THE RESPONSE OF WAGES TO PROTECTIVE LABOR LEGISLATION - EVIDENCE FROMCANADA

Using micro data from the 1986-87 Canadian Labour Market Activity Surv ey, the author examines the wage effect of laws requiring advance noti ce of layoffs and in some cases also requiring severance payments to l aid-off workers. The results suggest that incumbent workers protected by advance notice and severance pay laws were able to extract higher w ages than were incumbent workers unprotected by such laws. There is ev idence, however, that the ultimate wage effect differed by workers' un ion status: starting wages of nonunion workers appear to have fallen t o offset the subsequent wage increase, indicating that nonunion worker s may ''pay for'' advance notice and severance pay laws, whereas union workers who were protected by such laws seem to have been able to exp loit their bargaining position to increase their lifetime earnings.