Appendix B
Detailed definitions of major new concepts1

Warning View the most recent version.

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.

by Leroy O. Stone, Harpreet Kaur Randhawa and Hasheem Nouroz

Presence of indications of enhanced market-based vulnerability
Presence of flexibility among options for transition to retirement
Instability of market-related status
Cultural background
Wealth rank in 1996
Work history
Care change
Reception of retirement income by another economic family member

Presence of indications of enhanced market-based vulnerability

In this text "vulnerability" deals with events that are components of trajectories and which increase the risk of setback or damage to whatever plans or arrangements the person has made concerning standard of living in retirement. The measure used here focuses on the onset of unemployment or of involuntary job change. The following trajectory positions are pertinent:

Position 4: Employed in the first and last month of a quarter and had an involuntary job change during the quarter.
Position 5: Unemployed throughout the quarter.
Position 6: Unemployed or outside of the labor force in the first month of the quarter but employed in the last month.
Position 7: Employed in the first month of the quarter but unemployed in the last month.
Position 0: Unclassified, and there is an experience of unemployment within the quarter.

It is important to take into account at least one "auxiliary variable". This variable involves the business climate within which a person experienced a setback such as unemployment, since the consequences of the unemployment will be worse in a business cycle downturn than in a business cycle upturn.

The scale is named "VULSCORE", and each respondent begins with a value of zero. Then points are added depending on attributes of the respondent's trajectory. However, points arising from unemployment are weighted depending on the index of the business climate within which the unemployment took place. This index is named "URATIO", and in each quarter it has a separate value for each sex. The detailed definition that implements these concepts follows.

In every quarter, the respondent may get points toward her final value of VULSCORE depending on the following formula:

VULSCORE = VULSCORE + 5 * URATIO if the respondent was unemployed throughout the quarter.

VULSCORE = VULSCORE + 2 if the respondent was employed in the first and last month of the quarter and had an involuntary job change during the quarter.

VULSCORE = VULSCORE + 3 * URATIO if the respondent was employed in the first month but unemployed in the last month.

VULSCORE = VULSCORE + 3 if the respondent was unemployed at some time in the first quarter, and if either (a) the respondent was unemployed or outside of the labour force in the first month but employed in the last month, or (b) the trajectory position is unclassified.

URATIO is the ratio of unemployment rate for a specific quarter to the average of unemployment rate for the year.

Group the values into three ranked levels

The resulting scale score was rated as Low, Medium or High according to the following rule:

Low, Medium and High with following ranges of scale scores: 0, 1 to 10, and 11 or more respectively.

A second grouping was made in order to create Chart A.9. It is as follows:

A ranking of 0 to 7, with the following ranges of scale scores: 0, 1 to 5, 6 to 10, 11 to 15, 16 to 20, 21 to 30, 31 to 40 and 41 or more.

Presence of flexibility among options for transition to retirement

The present index of flexibility is based on movements that are components of a trajectory. These movements are treated as indirect indicators of flexibility. An example would be the presence of voluntary job changes. The absence of disruptions such as involuntary job change or unemployment are also regarded as enhancing flexibility.

The scale is named "FLEXSCORE", and each respondent begins with a value of zero. Then points are added depending on attributes of the respondent's trajectory. The detailed definition that implements these concepts follows.

However, the FLEXSCORE value is then reduced by one-half if the trajectory has a non-zero value on VULSCORE (the vulnerability scale). There is a further weighting of FLEXSCORE that takes speed of closure into account. The longer the person delays closure of her trajectory, the greater is the indication of flexibility. Thus delayed closure gives a slight boost to FLEXSCORE.

The score on our flexibility scale arises from criteria involving several trajectory positions. In essence, a person's FLEXSCORE is increased each time there is either:

  • A voluntary job change, or
  • A reduction in hours of work within the same job, or
  • A move from a fulltime job throughout one quarter to a part-time job throughout the next quarter, or
  • Certain reductions of hours of work found along with Positions 0 or 8. (See Appendix A for the details.)

Step One

In every quarter, the respondent may get points toward her final value of FLEXSCORE depending on the following formula:

Add 2 if the respondent was employed in the first and last month of a quarter, and had a voluntary job change during the quarter.

Add 1 if the average number of hours worked in a week in first month of the quarter has decreased by 10% in the last month of the quarter and the respondent was employed full time or part-time and with no job change throughout the quarter.

Add 1 if the average number of hours worked in a week in first month of the quarter has decreased by 10% in the last month of the quarter and the trajectory position is unclassified and the respondent was not unemployed in the quarter.

Step Two

Add 1 if the respondent was employed full time and with no job change throughout the quarter and in the next quarter employed part-time and with no job change throughout the quarter.

Step Three

Cut FLEXSCORE by half when vulnerability score is not zero.

Group the values into three ranked levels

The resulting scale score was rated as Low, Medium or High according to the following rule:

Low, Medium and High with the following corresponding ranges of scale scores: 0, 1, and 2 or more.

