A Demographically Augmented Shift-Share Employment Analysis: An Application to Canadian Employment Patterns

Transcription

1 JRAP 38(2): MCRSA. All rghts reserved. A Demographcally Augmented Shft-Share Employment Analyss: An Applcaton to Canadan Employment Patterns James A. Brox and Emanuel Carvalho Unversty of Waterloo - Canada Abstract. In ths paper we llustrate how the tradtonal shft-share model may be readly expanded to analyse dsaggregate data on varous age-sex cohorts of the labour market. Further we show that such results can be msleadng unless age-sex-specfc labour-force changes are explctly consdered. We then analyze the performance of the Canadan regonal labour markets as an example of the proposed procedure. 1. Introducton Tradtonal analyss of regonal employment changes has recognzed the mportance of accountng for both dfferences n ndustral structure and locatonal advantages (dsadvantages) that may be present n the regon. Frequently, shft-share analyss has been used to separate these effects, for example O Leary (2003) and Esteban (2000), n studyng regonal convergence n Europe. More recently, several studes have looked more closely at regonal nequalty n terms of gender [Penado and Caro Cespedes (2004) and Hunt (2004)] and/or age group [Stenberg and Wkstrom (2004), MacDonald and Wesbach (2004) and Kletzer and Farle (2003)]. These studes have typcally gnored, or down-played, the effects of the ndustral structure. In ths study, we suggest a relatvely smple extenson to the standard shft-share model whch allows for drect consderaton of the ndustral mx and the agesex composton of regonal employment change as well as for the regonal locatonal advantages. The study s organzed as follows. In secton 2, we descrbe the theoretcal form of the standard shftshare model and dscuss some of the common crtcsms of ts use n polcy analyss. In secton 3, we suggest modfcatons to allow for the extenson of the analyss for varous age-sex cohorts. Part of ths extenson recognzes the mportance of accountng for age-sex-specfc changes n the labour force when assessng regonal labour-market mpacts. In secton 4, we present an example of the use of the labour-force adjusted, age-sex-specfc, shft-share model by analysng changes n Canadan labour markets from 1986 to In the fnal secton, we summarze our fndngs of the paper and suggest some polcy mplcatons of the analyss. 2. Crtcsms of Shft-Share Models The conventonal shft-share model has been used to assess regonal development as measured on the bass of such varables as ncome, employment, value added, or a varety of others, by separatng growth nto three components: (1) the natonal-growth component, whch ponts to growth that would have occurred n the event that all ndustres n the study regon dsplayed the same rate of growth as the reference economy average; (2) the ndustry-mx component, whch measures the effect of the exstng ndustral structure on regonal growth by capturng the growth that would have occurred f the growth dsplayed by the exstng regonal ndustres matched that exhbted by the same ndustres n the reference economy; and (3) the compettve or dfferental-shft component, whch attrbutes regonal growth to the dynamsm or attractveness of the regon and s measured resdually. The applcaton of the shft-share model, and, n partcular, the relevance of the compettve-shft component have receved undue attenton n the lterature.

