Applied Research Bulletin - Volume 2, Number 2 (Summer-Fall 1996) - January 1996

Labour Market Polarization… What's Going On?

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According to the conventional wisdom of the 1980s,the labour market has become a more polarized place — more people earning more, more earning less — and all because the earnings of men and those of women working full time and full year have become more polarized. A closer look at this issue, however, challenges the conventional wisdom. In fact, labour market polarization for the labour force as a whole has not increased from 1984 to 1993.

An Applied Research Branch study by Myles Zyblock examines polarization within 31 different population groups, using several different measures of polarization. In this article, a commonly-used measure of polarization is employed; it is defined as the proportion of individuals earning less than 50 percent and more than 150 percent of the median earnings of their population group. If, for example, a growing proportion of individuals command earnings at levels falling outside the middle earnings group as defined by the 50 and 150 percent boundaries, then that means polarization is increasing.

The ARB study focused on 1984 and 1993, two similar years in the business cycle. Overall polarization in the labour market remained unchanged at 58.9 percent from 1984 to 1993. This result reflects the outcome of two opposing forces within the labour market — women's earnings becoming less polarized and men's earnings becoming more polarized.

Female earners have become a less-polarized group.

Polarization fell from 31.2 percent in 1984 to 29.9 percent in 1993 for women working full time and full year. Similarly, the polarization percentage for those years dropped from 62.4 to 61.2 for all other working women. From 1984 to 1993, polarization for all working women decreased also. Most of the decrease in polarization resulted from significant earnings gains within the bottom 30 percent of each female population group.

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The labour market continues to polarize men's earnings.

Men's real earnings stagnated from 1984 to 1993. Men working full time did not fare well in the labour market over this period. Their real earnings trickled ahead 1.5 percent. The top 30 percent of men working full time and full year experienced weighty gains in their earnings. This increased polarization in the male population. From 1984 to 1993, polarization posted a 12.5 percent increase for men employed full time and full year. The polarization for all other working men showed no noticeable increase from 1984 to 1993.

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Men and women had different labour market experiences with polarization. The result? Combined, the differences wash out, leaving the aggregate working population at the same level of polarization in 1993 as it experienced in 1984.

Caveat: Rising polarization is a problem for the young.

Young workers, under 35, regardless of gender, have become a more polarized group from 1984 to 1993. The problem is more severe for young men because polarization is rising while real average earnings are falling. Real earnings for young men tumbled six percent from 1984 to 1993. At the same time, polarization for this group increased 3.5 percent over the period. Although young women's earnings advanced by 3.5 percent from 1984 to 1993, they too became a more polarized group going into the 1990s. Polarization for young females rose 2.9 percent during this period.

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