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Skill differentials among Canadian blue-collar workers Scott, Richard Donald

Abstract

This thesis is an inquiry into the behaviour of skill differentials among Canadian blue-color workers during the postwar period. It sets forth, mainly for expository purposes, a model of relative wage determination based on three elements: the theory of human capital, the standard theory of the firm, and a set of stock-flow identities pertaining to the skilled and unskilled labour forces. Besides yielding the familiar conclusion that percentage wage differentials vary positively with the discount rate and the length of time spent in skilled training and negatively with the length of the working life and the level of remuneration accorded trainees, the model predicts that differentials will undergo cycles of long duration. Whereas the major portion of the theoretical analysis is set in a framework of perfect competition, some attention is paid to the problem of relative wage determination in the presence of trade unions. The formal model serves as an organizational structure for a review of the literature. Existing hypotheses concerning the behaviour of skill differentials are distinguished as being either of a long- or of a short-run character. Long-run hypotheses deal with education and training, social attitudes and policy, migration flows, technological change, and the impact of unionization. Short-run hypotheses are those that make reference to the rate of unemployment and the rate of inflation. The empirical undertaken includes both time-series and cross-sectional studies. Summary statistics are produced in order to trace the movement of skill differentials among building tradesmen and among production workers in a composite sample of thirty-nine mining and manufacturing industries. The results obtained indicate a downward trend over the period surveyed. In the case of the thirty-nine-industry sample, regression analysis reveals the existence of significant positive relationships between skill differentials and each of the short-run variables, unemployment and inflation. The building trades exhibit no short-run response. Examination of a number of regional cross sections supports the view that skill differentials tend to be narrower in British Columbia than in other parts of Canada, but this confirmation applies only to manufacturing. In the building trades, British Columbia skill differentials do not manifest an extreme ranking. Examination of an interindustry cross section uncovers no significant relationships between skill differentials and industry-specific factors such as plant scale, labour intensity, and employment concentration. The level of unionization is marginally insignificant as an explanatory variable. Terence J. Wales Thesis Supervisor

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