Labour Market Assessment - 2018

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Labour Market Assessment – 2018.pdf

Summary
This report provides parliamentarians with an assessment of the state of the labour market in Canada. It examines labour market indicators relative to their trend estimates, that is, the level that would be observed if cyclical fluctuations were excluded. PBO also compares Canada’s labour market performance with that of other advanced economies, and examines changes in the distribution of hourly wages in Canada.

PBO finds that at the national level, the labour market in Canada has continued to operate above trend over the past 12 months (that is, from the third quarter of 2017 to the third quarter of 2018). This outperformance has lifted the Canadian economy above our estimate of potential GDP, resulting in an output gap of 0.74 per cent in third quarter of 2018.

In this report, we also update Fortin and Lemieux’s (2015) analysis and take a closer look at the distribution of wages at the national and provincial levels, but also by sex, between 1997 and 2018.

We find that on a cumulative basis, real wage gains at the lower (10th percentile) and upper (90th percentile) ends of the distribution exceeded those at the middle of the distribution (50th percentile). Relatively larger wage gains at the lower end of the distribution reduced wage inequality in the lower half of the distribution between 1997 and 2018. On the other hand, they also resulted in wage polarization, i.e., a divergence in wage gains between the middle and the extremes of the distribution (Summary Figure 2).

Using the Fortin and Lemieux methodology, we found that minimum wage increases in the provinces fuelled wage gains in the 10th percentile of the distribution. Indeed, recent increases in the minimum wage in Ontario and Alberta have contributed to increasing the real cumulative gains of the 10th percentile of the distribution above the gains of the 90th percentile.

Finally, we note that, since 1997, cumulative wage gains for women have exceeded those for men at all levels of the distribution, except for the 10th percentile. Despite these significant wage gains, there remains a considerable gap between the wage levels of women and men. In 2018, at the national level, men’s wages were higher than women at all levels of the distribution, from 4 per cent in the 5th percentile to 19 per cent in the 65th percentile.

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