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

business cycle. Once again, the net cyclical effects largely mirror the gross
cyclical patterns observed in the raw data (in Table 8), except perhaps for the
stronger net estimated moving down effect among men compared to what
was observed in the data.

Earnings Mobility across Age Groups

The analysis in the fourth section revealed quite substantial distributional
changes going on for different age groups. It would be useful to follow this up
by looking at age-group differences in the underlying earnings mobility as
well. As already noted, the underlying transition probabilities can be viewed
as the more basic primitives driving the observed changes in the cross-
sectional distribution of workers.

When one breaks down populations into separate age groups, the
numbers of observations per age group in the samples are obviously reduced,
especially among entry (age 20-24) and older (age 55-64) workers. We thus
reduce the fineness of the earnings interval breakdown for each age group by
collapsing the previous six intervals into three:

Very low!

> → Low

Low I

Low middle !     ....

> → Middle

High middle J

So the earnings cut-offs now are 50 per cent and 150 per cent of the median.
The year-to-year transition matrices underlying this section are correspond-
ingly three-by-three.

The resulting average probabilities by age group are presented in Table
10. Here it can be seen that average mobility is highest for younger workers
and thereafter declines with age. Again, earnings mobility is higher every-

Cyclical Changes in Short-Run Earnings Mobility in Canada

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