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 / Arts, Faculty of / Vancouver School of Economics / Graduate

This thesis seeks to add to the understanding of wage determination in Canada. Data from the Labour Market Activity Survey and the Survey of Displaced Workers are analysed to indicate the degree to which wages for workers of given observable characteristics vary across industries. Possible explanations for such differentials are considered, with market-clearing models argued to be unconvincing compared to the main alternative, efficiency-wage theory, which allows for a persistent distribution of labour rents across industries. In particular, the key mechanisms in versions of the efficiency-wage hypothesis appealing to workers' concern for fairness are found to be relatively free of persuasive objections, and to be supported by a substantial body of theoretical and empirical work in social psychology and sociology, as well as in economics. The extent to which the observed inter-industry wage differentials can be explained in terms of posited mechanisms for the operation of workers' concern for fairness is then examined. Some indications of the influence of the concern for equity on inter-industry wage differentials are found, although limitations in the data and multicollinearity among regressors restrict the ability to isolate different industry-specific effects. It is concluded that while there is both a theoretical and an empirical basis for the proposition that workers' concern for fairness plays a role in the determination of wages in Canada, more work on this question, ideally combined with the availability of comprehensive firm-level data, is needed to get a more precise idea of the extent of this influence.

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This study investigates a broad range of factors which might be thought to influence the employment earnings of Canadian males. Micro-data drawn from the 1971 census are analysed, using as a frame of reference the human-capital model derived, and implemented for the United States, by Jacob Mincer. Opening discussion furnishes a detailed critique of the model itself, and of the auxiliary hypotheses required to make it perform empirically. Particular emphasis is laid upon the implicit assumption of perpetual long-run equilibrium and upon the neglect of variables arising on the demand side of the labour market. Generally, it is argued that although the human-capital paradigm may serve as a framework for empirical description, it is inadequate as a scientific theory because it fails to generate a wide array of hypotheses which are clearly susceptible to falsification. Earnings functions are estimated by ordinary least squares for a sample of almost 23,000 out-of-school males who worked, mainly in the private sector, at some time during 1970. Results yielded for Canada by the human-capital specification are compared with those reported by Mincer. The regressions are then expanded to include variables such as industry, region, and occupation, together with other personal attributes. These are found to rival the importance of the orthodox human-capital variables. Contrary to United States results, the elasticity of earnings with respect to weeks (or hours) worked is less than unity. In light of recent analyses which make human-capital investment and labour supply objects of simultaneous decision within a life-cycle context, further investigation is carried out using a simplified, two-equation, linear model in which earnings and hours are both endogenous. Estimates performed by the method of three-stage least squares indicate an elasticity of earnings with respect to hours considerably in excess of unity. However, within particular regional and industrial categories, wages and hours tend to be offsetting. Schooling coefficients, or "rates of return," fall in the 5.25-6.50% range. / Arts, Faculty of / Vancouver School of Economics / Graduate