Title

Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France

Author(s)

David Card David Card (Princeton University)

Francis Kramarz Francis Kramarz (INSEE)

Thomas Lemieux Thomas Lemieux (University of Montreal)

Abstract

According to standard economic models, adverse demand shocks will lead to bigger employment losses if institutional factors like minimum wages and trade unions prevent real wages from falling. Some economists have argued that this insight explains the contrast between the United States, where real wages fell over the 1980s and aggregate employment expanded vigorously, and Europe, where real wages held steady and employment was stagnant. We test the hypothesis by comparing recent changes in wages and employment rates for different age and education groups in the United States, Canada, and France. We argue that the same forces that led to falling real wages for less-skilled workers in the U.S. also affected Canada and France. Consistent with the view that labor market institutions in Canada and France reduce wage flexibility, we find that the relative wages of less-skilled workers fell more slowly in Canada than the U.S. during the 1980s, and did not fall at all in France. Contrary to expectations, however, we find little evidence that wage inflexibilities generated divergent patterns of relative employment growth across the three countries.

Creation Date

1995-12

Section URL ID

IRS

Paper Number

355

URL

https://dataspace.princeton.edu/bitstream/88435/dsp01qf85nb29s/1/355.pdf

File Function

Jel

B41

Keyword(s)

flexibility, international comparisons, wage structure, Canada, France

Suppress

false

Series

1