Wages and jobs in the 1980s: Changing youth wages and the declining middle

by John Myles, Garnett Picot and Ted Wannell
Business and Labour Market Analysis Division
Analytical Studies Branch research paper series, No. 017

Drawing on two unique Statistics Canada surveys, the 1981 Work History Survey and the 1986 Labour Market Activity Survey, this study reports on changes in the distribution of jobs by hourly wage rate between 1981 and 1986.

The results show some increased concentration of jobs in two segments of the wage distribution the bottom and the upper middle. Changes in the structure of employment (the growth in jobs in service industries and a changing occupational mix) account for some of these changing wage patterns. However, even though the restructuring of jobs among industries and occupations was substantial over the period, most of the change in the wage distribution is left unexplained after accounting for this phenomenon. The overall change is more related to changes in the wage distribution within industries and occupations.

Much of the observed shifts in the overall wage distribution are related to an economy-wide decline in relative wages paid to young workers, and to a lesser extent, an increase in the relative wages of older workers. The job opportunities available to young workers in 1986 were much more concentrated at the very bottom of the wage distribution than was the case in 1981. Wages among the young displayed flexibility over this period, coinciding with a declining unemployment rate during 1984-86.

Possible reasons for the decline in the relative earnings of the young are discussed, including labour market "crowding" due to the large cohort of young workers, the lingering effect of the recession on the demand for labour in entry level jobs, and other changes occurring in the youth labour market. A regional analysis of the changing wage distributions is also included.

Not available electronically.