What caused earnings inequality to increase in Canada during the 1980s?

Abstract

While broad consensus exists that earnings inequality increased in Canada during the 1980s, as in other industrialised countries, there is little agreement about the causes. The main contribution of this paper is the simultaneous, empirical examination of eight hypotheses of increased earnings inequality, using multivariate regression analysis, namely: the decline in unionisation, minimum wages and industrialisation, as well as the increase in unemployment, trade, relative supply of university-educated workers and relative supply of female workers, and technological change. In Canada, during the 1980s, employment and unionisation factors strongly and consistently explain the increase in annual earnings and hourly wage-rate inequality, after controlling for six other possible determinants. The results also point to the importance of considering a multidimensional explanation of increased earnings inequality and avoiding generalisations across gender, income and work status groups. Copyright 2000 by Oxford University Press.