A Comparison of Canadian and U.S. Labour Market Performance, 1989-2000

The gap between Canadian and U.S. living standards widened considerably in the 1990s. Americans, on average, were 16 per cent better off in terms of real personal income per capita in 2000 than in 1989, while Canadians experienced a 5 percent increase in real incomes. The thesis of this paper is that this divergence to a large degree, particularly in the first half of the 1990s, has its roots in part in the different labour market and productivity performance of the two economies and that Canada's inferior income performance reflected cyclical factors associated with poor macroeconomic policy management rather than structural factors. The paper is divided into three main parts. The first section examines general economic and labour market developments in Canada and the United States in the 1989-2000 period, looking at trends in real income, population, labour force, employment, unemployment, output and productivity. The second section looks at the common trends in the two labour markets, including the concentration of employment growth in services and in managerial and professional occupations; growing wage inequality; and the downward trend in the non-accelerating inflation rate of unemployment. The third section examines divergent trends in the two labour markets, including the widening of the unemployment rate gap; the emergence of a participation rate gap; and greater self-employment and part-time employment growth in Canada.