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

Table 9: Net Responsiveness to Unemployment in the
Average Summary Mobility Measures for
Men and Women, 1982-1996

Note: The unemployment responsiveness coefficients for the average net probability of
moving up, Avg Pr (Net), are obtained as the respective coefficients in an OLS time-series
regression on Avg Pr (Net) as the dependent variable with the time trend and the change in
the (adult male) unemployment rate as independent variables. The “Elasticity” figures for Avg
Pr (Net) are obtained as the respective coefficients in an OLS time-series regression on ln
(Avg Pr (Net)) as the dependent variable with the time trend and the change in the log of the
(adult male) unemployment rate as independent variables. Figures in parentheses are
(absolute values of) coefficient “t-ratios”.

point increase in the unemployment rate, the average net probability of
moving up is estimated to fall by 1.63 percentage points. Expressed differ-
ently, if the unemployment rate doubles in a recession (say, from 7 to 14 per
cent), the opportunity rate of (annual) advancement in the earnings distribu-
tion (i.e., the net probability of moving up) is estimated to be cut in half.
Recessions inhibit labour market opportunities while economic expansions
promote them. For women, the net cyclical effects are again generally
opposite in sign and much weaker, so the unemployment rate effect on the
net probability of moving up is positive but only about a third as strong as that
of men, reflecting the relative weaker responsiveness of their earnings to the

Charles M. Beach and Ross Finnie

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