A Decomposition of Economic Vulnerability Among Indigenous and Non‐Indigenous Adults in Canada

Abstract

Using the 2004–2007 and 2008–2011 panels of the Canadian Survey of Labour and Income Dynamics, we examine earnings and employment disparities between Indigenous and non‐Indigenous adults. While an income gap exists and tends not to significantly change over time, taxes and transfers reduce it by almost 40 percent. Further, the gap is generally largest at the bottom of the income distribution. The explained component of the gap is primarily due to differences in education, particularly for young workers, and although the unexplained portion decreases over time, this is due to increased differences in observed labor market characteristics, implying that labor market discrimination may be on the rise. In addition, the probability of joblessness is higher for Indigenous adults and the male gap has increased. Results are robust to a bounding technique that adjusts for labor force participation differences and tend to be driven by First Nations (as opposed to Métis) adults.