of moving down changes
remarkably little over the different regions of the distribution. Thus the net
probability of moving up also declines as one moves up the distribu-tion.
These patterns are consistent with younger workers being initially
concentrated in the lower portion of the distribution and then moving up
relatively rapidly early in their careers with individuals’ earnings then
becoming more stable once they have reached middle age. Note also that the
width of the second earnings interval is only 0.25 of the median, while higher
interior intervals are twice as wide, so it takes a bigger change in earnings to
move out of these intervals, thus reducing mobility across intervals.
A further point of interest is that, except at the top earnings interval, the
staying probabilities are higher for women than for men, most markedly so at
the bottom end of the distribution. That is, women’s earnings are generally
less mobile or more stable from one year to the next than men’s. This pattern
is consistent with women typically having flatter age-earnings profiles than
men and with women’s earnings being less sensitive to business-cycle un-
employment rate variations. The average probability of moving up one or
more earnings intervals from 1995 to 1996 was 26.4 per cent for men versus
19.6 per cent for women, and the average probability of moving down was
13.2 per cent for men as compared to 14 per cent for women. Men are thus
much more likely to advance their earnings by one or more earnings intervals
in a year and are also about as likely to experience year-to-year earnings
losses of one or more intervals as women.
The figures in Table 7 also show evidence of cyclical sensitivity.
Comparison of the 1991-92 (cyclical trough) transition probabilities with the
1988-89 (cyclical peak) probabilities shows, first, that the staying prob-
abilities (or earnings immobility) towards the lower and upper ends of the
distribution increase during recessions — more so for men among lower
earnings intervals and for women among the top earnings interval. The
probabilities of moving up across earnings intervals — figures below the
principal diagonal — generally decline in periods of recession, while the
probabilities of slipping down one or more intervals — figures above the
principal diagonal — generally rise in recession, though this latter effect is
Cyclical Changes in Short-Run Earnings Mobility in Canada
471