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

The paper by Charles M. Beach and Ross Finnie represents the first attempt to quantify short-term or cyclical changes in earnings mobility in Canada. Mobility analysis can be seen as a complement to the analysis of income distribution. For a given degree of earnings inequality, more earnings mobility corresponds to securing greater labour market opportunity. Using longitudinal income-tax-based data, the authors divide the employed population into eight age/sex groups: entry workers (20–24), younger workers (25–34), prime-age workers (35–54), and older workers (55–64) for both sexes; and divide the earnings distribution into lower, middle and upper regions or earnings intervals based on median earnings levels for the distribution as a whole, and calculate the proportion of workers in each group for all years over the 1982–96 period. They also develop transition matrices that show the probability of moving from one earnings interval to another over a one-year period. They find that there have been major cyclical changes in earnings polarization and that these changes have been concentrated in recessions, notably in the 1990–92 downturn. They also find that men in particular experienced a marked decrease in their net probability of upward mobility in the earnings distribution during recessions, as the probability of moving up fell sharply as did the probability of moving down. The results of the paper are particularly relevant for an understanding of how earnings mobility may be affected by the current economic slowdown.