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



and trough (1983, 1992) years within the 1982-1996 period.2,3 Average
percentages of workers in each earnings interval over the full sample period
appear in the last row of each panel. That men on average have higher
earnings than women shows up in men being much more prevalent in the
upper two earnings intervals, while women occur more frequently in the
lower three intervals.

For men as a whole, the major change was an increasing polarization of
workers, characterized by movements from the high and high-middle regions
of the distribution (which include many manufacturing and unionized jobs)
towards the lower and top ends of the distribution. For women as a whole,
the most notable change was the general upward shift of the entire earnings
distribution from the lower three regions to the upper three regions of the
distribution (due to increases in both wage rates and hours worked).

Cyclical patterns in these shifts are also apparent, particularly for males
(who tend to work more in manufacturing and primary-goods sectors than
women who are concentrated more in services and public sector jobs which
are less cyclically volatile). Between 1989 and 1992, for example, the
percentage of men within the lowest two earnings intervals rose from 16.8 to
20.7 per cent. During the preceding 1983-89 expansion, the share had
declined from 18.7 to 16.8 per cent. Cyclical changes thus appear to occur
most markedly during periods of economic recession and slack labour market
performance. For women, however, general downward trends in the bottom
three shares and upward trends in the upper three shares appear more
predominant. These cyclical patterns are illustrated in Figures 1 and 2.

Now consider the cyclical patterns of earnings polarization and distribu-
tional shift in more detail. Polarization of earnings refers to a growing
proportion of workers at the two ends of the earnings distribution and a
corresponding reduction in the proportion of workers around the middle of
the distribution. This has been found by Beach and Slotsve (1996) to
characterize the male earnings distribution in Canada based on grouped
histograms of cross-sectional SCF data published by Statistics Canada. It
would be worthwhile to examine this issue further with the large LAD

2In 1996, the five earnings cut-offs dividing the distribution into six earnings groups
were $6.3 (thousand), $12.6, $25.2, $37.8 and $50.4.

3Standard errors could be calculated for these earnings interval shares as these are
multinomially distributed, but the underlying sample sizes are so large they were judged not
worth reporting.

Cyclical Changes in Short-Run Earnings Mobility in Canada

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