Foundations and Current Issues in Industrial Relations and Human Resources Final Essay: Labour Market Polarization In Canada: Potential Causes and Solutions
Submitted To: Professor Rafael Gomez
Submitted By: Cassandra Ferraro and Jojo Yinglin Zhou
Date Submitted: Monday April 13th, 2015
Course Code: IRE2001H-S
Labour Market Polarization in Canada
Income inequality refers to the degree that income is distributed unevenly within a country. Income inequality is an important indicator of equity, which is one of the essential factors that helps to create long-term stability and efficiency. Income inequality is closely related to the living standard and life satisfaction of a country’s citizens. Therefore, when income inequality appears, it could lead to various social and economic problems. According to the Social Planning Council of Winnipeg (2013), researchers have summarized three measurable impacts of income inequality. First, due to the reduction of jobs and wages in certain industries, workers may have lower productivity when they are excluded from employment and the economy. Thus, this would in turn slow down the growth of the economy. Second, direct financial costs will be induced due to the needs to provide more social services, including social housing and supporting programs, in order to help people living in poverty. Finally, indirect financial costs aiming at maintaining security will increase, as the costs for supporting the criminal justice system and health care system will be increased by a large margin. Over the past three decades, income inequality has become an increasingly severe issue in many developed countries including Canada. CBC News reported that in 2010, the share of income owned by the top one percent in Canada has increased from 8% in 1982 to 13.3%. Even after taxes, it still went from 6.3-9.9 percent (Rochon, 2014). In 2011, The Globe and Mail reported that income inequality in Canada was higher than the average of 34 OECD countries, although it was slightly better than the situation in the United States. In 2008, the average income of the top 10 per cent Canadians was $103,500, which was 10 times higher than that of the bottom 10 per cent. However, this ratio was only 8 to 1 in the early 1990s (Grant, 2012). In 2012, the richest one percent Canadian earned 10.6 percent of Canada’s income, which increased dramatically from 7.1 per cent in 1982 (The Globe and Mail, 2013). In addition to the widening absolute wage gap between individuals, income inequality between Canadian families has also increased since 1990s, and it peaked in the 2000s (Rajotte, 2013). During the past few decades, the percentage of middle-income families was shrinking while the share of low- and high-income families has been growing. A study conducted by RBC demonstrated that up until 2009, the wealthiest households in Canada made up 3.7 percent of all households but controlled 67 percent of the total household wealth in the country (Royal Bank of Canada, 2009). While scholars have reached a consensus that income inequality has become an increasingly severe issue in most developed countries, there has been heated debate regarding the main causes and possible solutions for this worldwide phenomenon. In terms of Canada, the widening wage gap could be attributed to multiple factors, including (but not limited to) the female participation rate in labor force, the increase in demand for workers with postsecondary education, the decline of unionization, and the increase in international trade. This paper will classify and analyze all those factors into 3 major categories: the supply of labor, the demand of labor, and the institutional factors. Finally, we will conclude this paper by offering possible solutions to reverse, slow, or mitigate the factors that have led to labour market polarization in Canada. I. Supply of Labor
1.1: The Increasing Demand for Postsecondary Education
Among the many...
References: Berman, E., J. Bound & Z. Griliches. (1994). Changes in the Demand for Skilled Labour Within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures. Quarterly Journal of Economics, 109, 367-398
Berman, E., J, Bound., & S, Machin
Breau, S., & Rigby, D. (2009). International Trade and Wage Inequality In Canada. Journal of Economic Geography. Retrieved from: http://joeg.oxfordjournals.org/content/10/1/55
Freeman, R. B. The Overeducated American (New York: Academic Press), 1976.
Grant, T. (2012). Canada 's Wage Gap at Record High: OECD. The Globe and Mail. Retrieved from: http://www.theglobeandmail.com/report-on-business/economy/canadas-wage-gap-at-record-high-oecd/article4099041/
Kuhn, P. (1995). Labour Market Polarization: Canada in International Perspective.
Lemieux, T. (2006). Post Secondary Education and Increasing Wage Inequality. National
Bureau of Economic Research
Mishel, L., & Walter, M. (2003). How Unions Help All Workers. Economic Policy
Ontario Ministry of Labour. (2014). Section 3: The Economic Impact of Minimum Wages. Retrieved from: http://www.labour.gov.on.ca/english/es/pubs/mwap/section_03.php
Picot, G., & Hou, F
Rajotte, J. (2013). Income Inequality in Canada: An Overview. Report of the Standing Committee on Finance. Retrieved from: http://www.parl.gc.ca/content/hoc/Committee/412/FINA/Reports/RP6380060/finarp03/finarp03-e.pdf
Rochon, L. (2014). Income Inequality Damaging Canadian Economy. CBC News. Retrieved from: http://www.cbc.ca/news/canada/manitoba/income-inequality-damaging-canadian-
Social Planning Council of Winnipeg. (2013). Income Inequality – Affects and Effects! Social Planning Council of Winnipeg – Background Note. Retrieved from: http://www.spcw.mb.ca/files/7613/6018/6266/Income_Inequality_brief_background_Jan13.pdf
Swidinsky, R., & Swidinsky, M. (2002). The Relative Earnings of Visible Minorities in Canada. Industrial Relations, 57(4), 630,659.
The Globe and Mail
Yew, M. (2014). Minimum wage in 2013 just a penny more than 1975, after inflation: Statistics Canada. Toronto Star. Retrieved from: http://www.thestar.com/business/2014/07/16/minimum_wage_in_2013_same_as_1975_in_constant_dollars_statistics_canada.html
Please join StudyMode to read the full document