Cohort, Year and Age Effects in Canadian Wage Data

We use Canadian Surveys of Consumer Finances 1971-1993 to study the wages of full-time, full-year male and female workers. Median real wages of 24-year-old males without a university degree fell by 25% between 1978 and 1993. For 24-year-old females the decline was more modest and reversed in 1987, but real wages in 1993 were still significantly lower than they were in 1978. We investigate whether these changes are permanent "cohort" effects or more temporary "year" effects. Graphs of median wages against year and age indicate some periods where year effects are more prominent than cohort effects and other periods where the reverse is true. We then compare the results from two models, one assigning the trends to year effects, the other assigning them to cohort effects, and use these models to produce real wage projections.