2 Demographcally Augmented Shft-Share 57 The applcaton of the conventonal shft-share analyss normally nvolves assessng the ndustral performance of a regon n relaton to the reference economy, where the natonal economy s often used as the reference economy. The analyss s frequently conducted on the bass of employment, whch offers the most readly avalable data over all age groups, accordng to the followng specfcaton: p r r n N E g (1) r r n n I E ( g g ) (2) r r r n C E ( g g ) (3) where the natonal-growth component, N r, s gven by regonal employment n the th ndustry, E r, tmes the overall rate of employment change n the reference economy, the naton, g n. The natonal-growth component, therefore, represents the growth n employment that would have resulted f the regon had experenced the same growth as the reference economy. The ndustral-mx component, I r, s gven by regonal employment n the th ndustry, E r, tmes the natonal (reference economy) rate of employment change n the th ndustry, g n, less the overall rate of employment change n the naton, g n. Thus, the ndustry-mx effect represents the employment growth that would have resulted had each regonal ndustry dsplayed a growth rate consstent wth that experenced by the correspondng ndustry n the reference economy. The ndustry-mx effect s often vewed as a measure of the strength of the ndustral composton n the regon. The compettve component, C r, s gven by regonal employment n the th ndustry, E r, tmes the regonal rate of employment change n the th ndustry, g r, less the natonal rate of employment change n the th ndustry, g n. Ths component s often nterpreted as ndcatve of the locaton advantages/dsadvantages possessed by the partcular ndustry n the regon. Rchardson (1978) s perhaps most representatve of the shft-share crtcs. The man crtcsms of shftshare concern fve central themes: (1) lack of theoretcal content (2) aggregaton problems (3) weghtng bas (4) nstablty of compettve effect (5) nterdependence of the ndustry mx and compettve effects. Whle some studes such as Chalmers and Beckhelm (1976) have attempted to create a theoretcal bass for the shft-share model usng locaton theory, Fothergll and Gudgn (1979) argued that whle techncally t s true that the theoretcal bass s questonable, the use of the shft-share model allows the researcher to test hypotheses n a more meanngful way. Indeed, Andrkopoulos, Brox and Carvalho (1990) showed that forecasts based on the shft-share model are more accurate than those based on analyss of aggregate employment changes. Further, Ireland and Moomaw (1981) and Andrkopoulos, Brox and Carvalho (1987) used shft-share models to forecast nvestment decsons on a regonal bass, and Rgby and Anderson (1993) used an extended verson of the shftshare model to explan changes n Canadan labour productvty. Aggregaton problems have been commonly presented as a flaw n shft-share models, however, most emprcal studes, such as Ashby (1968), Fothergll and Gudgn (1979), and Esteban (2000), have concluded that shft-share models are no more senstve to the level of dsaggregaton than are other models commonly appled to regonal analyss. Rchardson (1978) argued that factors such as busness cycles, demographc shfts and smlar events cause a potental weghtng bas owng to the choce of the base year. McDonough and Shag (1991) showed that such effects are mnmal n the short run and can be accounted for by usng the so-called dynamc shftshare model n longer-term analyss. Fothergll and Gudgn (1979), based on an emprcal applcaton to eleven Brtsh regons, also showed that the effect of weghtng s small. Brown (1969) suggested that the nstablty of the compettve effect rendered the shft-share model next to useless for both forecastng and polcy analyss. Ths clam was dscounted by Danson, Lever and Malcolm (1980) for Brtsh urban areas, and shown to be a mnor ssue for predcton by Ireland and Moomaw (1981) for Oklahoma, and for Ontaro and Quebec by Andrkopoulos, Brox and Carvalho (1990). The nterdependence of components or ts absence has become a standard measure of the valdty of shftshare analyss, as noted, for example, by Arcelus (1984) and Houston (1967). The desrablty of component ndependence has been seen as so promnent that a varety of alternatve shft-share models have been suggested to reduce the correlaton between the ndustry-mx and compettve effects. Loverdge and Seltng (1998) examned a number of these alternatve shft-share models ncludng those by Esteban- Marqullas (1972), Bshop and Smpson (1972) and Arcelus (1984). They showed that the Esteban- Marqullas models do not solve the very problem they

