An Index of Labour Market Well-being for Canada and the United States

Lars Osberg

Economics Department, Dalhousie University

Andrew Sharpe & Jeremy Smith

Center for the Study of Living Standards

Are workers better or worse off ?

Previous work has constructed “Index of Economic Well Being” for society as a whole consumption flows accumulation of wealth Inequality economic security

Individuals have multiple roles – but in their capacity as workers, same problems of dimensionality and aggregation of “returns from work” exist

Dimensions of Well Being

Concept Present

Representative

Agent /

Worker

Average

Current Returns

from work

- e.g. average wage/earnings

Dimensions of Well Being

Concept Present Future

Representative

Agent /

Worker

Average

Current Returns

from work

- e.g. average wage/earnings

Average Accumulation of Human Capital

Dimensions of Well Being

Concept Present

Representative

Agent /

Worker

Average

Current Returns

from work

- e.g. average wage/earnings

Diverse Population

Inequality of current returns from work

Dimensions of Well Being

Concept Present Future

Representative

Agent /

Worker – Central Tendency

Average

Current Returns

from work

- e.g. average wage/earnings

Average Accumulation of Human Capital

Diverse Population

Inequality of current returns from work

Uncertainty / Insecurity of future returns

Labour Market Compensation per workerIncome

Compensation per hour

Average years of schooling

HumanCapital

Hourly wage inequality

Labour Market Incidence of low wage employmentEquality

Index of Labour Market Well-being

Risk imposed by unemployment - average of unemployment rate and long-term unemployment rate - UI coverage rate - UI benefits replacement rate - employment protection legislation

Risk to health imposed byemployment - workplace death rate - time loss rate from workplace injuries

Risk imposed by poverty at the Labour Market end of working lifeSecurity - elderly poverty intensity

- social security replacement rate - employer pension coverage rate - incidence of defined benefit pension plan membership

Summary Table 1: Labour Market Income in Canada and the United States, 1976-2001

  Canada United States

  Index of Compen-sation per Employee

(A)

Index of Compen-sation per hour (B)

Index of Labour Market

Income = (A)*0.5 + (B)*0.5

Index of Compen-sation per Employee

(A)

Index of Compen-sation per hour (B)

Index of Labour Market

Income = (A)*0.5 + (B)*0.5

1976 1.000 1.000 1.000 1.000 1.000 1.000

1981 0.969 0.967 0.968 0.955 0.967 0.961

1989 1.007 0.965 0.986 1.028 1.004 1.016

1995 1.020 1.009 1.014 1.044 1.022 1.033

2001 1.094 1.084 1.089 1.173 1.149 1.161

Source: Tables 1 and 9.

  

 

Summary Table 2: Human Capital in Canada and the United States, 1976-2001

  Canada United States

  Average Years of

Schooling (human capital)

Index of Human Capital

Average Years of

Schooling (human capital)

Index of Human Capital

1976 11.73 1.000 11.84 1.000

1981 12.20 1.040 12.21 1.031

1989 12.68 1.081 12.62 1.066

1995 13.00 1.108 13.01 1.099

2001 13.44 1.146 13.25 1.119

 

Summary Table 3: Labour Market Equality in Canada and the United States, 1976-2001

  Canada United States

  Ratio of 9th to 1st

Earnings Deciles (A)

Index of Earnings

Inequality (B)=index of

(A)*-1

Index of Labour Market Equality

(C)=(B)+2

Ratio of 9th to 1st

Earnings Deciles (A)

Index of Earnings

Inequality (B)=index of

(A)*-1

Index of Labour Market Equality

(C)=(B)+2

1976 3.832 -1.000 1.000 4.922 -1.000 1.000

1981 4.010 -1.046 0.954 4.911 -0.998 1.002

1989 4.424 -1.155 0.845 5.550 -1.128 0.872

1995 4.195 -1.095 0.905 5.746 -1.167 0.833

2001 4.195 -1.095 0.905 5.746 -1.167 0.833

Summary Table 7: Labour Market Security in Canada and the United States, 1976-2001

   Canada

United States

  Index of Security from the

Risk Imposed

by Unemp-loyment

(A)

Index of Security from the Risk to Health

Imposed by

Employ-ment(B)

Index of Security from the

Risk Imposed

by Poverty in

Retire-ment (C)

Index of Labour Market

Security = [(A)+(B)+

(C)]/3

Index of Security from the

Risk Imposed by

Unemp-loyment (A)

Index of Security from the Risk to Health

Imposed by

Employ-ment (B)

Index of Security from the

Risk Imposed by Poverty in

Retire-ment (C)

Index of Labour Market

Security = [(A)+(B)+

(C)]/3

1976 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000

1981 0.593 1.001 1.114 0.903 0.871 1.111 1.058 1.013

1989 0.638 0.930 1.226 0.931 1.012 1.247 1.085 1.115

1995 -0.015 1.159 1.239 0.794 0.982 1.316 1.095 1.131

2001 0.472 1.190 1.209 0.957 1.446 1.433 1.034 1.304

Summary Table 9: Relative Levels of Labour Market Well-being, United States=100, 2001

  Canada United States

Labour Market Income (A) 86.2 100.0

Human Capital (B) 101.5 100.0

Labour Market Equality (C) 127.0 100.0

Labour Market Security (D) 96.4 100.0

Labour Market Well-being =[(A)+(B)+(C)+(D)]/4

102.8 100.0

Caveats

Preliminary work – better component sub-indices are possible and desirable

Countries differ in “social wage” – I.e.range of issues determined in labour market varies E.g. employer paid health plans in USA vs tax-financed,

universal Medicare in Canada Implies overstatement of US Labour Market Well Being

Sensitivity to alternative weightings not yet explored

Implications

Are workers better or worse off ? Answer depends on range of issues considered &

method of aggregation across workers Average wage/earnings is a poor indicator

What is the gap between groups of workers (e.g. males / females) ? May similarly depend on aggregation