Earnings mobility of rural versus urban workers in Canada

The policy choice to enhance household income for poor, working families depends on the dynamics of individual earnings and their direct, albeit imperfect, link to household income levels. This paper assesses the factors affecting the dynamics of low pay for rural versus nonrural individuals in Canada. Approximately one-quarter of the rural workers sampled in Statistics Canada's SLID data receive a wage less than two-thirds of the median wage for the period and the percentage is increasing over time. In contrast, an average of 17% of workers in urban areas receives wages below this threshold. The low pay in rural areas is also "longer lasting," either because the probability of an upward wage move is less, because the probability of moving out of the labor force is less, or because the probability of moving down from high pay is greater. Thus, direct mechanisms such as a minimum wage are likely to be more effective in rural areas. The higher probability of a move downward (either to low pay or out of the labor force) may be associated with greater seasonal work in rural areas. Hence, policy to address rural low pay may need to take seasonality into account more than in urban labor markets.