An Index of Labour Market Well-being for Canada and the United States Lars Osberg Economics Department, Dalhousie University Andrew Sharpe & Jeremy Smith Center for the Study of Living Standards

Are workers better or worse off ?  Previous work has constructed “Index of Economic Well Being” for society as a whole consumption flows accumulation of wealth Inequality economic security  Individuals have multiple roles – but in their capacity as workers, same problems of dimensionality and aggregation of “returns from work” exist

Dimensions of Well Being ConceptPresent Representative Agent/ Worker Average Current Returns from work - e.g. average wage/earnings

Dimensions of Well Being ConceptPresentFuture Representative Agent/ Worker Average Current Returns from work - e.g. average wage/earnings Average Accumulation of Human Capital

Dimensions of Well Being ConceptPresent Representative Agent/ Worker Average Current Returns from work - e.g. average wage/earnings Diverse Population Inequality of current returns from work

Dimensions of Well Being ConceptPresentFuture Representative Agent/ Worker – Central Tendency Average Current Returns from work - e.g. average wage/earnings Average Accumulation of Human Capital Diverse Population Inequality of current returns from work Uncertainty / Insecurity of future returns

Summary Table 1: Labour Market Income in Canada and the United States, CanadaUnited States Index of Compen- sation per Employee (A) Index of Compen- sation per hour (B) Index of Labour Market Income = (A)*0.5 + (B)*0.5 Index of Compen- sation per Employee (A) Index of Compen- sation per hour (B) Index of Labour Market Income = (A)*0.5 + (B)* Source: Tables 1 and 9.

Summary Table 2: Human Capital in Canada and the United States, CanadaUnited States Average Years of Schooling (human capital) Index of Human Capital Average Years of Schooling (human capital) Index of Human Capital

Summary Table 3: Labour Market Equality in Canada and the United States, CanadaUnited States Ratio of 9 th to 1 st Earnings Deciles (A) Index of Earnings Inequality (B)=index of (A)*-1 Index of Labour Market Equality (C)=(B)+2 Ratio of 9 th to 1 st Earnings Deciles (A) Index of Earnings Inequality (B)=index of (A)*-1 Index of Labour Market Equality (C)=(B)

Summary Table 7: Labour Market Security in Canada and the United States, Canada United States Index of Security from the Risk Imposed by Unemp- loyment (A) Index of Security from the Risk to Health Imposed by Employ- ment(B) Index of Security from the Risk Imposed by Poverty in Retire- ment (C) Index of Labour Market Security = [(A)+(B)+( C)]/3 Index of Security from the Risk Imposed by Unemp- loyment (A) Index of Security from the Risk to Health Imposed by Employ- ment (B) Index of Security from the Risk Imposed by Poverty in Retire-ment (C) Index of Labour Market Security = [(A)+(B)+( C)]/

Summary Table 9: Relative Levels of Labour Market Well-being, United States=100, 2001 CanadaUnited States Labour Market Income (A) Human Capital (B) Labour Market Equality (C) Labour Market Security (D) Labour Market Well-being =[(A)+(B)+(C)+(D)]/

Caveats  Preliminary work – better component sub-indices are possible and desirable  Countries differ in “social wage” – I.e.range of issues determined in labour market varies E.g. employer paid health plans in USA vs tax-financed, universal Medicare in Canada Implies overstatement of US Labour Market Well Being  Sensitivity to alternative weightings not yet explored

Implications  Are workers better or worse off ? Answer depends on range of issues considered & method of aggregation across workers Average wage/earnings is a poor indicator  What is the gap between groups of workers (e.g. males / females) ? May similarly depend on aggregation