Long-Run Inequality and Short-Run Instability of Men'S and Women'S Earnings in Canada

25 Pages Posted: 18 Aug 2010

See all articles by Charles M. Beach

Charles M. Beach

Queen's University - Department of Economics

Ross Finnie

Statistics Canada - Business and Labour Market Analysis Division; Queen's University - School of Policy Studies

David M. Gray

University of Ottawa - Department of Economics

Abstract

This paper examines the variability of workers’ earnings in Canada over the period 1982–2006. We decompose the total variance of workers’ earnings into a ‘permanent’ component between workers and a ‘transitory’ earnings instability component over time for given workers. We then investigate the statistical relationships between these components and indicators for the business cycle. The most marked change in earnings variances in Canada since 1982 is the general rise in total earnings variance, which is essentially driven by a quite dramatic rise in long-run earnings inequality. The patterns across age categories of the two variance components are almost opposite. Long-run earnings inequality generally rises with age, but earnings instability is seen to generally decline with age, so that earnings instability is markedly highest among entry age workers. Unemployment rate effects are positive on almost all variance measures, while higher unemployment is associated with widened long-run earnings differentials and greater short-run earnings instability.

Suggested Citation

Beach, Charles M. and Finnie, Ross and Gray, David M., Long-Run Inequality and Short-Run Instability of Men'S and Women'S Earnings in Canada. Review of Income and Wealth, Vol. 56, Issue 3, pp. 572-596, September 2010, Available at SSRN: https://ssrn.com/abstract=1660786 or http://dx.doi.org/10.1111/j.1475-4991.2010.00406.x

Charles M. Beach (Contact Author)

Queen's University - Department of Economics ( email )

99 University Avenue
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613-533-2278 (Phone)

Ross Finnie

Statistics Canada - Business and Labour Market Analysis Division ( email )

24th Floor - R.H. Coats Building
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Ottawa, Ontario K1A 0T6
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Queen's University - School of Policy Studies ( email )

Kingston, Ontario K7L 3N6 K7L 3N6
Canada

David M. Gray

University of Ottawa - Department of Economics ( email )

200 Wilbrod Street
P.O. Box 450, Station A
Ottawa, Ontario K1N 6N5
Canada

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