The labour market in the 1990s

• Published in: Canadian economic observer Vol. 13; no. 1; p. 3.1
• Main Authors: Heisz, Andrew, Picot, G
• Format: Journal Article
• Language: English
• Published: Ottawa Statistics Canada 01.01.2000
• Subjects: 1990-1999; Competition; Decade reviews; Education; Educational attainment; Employment; GDP; Gross Domestic Product; Hiring; Human capital; Labor force; Labor market; Labor supply; Low income groups; Self employment; Statistics; Unemployment; Workers; Young adults
• ISSN: 0835-9148; 1705-0189

It is beyond this paper to asses the effect of each of these factors. We do, however, contrast the labour market of the 1980s with the 1990s, and ask whether the observed changes are consistent with the notion that the nature of work has changed fundamentally due to competitive and technological pressures. Or did other forces play a major role in the weak labour market observed through most of the 1990s? As is well known, the labour market has strengthened during 1998 and 1999, setting them apart from the rest of the decade. This article focuses on macro-level events such as the shift to self-employment, the outcomes for workers with a given level of human capital, worker mobility, job stability, downsizing, and aggregate income levels. Next month's article in the CEO will focus on the distributional outcomes of the 1980s and 1990s.(f.2) Overall, there has been significant change in labour flows between the 1980s and 1990s. Specifically, the 1990s saw lower hiring and quit rates, reduced labour mobility, robust aggregate job tenure, and little change in the likelihood of permanent layoff. The biggest change was in the reduced likelihood of getting a job, not in the likelihood of losing it. However, these observations probably do not suggest a structural shift in labour markets. In light of slow employment growth, these changes do not seem particularly surprising, except perhaps the stability in the permanent layoff rate. Even there, however, it has been shown that firms were much more likely to adjust their hiring rate during recessions rather than resorting to permanent layoffs, which is the least cyclically sensitive of these labour market flows (Picot, [Lin] and Pyper, 1998). The performance of the 1990s labour market was significantly different than that of the 1980s. In a weak recovery, firms apparently turned to trimmed hiring rather than increased layoffs to adjust. With a low hiring rate, the participation rate was depressed, particularly among the young. With slack labour markets, self-employment increased as workers created their own jobs, quit rates fell, and labour mobility slowed, increasing job tenure among the employed. Downsizing was higher in the 1990s than the 1980s. This version of the story suggests that the weakness of the recovery played a major role in the changes in labour market outcomes between the two decades. This could also have prompted firms to change their behaviour in a more enduring manner, however, resulting in long-term structural shifts. In this case, the nature of work would have changed in a "structural" sense. But what of relative positions? Part II of the paper in next month's CEO deals with distributional outcomes.