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Increasing Male Earnings Inequality in Canada and the United States, 1981­1997: The Role of Hours Changes versus Wage Changes

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  • Susan Johnson
  • Peter Kuhn

Abstract

This paper looks at changes in hourly wages and hours worked per week of prime-age males in different skill groups (measured by earnings quintile) in the United States and Canada from 1981 to 1997. The analysis reveals that increases in hourly wage inequality are primarily responsible for increases in weekly earnings inequality in both countries. Increases in the dispersion of hours worked per week play a more important part in explaining the increase in earnings inequality in Canada than in the United States. High-skill workers experienced increases in earnings growth due to increases in hours and, at least for the US, increases in wages. In contrast, low-skill workers experienced declines in earnings growth due to decreases in wages and hours. This evidence is consistent with a skill-biased demand shock. In Canada a larger percentage of the reduction in earnings of low-skill workers is accounted for by declining hours. This evidence suggests a higher degree of downward wage rigidity in Canada than in the United States.

Suggested Citation

  • Susan Johnson & Peter Kuhn, 2004. "Increasing Male Earnings Inequality in Canada and the United States, 1981­1997: The Role of Hours Changes versus Wage Changes," Canadian Public Policy, University of Toronto Press, vol. 30(2), pages 155-176, June.
    • Handle: RePEc:cpp:issued:v:30:y:2004:i:2:p:155-176
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    References listed on IDEAS

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    1. Murphy, Kevin M & Welch, Finis, 1993. "Inequality and Relative Wages," American Economic Review, American Economic Association, vol. 83(2), pages 104-109, May.
    2. Wood Júnior, Thomaz, 1995. "Workers," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 35(2), March.
    3. Wasmer, Etienne, 2001. "Between-group Competition in the Labor Market and the Rising Returns to Skill: US and France 1964-2000," IZA Discussion Papers 292, Institute of Labor Economics (IZA).
    4. Adrian Wood, 1997. "How Trade Hurt Unskilled Workers," Palgrave Macmillan Books, in: Jitendralal Borkakoti & Chris Milner (ed.), International Trade and Labour Markets, chapter 7, pages 140-168, Palgrave Macmillan.
    5. Morissette, Rene, 1995. "Why Has Inequality in Weekly Earnings Increased in Canada?," Analytical Studies Branch Research Paper Series 1995080e, Statistics Canada, Analytical Studies Branch.
    6. Kevin M. Murphy & W. Craig Riddell & Paul M. Romer, 1998. "Wages, Skills, and Technology in the United States and Canada," NBER Working Papers 6638, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Landon, Stuart & Smith, Constance E., 2009. "Investment and the exchange rate: Short run and long run aggregate and sector-level estimates," Journal of International Money and Finance, Elsevier, vol. 28(5), pages 813-835, September.
    2. Ostrovsky Yuri, 2010. "Long-Run Earnings Inequality and Earnings Instability among Canadian Men Revisited, 1985-2005," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-34, March.
    3. Biewen Martin & Plötze Daniela, 2019. "The Role of Hours Changes for the Increase in German Earnings Inequality," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(2), pages 1-28, April.
    4. Heisz, Andrew & Larochelle-Cote, Sebastien, 2007. "Comprendre les differences regionales dans les heures de travail," Direction des études analytiques : documents de recherche 2007293f, Statistics Canada, Direction des études analytiques.
    5. Biewen Martin & Plötze Daniela, 2019. "The Role of Hours Changes for the Increase in German Earnings Inequality," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(2), pages 277-304, April.
    6. Robert Andersen & M. McIvor, 2013. "GINI Country Report: Growing Inequalities and their Impacts in Canada," GINI Country Reports canada, AIAS, Amsterdam Institute for Advanced Labour Studies.
    7. Heisz, Andrew & Larochelle-Cote, Sebastien, 2007. "Understanding Regional Differences in Work Hours," Analytical Studies Branch Research Paper Series 2007293e, Statistics Canada, Analytical Studies Branch.
    8. Fernando Lozano, 2010. "Understanding the workweek of foreign born workers in the United States," Review of Economics of the Household, Springer, vol. 8(1), pages 83-104, March.

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