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Wage Growth in Canada and the United States: Factors Behind Recent Weakness

Dany Brouillette, James Ketcheson (), Olena Kostyshyna and Jonathan Lachaine

Staff Analytical Notes from Bank of Canada

Abstract: This note examines the relatively subdued pace of wage growth in Canada since the commodity price decline in 2014 and assesses whether the weakness is attributable to cyclical (e.g., labour market slack) or structural factors (e.g., resource reallocation and demographic change). Our analysis indicates that ongoing labour market slack and, to a lesser extent, weak labour productivity growth appear to be key factors weighing on wage growth since 2014 in Canada. The decline in commodity prices may also be a key factor that contributed to subdued Canadian wage growth. A comparative analysis of US wage growth is also conducted. In the United States, weak labour productivity growth is a key macro factor weighing on wage growth, but labour market slack is no longer a material drag.

Keywords: Labour markets; Recent economic and financial developments (search for similar items in EconPapers)
JEL-codes: E E2 E24 J J3 J30 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2017
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Handle: RePEc:bca:bocsan:17-8