List of References
Amano, R., and R.T. Macklem, 1998, “Unemployment Persistence and Costly Adjustment of Labor,” Canadian Public Policy, Vol. 24, February, pp. S138–S152.
Budd, J., 1996, “Union Wage Determination in Canadian and U.S. Manufacturing, 1964–1990: A Comparative Analysis,” Industrial and Labor Relations Review, Vol. 49, July, pp. 673–89.
Card, D., and W.C. Riddell, 1995, “Unemployment in Canada and the United States: A Further Analysis”, Working Paper No. 352, Industrial Relations Section, Princeton University, November.
Corak, M., “Is Unemployment Insurance Additive? Evidence from the Benefit Duration and Repeat Users,” Industrial and Labor Relations Review, Vol. 47, October, pp. 62–72.
Jones, S., and W.C. Riddell, 1998, “Gross Flows of Labour in Canada and the United States,” Canadian Public Policy, Vol. 24, February, pp. S103–S120.
Kuhn, P. and L. Robb, 1998, “Shifting Skill Demand and the Canada-U.S. Unemployment Rate Gap: Evidence from Prime-Age Men,” Canadian Public Policy, Vol. 24, February, pp. S170–S191.
Prasad, E. and A. Thomas, 1998, “Labour Market Adjustment in Canada and the United States, Canadian Public Policy, Vol. 24, February, pp. S121–S137.
Riddell, W.C., and 1999, “Canadian Labour Market Performance in International Perspective,” University of British Columbia, and Canadian Institute for Advanced Research, unpublished paper, August.
Riddell, W.C. A. Sharpe, 1998, “The Canada-U.S. Unemployment Rate Gap: An Introduction and Overview,” Canadian Public Policy, Vol. 24, February.
Sargent, T. C., 1996, “An Index of Unemployment Insurance Disincentives,” mimeo, Economic Studies and Policy Analysis Division, Department of Finance, September.
Storer, P., and M.Van Audenrode, 1998, “Exploring the Links Between Wage Inequality and Unemployment: A Comparison of Canada and the United States,” Canadian Public Policy, Vol. 24, February, pp. S233–S253.
Prepared by Paula R. De Masi.
For a more detailed discussion comparing the Canadian, U.S., and European labor markets, see Riddell (1999).
This decomposition is derived by considering the unemployment rate as the probability of unemployment conditional on being in the labor force, or,
P(U|LF) = P(U[N) * P(N) / P(LF)
where P(LF) is the probability of being in the labor force (labor force participation rate), P(N) is the probability of nonemployment (one minus the employment rate), and P(U|N) is the probability of unemployment conditional on being nonemployed (the labor force attachment of the nonemployed). Taking logs:
In P(U|LF) = In P(N) + In P(U|N) − In P(LF).
Therefore, changes in the unemployment rate can be decomposed into changes in labor force participation, in nonemployment, and in the labor force attachment of the nonemployed.
Using data on gross labor flows between employment, unemployment, and out of the labor force, Jones and Riddell (1998) also find evidence of an increase in labor force attachment of the unemployed during the 1980s.
Without correcting for these cyclical differences, Riddell finds that just over half of the widening of the unemployment differential can be explained by the relative increase in nonemployment (37 percent); and the relative change in labor force participation (17 percent). The differential in labor force attachment of the nonemployed, however, remained the single most important factor, accounting for about 45 percent of the increase in the unemployment differential.
Disincentives introduced by the unemployment insurance system are quantified in the Disincentive Index which reflects a variety of system parameters including the replacement rate, the minimum and maximum weeks of benefit, the number of weeks required to qualify for benefits, and the waiting period. See Sargent (1996).
For example, Card and Riddell (1995) illustrate that based on data from the late 1980s, the eligibility rate for unemployment insurance was 53 percent in Canada versus 43 percent in the United States. Riddell (1999) reports that over the 1980s, the mean per capita weeks of unemployment in Canada declined from 16.8 weeks to 15.6 weeks, and in the United States from 13 weeks to 10.6 weeks.
For a summary of reforms, see Canada—Selected Issues Paper, SM/96/69, Chapter VI. Unemployment Insurance Reforms.