Propensity for returning to the labor market after departure

"RETMARKET" is the name given to our index of propensity to return to the labour market after leaving it. Essentially, each separate return to the labor market (from being outside of it) increases RETMARKET by one, and there is a multiplier of certain of these returns according to the number of quarters in which the person held the same job for three consecutive months. The detailed definition, which follows, depends upon the respondent's occupancy of certain sequences of positions within their trajectory.

Each respondent begins with a scale value of zero. Then increments are added according to the following procedure:

Step One

Determine if the respondent left the labour market in any of the 16 quarters.

If the respondent left the labour market then, for each subsequent quarter, add 1 to the scale if the respondent was working full time or part-time with no job change throughout the quarter.

Step Two

If the respondent had left the labour market but was not working full time or part-time with no job change throughout the quarter then, add 1 to the scale if in any of the subsequent quarters the respondent was employed in the first and last month of a quarter.

Step Three

If for any of the 16 quarters, the respondent was outside the labour force in the first month and employed in the last month but had no unemployment in that quarter, then, add 1 to the scale for each such quarter.

Group the values into three ranked levels

The resulting scale score was rated as Low, Medium or High according to the following rule:

Low, Medium and High with following ranges of scale scores: 0, 1 to 4, and 5 or more respectively.

Instability of market-related status

The greater the number of quarter-to-quarter changes of position within a trajectory, the greater is its index of market-related instability. The measure for this concept simply counts the number of such changes within a trajectory.

Each respondent begins with a scale value of zero. Then increments are added according to the following procedure:

Add 1 to the scale for each of the 15 quarters, if the position in the current and the next quarter are not the same.

Group the values into three ranked levels

The resulting scale score was rated as Low, Medium or High according to the following rule:

Low, Medium and High with the corresponding ranges of scale scores as follows: 0, 1 to 2 and 3 or more.

Cultural background

Five very broad categories of cultural background have been defined. They are: (1) "Anglo charter group", (2) "Franco charter group", (3) All others born in Canada, (4) Immigrants who arrived after 19592 and (5) Immigrants who arrived before 1959. It is understood that except possibly groups 1 and 2, these groups are in fact heterogeneous collections of more meaningfully defined categories of cultural background. Limitations of the sample prevent the definition of useful subgroups of all others born in Canada, and of immigrants.

The criteria used to define each of these five classes are provided in the following steps.

Step One

If the respondent (a) was born in Canada, (b) reported being of British, English, Scottish or Irish ethnic origin, and (c) had a mother tongue that was English, English and French, English and Italian, or English and Ukrainian, then she was classified to the first cultural background group called the "Anglo Charter Group".

Step Two

If the respondent (a) was born in Canada, (b) reported being of and French, Québécois, or French Canadian ethnic origin, and (c) had a mother tongue that was French, English and French, French and Italian, French and Spanish, or French and Portuguese, then she was classified to the second cultural group, "Franco Charter Group".

Step Three

All others born in Canada were classified to the third group.

Step Four

If the respondent was born outside Canada and immigrated to Canada after 1959, then he belongs to the fourth group.

Step Five

If the respondent was born outside Canada and immigrated to Canada during or before 1959, then he belongs to the fifth group.

Collapse two of the five categories

The five categories were collapsed down to four categories by aggregating groups 1 and 3 for the purposes of the modeling work. The patterns of partial association for these two groups were similar. The four groups are:

  • Anglo and other Canadian born group
  • Franco charter group
  • Immigrants arriving after 1959
  • Immigrants arriving before 1959.

Wealth rank in 1996

One of two wealth indicators used in the model targets the respondents who were homeowners and had high income in 1996. The second indicator deals with non-home owners and had moderate household income in 1996. These two groups were defined on the basis of a wealth rank scale that makes use of three variables: household income, major source of income and ownership status of the dwelling in which the household lives in. These groups are found at the highest and fourth highest of the wealth ranks described below.

The combinations of attributes that form each level of the ranking are as follows: All of the second to fifth ranks are limited to persons not previously classified to a higher rank.

Highest rank:

Sources of income: wages and salaries, investment income or retirement pension.


Household income quartile: Fourth (highest).


Home ownership: Dwelling is owned.


Second highest rank:

Sources of income: wages and salaries, investment income or private retirement pension.


Household income quartile: First to third quartiles.


Home ownership: Dwelling is owned.


Third highest rank:

Home ownership: Dwelling is owned.


Fourth highest rank:

Household income quartile: Second, Third or Fourth.


Home ownership: Dwelling is not owned.


Lowest rank:

Household income quartile: First (lowest).


Home ownership: Dwelling is not owned.


Work history

The work history variable is an index of the extent to which the person's paid-work life since her first full-time job was concentrated in time spent doing full-time jobs. SLID permits only a rough proxy; however, because its coverage of full-time work history is only in terms of the number of years the person worked full time for at least half of the year.