3 58 Brox and Carvalhos purport to elmnate, as one form of nterdependence replaces another. Ths pont has been further stressed by Kel (1992). If the mportance of avodng nterdependence s momentarly suspended, Esteban- Marqullas and Arcelus models are more complex. Nevertheless, they suffer from a lack of what Loverdge and Seltng (1998) termed the zero natonal devaton property,.e., the ndustry-mx and compettve effects summng to zero. Gven ther emprcal results and the need for practtoner acceptance and use, Loverdge and Seltng concluded that the classc model and ts close relatves are the overall wnners (1998, p.55) 3. Demographcally-enhanced Shft-Share In ths study, the standard shft-share analyss s extended beyond ts conventonal applcaton of assessng regonal ndustral performance to account for the mpact of regonal economc growth or declne on partcular age-sex cohorts. To accommodate the effect of regonal economc performance on partcular agesex cohorts, the conventonal shft-share model s modfed accordng to the followng specfcaton: r r n N E g a a (4) r r n n I E ( g g ) (5) a a r r r n C E ( g g ) (6) a a a where the natonal-growth component, N ar, s gven by regonal employment n the th ndustry for a partcular age-sex cohort, E ar, tmes the overall rate of employment change n the reference economy, the naton, g n ; the ndustral- mx component, I ar, s gven by regonal employment n the th ndustry for the partcular age-sex cohort, E ar, tmes the natonal rate of employment change n the th ndustry, g n, less the overall rate of employment change n the naton, g n ; and the compettve component, C ar, s gven by regonal employment n the th ndustry for the partcular agesex cohort, E ar, tmes the regonal rate of employment change n the th ndustry for the partcular age-sex cohort, g ar, less the natonal rate of employment change n the th ndustry, g n. Fnally, snce labour-force changes for specfc agesex cohorts may reflect factors other than labourmarket condtons, 1 the compettve component adjusted for regonal labour-force growth of the partcular age-sex cohort, C lar, s calculated by applyng the same shft-share modellng procedure to the dsaggregated regonal labour-force data, and then subtractng the compettve share component for the age-sex regonal labour force, L ar, from that obtaned for the employment data descrbed above: r r r r r n r r n C C L E [( g g )] L [( g g )] (7) la a a a a where, L ar s the compettve-share component of regonal labour force n the th ndustry for the partcular age-sex cohort; g r la s the regonal rate of labour-force change n the th ndustry for the partcular age-sex cohort; and g n l s the natonal rate of labour-force change n the th ndustry. Thus, our dsaggregated verson of the model desgnates each specfc age-sex cohort n each regon as a separate sub-regon of ts own, analysed n relaton to aggregate economc performance. An alternatve would be to treat the natonal performance of specfc age-sex cohorts as the reference economy and conduct shft-share analyss ndependently for each age-sex component. Our approach allows us to compare the performance of specfc age-sex cohorts to the overall level of economc performance, whle the alternatve approach would provde a more drect measure of the relatve status of a partcular age-sex cohort compared to the same cohort natonally. Accordngly, the natonal-growth component gves the employment change that would have occurred f the employment for the partcular age-sex cohort n each regon had matched the reference economy, that s, the natonal overall average for all age-sex cohorts. The ndustral-mx component gves the employment growth that would have occurred for the partcular age-sex cohort for a gven ndustry n each regon, f the ndustry employment growth had been at the relevant natonal average for that ndustry. The ndustral mx s nterpreted as a measure of the structural strength (weakness) of the ndustral base n each regon. The compettve-share component s nterpreted as the locatonal advantages (dsadvantages) of each age-sex employment cohort for each ndustry, measured by the actual employment growth for each age-sex cohort n the relevant regonal ndustry mnus the natonal average growth for the correspondng ndustry. The labour-force adjusted compettve com- a la l 1 Increased partcpaton n post-secondary educaton for the young and early retrement decsons by older workers are examples of the effects whch we have n mnd here.

4 Demographcally Augmented Shft-Share 59 ponent measures regonal employment growth for a gven ndustry at the age-sex cohort level relatve to the change n the regonal labour-force partcpaton for that age-sex cohort for a gven ndustry. Ths component s nterpreted as the net demand mpact for the specfc age-sex cohort after adjustment for age-sexspecfc supply of labour. 4. An Applcaton The modfed verson of the shft-share model dscussed above has been appled to each of fve Canadan regons ncludng the Atlantc Regon (Newfoundland, Prnce Edward Island, Nova Scota and New Brunswck), Quebec, Ontaro, the Prare Regon (Mantoba, Saskatchewan, and Alberta), and Brtsh Columba, separately for males and females, dvded nto three age groups: young workers (aged15-24), adult workers (aged 25-54), and older workers (aged 55+). The raw data utlzed n the computatons are drawn from Statstcs Canada s Labour Force Survey and have been retreved from CANSIM II, table Based on annual averages by one-, two-, and three-dgt standard ndustral codes, multdmensonal tables for the perod extendng from 1986 to 1995 have been constructed accordng to regon, ndustry, gender and age group for both total employment and total labour force. Tables 1, 2, and 3 present the shft-share components, n numbers of employees, by gender for younger workers, adult workers and older workers, respectvely. For comparson purposes, Table 4 presents the tradtonal shft-share measures, agan presented on the bass of numbers of employees, for the same ndustres and regons. It s readly apparent that although the same basc pattern s found for both the tradtonal compettve shares and the age-sexspecfc verson, there s consderable varaton n the detals. For example, n the Atlantc regon, the compettve share s postve n four of the nne ndustral sectors n the tradtonal shft-share model (Table 4), but negatve for every ndustry n the case of younger workers for both males and females (Table 1). In the same regon, adult female workers (Table 2) are found to have a postve compettve share for every sector. Smlar varablty may be noted for most age-sex cohorts. Aggregatng across varous cohorts allows one to consder the dfferental performance of varous categores of workers. For example, n Table 5, we present the compettve share by age category, produced by aggregatng across regons and sex cohorts. Here t s obvous that adult workers have fared better than the younger or older age groups. Smlarly, n Table 6, we present the compettve share by gender. In ths case t s clear that female workers have ganed at the expense of male workers n almost every ndustry. Fnally, n Table 7, we present the results of adjustng the compettve shares for each age-sex cohort by the dfferental labour-force effect. Ths s partcularly mportant when consderng the relatve performance of the dsaggregate cohorts as labour-force partcpaton rates show consderable varaton over dfferent age-sex groups. For example, whle the compettve share s negatve for every cohort for young Atlantc workers (Table 1), the correspondng results n Table 7 show fve postve results for young Atlantc males and three postve effects for young Atlantc females. 5. Summary and Conclusons Ths study has three man purposes: (1) to llustrate how the tradtonal shft-share model may be readly expanded to analyse dsaggregate data on varous age-sex cohorts of the labour market; (2) to show that such results can be msleadng unless agesex-specfc labour-force changes are explctly consdered; (3) to analyze the performance of the Canadan regonal labour markets as an example of the proposed procedure. The results of ths study clearly ndcate that adult workers have fared better than ether young or older workers, n terms of relatve employment growth over the perod consdered. When labour-force changes are taken nto account, these conclusons are modfed to some extent. In that case, the relatve performance of the adult workers s seen to be less favourable, wth mproved performance for the younger workers and relatvely lttle change noted for the older workers. These results would tend to suggest that the recent trend towards early retrement for older workers has, to some extent, reduced the employment problem facng younger cohorts. When the sex cohorts are consdered, t appears that, n most age groups, females have fared slghtly better than correspondng male groups. Regonally, we note that accountng for labourforce adjustment has tended to make the relatve poston of the adult workers worse and that for younger workers better n most regons. The same adjustment, however, has had a more ambguous effect on the poston of older workers. 2 CANSIM II s Statstcs Canada s computerzed database.

