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

54 Pages Posted: 6 Jul 2010 Last revised: 31 Dec 2022

See all articles by David Card

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Francis Kramarz

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Thomas Lemieux

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 1996

Abstract

Standard models suggest that adverse labor demand shocks will lead to bigger employment losses if institutional factors like minimum wages and trade unions prevent downward wage adjustments. 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 were (roughly) constant and employment was stagnant. We test this hypothesis by comparing changes in wages and employment rates over the 1980s 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. affected similar workers in Canada and France. Consistent with the view that labor market institutions are more rigid in France, and more flexible in the U.S., we find that relative wages of less-skilled workers fell the most in the U.S., fell somewhat less in Canada, 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.

Suggested Citation

Card, David E. and Kramarz, Francis and Lemieux, Thomas, Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France (March 1996). NBER Working Paper No. w5487, Available at SSRN: https://ssrn.com/abstract=1633249

David E. Card (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Institute for the Study of Labor (IZA)

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Francis Kramarz

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

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National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

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Thomas Lemieux

University of British Columbia (UBC) - Department of Economics ( email )

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Canada

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