The variable creates a ranking of persons. At the top level are those for whom all years since that of their first full-time job were years in which they worked full time for at least half of the year. Lower ranks are based on how closely the respondents approximated the top rank. Generally, it is thought that the lower the rank, the more likely the person was exposed to non-standard work over the course of her working life.

The work history index is divided into three levels according to a standard work history ratio, which is defined as follows:

Standard work history ratio = (Number of years of full time work of six months or more) / (Number of years since first started working full time) (1)

Level One

The respondents who have a standard work history ratio of less than 0.85. That is, at least 16% of the years, since they first worked full time, were years in which they did not work full time for at least one-half of the year.

Level Two

The respondents who have a standard work history ratio between 0.85 and 0.99. That is, between 1% and 15% of the years, since they first worked full time, were years in which they did not work full time for at least one-half of the year.

Level Three

The respondents who have a standard work history ratio of one. That is they have been working full time for six months or more every year since they first worked full time.

Care change

The variable "care change" is a proxy for the occurrence of an increase in caring responsibility in the year before closure of the trajectory began. The respondent is first assigned a level on a ranking of personal caring responsibility (another proxy, as shown below) in each year. Care change is then measured by using (a) the personal caring rank for the respondent in two consecutive years and (b) the year when the closure of the trajectory began.

Care change is a dichotomy. It is equal to one when the personal caring rank in the current year is higher than the personal caring rank in previous year, and the closure of trajectory begins in the next year. For example, the care increase took place between 1996 and 1997, and the trajectory began closing in 1998. Care change is valued at zero for all trajectories that do not have this kind of pattern, including unclosed trajectories.

The personal caring rank is grouped into three levels (a) low (b) medium or (c) high, using the personal caring scale which is calculated using the following procedure:

Each respondent begins with a value of zero on the personal caring scale. Then increments are added according to the following procedure:

Step One

Add 2 to the scale if the respondent's major activity during the reference year is caring for other family members (including young children).

Step Two

Add 0.5 to the scale if the respondent has between one to 10 family members who are of age 16 or older and who have a disability.

Step Three

Add 0.025 to the scale if the respondent's parent moved in with the respondent's family (i.e., a move took place which resulted in the person living with one or more of her parents).

Step Four

Add 0.5 to the scale if the respondent is living with one or more of her children (natural or adopted in some way).

Step Five

Add 0.25 to the scale if (a) the respondent is living with one or more of her parents and (b) the respondent's parent did not join the family (i.e. a move did not take place which resulted in the respondent living with one or more of her parents).

The maximum scale value found was 3.0 in 1996. This is an empirical result that can change according to the sample examined and the reference year.

Table B.1
Grouping to produce personal caring rank
Low0 (if the scale is 0)
Medium1 (if the scale is between 0.25 to 0.524)
High2 (if the scale is higher than 0.524)

The Low, Medium and High values represent 38%, 50% and 12% of the distribution of the scale values in 1996. In order to get the value 1 on the care change variable, a person must move up one level in this ranking over a two-year period.

Reception of retirement income by another economic family member3

A two-valued index (values of 1 or 0) was created to test whether another member in the respondent's economic family had started to receive retirement-related income in the year before the closure of the trajectory began. This was done by using (a) retirement-related income in two consecutive years for the respondent and for her household and (b) year when the closure of the trajectory began.

In any year, it was judged that another member in the respondent's economic family was receiving retirement-related income when the household's total of retirement-related income exceeded that of the respondent. The first year when that excess is found is judged to be the year when another member in the respondent's economic family had started to receive retirement-related income. If following that year the respondent began closing her trajectory then the respondent received a value of one on the index.

For example, if the said excess did not exist in 1996 and was found in 1997, and closure of the person's trajectory began in 1998, then this indicates that another member in the family had started to receive retirement-related income in the year before that in which closure began.

The individual retirement related income consists of the following components:

  • Canada Pension Plan and Quebec Pension Plan benefits. Includes disability, death and child benefits.
  • Total of Old Age Security benefits, i.e., the Old Age Security pension plus the Guaranteed Income Supplement.
  • Private retirement pensions. Excludes RRSP withdrawals, but includes RRSP annuities and RRIF withdrawals.
  • RRSP withdrawals.

The corresponding household-level figures pertain to these variables.


Notes

  1. Speed of closure is one of the major new concepts; but it is not covered in this appendix because there is sufficient detail about its definition provided in Appendix A and Volume 1 of the book.
  2. This date was set taking into account not only the historic waves of immigration but also the distribution by year of immigration for members of the SLID cohort that comprise the sample. Theis distribution is split near the middle by using the 1959 date. While there is great interest in breaking down the more recent immigrants according to teh the major waves of immigration since the 1960s, the sub-sample sizes are so small as to be unusable within the subset of self-employed who began transitions between 1996 and 1997.
  3. A person is a member of the respondent's economic family when she lives in teh same household and is related by blood, marriage or adoption. In the defintiion that follows, there is no specififc test for this condition becasue household members in the age range under consideration are almost certain to be in the same economic family.