5 60 Brox and Carvalhos Table 1. Shft-Share Components for Youth Workers (Ages 15-24) for the Perod Natonal Growth Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Industral Mx Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Compettve Share Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn

6 Demographcally Augmented Shft-Share 61 Table 2. Shft-Share Components for Adult Workers (Ages 25-54) for the Perod Natonal Growth Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Industral Mx Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Compettve Share Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn

7 62 Brox and Carvalhos Table 3. Shft-Share Components for Older Workers (Ages 55+) for the Perod Natonal Growth Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Industral Mx Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Compettve Share Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn

8 Demographcally Augmented Shft-Share 63 Table 4. Tradtonal Shft-Share Components for the Perod Natonal Growth Industry/Regon Atlantc Quebec Ontaro Prare B.C. Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Industral Mx Industry/Regon Atlantc Quebec Ontaro Prare B.C. Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Compettve Share Industry/Regon Atlantc Quebec Ontaro Prare B.C. Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn

9 64 Brox and Carvalhos Table 5. The Compettve Share by Age Category for the Perod Industry/Age Cohort Youth Adult Elder Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Table 6. The Compettve Share by Gender for the Perod Industry/Gender Male Female Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Whle results are found to be sgnfcant n terms of actual changes, our work has lttle to say concernng desred changes. For example, much of the relatve declne n youth and older workers s the result of changes n partcpaton rates rather than changes n employment opportuntes. Whether such changes n partcpaton rates are desrable, representng nvestment n human captal by youths, or ncreased consumpton of lesure by older ndvduals, or the results of undesred dscouraged-worker effects, we cannot say. The ndustry-mx effects are clear and not overly surprsng, wth agrculture, other prmary, manufacturng, utltes, and publc admnstraton exhbtng weakness n the perod and wth constructon, the fnance, real estate and nsurance, and servce sectors showng growth. Such results, especally when extended to more dsaggregate data, provde the bass for labour tranng polces. Further, when consderng the compettve share effects, especally when dsaggregated for specfc age-sex cohort mpacts, we note some major dfferences across the varous regons. Ths mples that labour-market polces mght be best addressed at a relatvely localzed and dsaggregated level. The smple extenson to the tradtonal shft-share model suggested by ths paper could easly be appled to forecastng followng the same procedure as used by Ireland and Moomaw (1981) for Oklahoma, and by Andrkopoulos, Brox and Carvalho (1990) for the Canadan provnces of Ontaro and Quebec. Also, as suggested by Loverdge and Seltng (1998), the effects of polcy changes on specfc age-sex cohorts could be analysed by lookng at the age-sex specfc compettve-share components n regons followng a partcular polcy, e.g., changng the regulatons concernng mandatory retrement or changng youth mnmum wage laws, relatve to smlar effects n other regons.

10 Demographcally Augmented Shft-Share 65 Table 7. Labour Force Adjusted Compettve Shares Youth (Ages 15-24) Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Adults (Ages 25-54) Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn Older Workers (Ages 55+) Agrculture Other Prmary Manufacturng Constructon TCOU Trade "Fn. Insur, & R.Est." Servce Publc Admn

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