VI. Explanations of Developments in the Relationship between Labour Productivity and Real Wages in Canada

International Productivity Monitor, Fall 2008 | Go to article overview

VI. Explanations of Developments in the Relationship between Labour Productivity and Real Wages in Canada


Previous sections have summarized the theory and challenges underlying the measurement of the relationship between labour productivity and real wages as well as reviewed recent trends in Canada and other OECD countries. This part of the report suggests possible explanations for changes in the relationship in Canada. The first section provides a decomposition of the difference in growth rates between a commonly used indicator of compensation, median earnings, and labour productivity since 1980. The second section briefly examines how labour's terms of trade have evolved since 1961, and points out potential areas for further research. The third section narrows the discussion to the labour share. It discusses the potential effect of business cycles and structural factors on the labour share in Canada.

A. An Accounting Perspective on the Relationship between Labour Productivity and Real Wages in Canada

In May 2008, Statistics Canada (2008) released a comprehensive review of the earnings of Canadians between 1980 and 2005 based on census data. A widely reported finding was that the median earnings of full-time, full-year workers in Canada rose only $53 dollars, from $41,348 (2005 dollars) in 1980 to $41,401 in 2005. In light of the significant labour productivity gains over the same period (37.4 per cent), this finding begs the question of whether workers have an interest in labour productivity growth when they do not seem to benefit from it. This part of the report also seeks to explain where these productivity gains have gone.

As was discussed in part IV, a number of conceptual and methodological hurdles stand in the way of a meaningful comparison between labour productivity and earnings growth. This section provides an accounting analysis of the gap between stagnant median earnings and labour productivity growth in an attempt to quantify the role of particular methodological differences between the two measures. (15)

The apparent discrepancy between labour productivity and earnings is in part a result of inconsistent measurement. The two measures embody different definitions and concepts that are either not comparable, or cannot be meaningfully compared as they lack consistency. As shown in Summary Table 14, about one fifth of the 1.26 percentage-point gap between annual median earnings growth and annual labour productivity growth over the 1980-2005 period was due to measurement issues.

First, to make a meaningful comparison between earnings and labour productivity, the same unit of labour input must be used. While census earnings are reported for full-time full-year workers, productivity is reported for all workers and is generally expressed on an hourly basis. In our analysis, the transformation from full-time, full-year workers to hours was divided in two steps (Summary Table 15). First, it was noted that the average earnings of full-time full year earners grew at about the same rate as that of all earners, where an earner is defined as anyone with earnings during the year rather than an average of the monthly number of earners as is the case for the definition of annual average employment. Second, it was found that the number of hours worked per year per earner has increased slightly over the 1980-2005 period, up 2.25 per cent or 0.09 per cent on an annual basis.16 Adopting a more appropriate measure of labour input, hours worked, thus increases the gap by 0.10 percentage points (7.9 per cent).

Second, the census earnings definition is not an exhaustive measure of total labour compensation as it excludes supplementary labour income, which includes employer contributions to social insurance programs such as CPP and EI, which can be considered a form of delayed or future earnings. As noted earlier in the report, national accounts data show that nominal supplementary labour compensation increased much faster than census earnings, boosting average total labour compensation. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

VI. Explanations of Developments in the Relationship between Labour Productivity and Real Wages in Canada
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.