CHAPTER 10. WORKER MOBILITY: MIGRATION, IMMIGRATION, AND TURNOVER

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# CHAPTER 10. WORKER MOBILITY: MIGRATION, IMMIGRATION, AND TURNOVER - PowerPoint PPT Presentation

CHAPTER 10. WORKER MOBILITY: MIGRATION, IMMIGRATION, AND TURNOVER. In 1996-97, over 3 million workers moved between states 70 to 85 percent of movers cited economic reasons for the move. About one-half of all interstate moves are associated with a change in employment.

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Presentation Transcript
• In 1996-97,
• over 3 million workers moved between states
• 70 to 85 percent of movers cited economic reasons for the move.
• About one-half of all interstate moves are associated with a change in employment.
• Probability of an interstate move falls with age but rises with education.
• More educated people are more likely to make long distance moves.
Economic model of worker mobility

PV of Net Benefits =

where

Bjt = \$ from new job (j) in year t (mea

Bot = \$ from old job (0) in year t.

T = number of years one expects to work at job j.

C = the utility lost in the move itself (“moving costs”)

r = discount rate

Predictions from model
• A worker is more likely to move if:
• young
• more years to collect benefits
• “psychic” costs are lower
• peak years for mobility are ages 20-24 (12% move across state border each year)
• by age 47, mobility rate drops to 4 percent.
• costs of move are low
• single versus family
• effect of second earner in family
Predictions from model
• Net “out-migration” from an area will occur if wages fall in that area relative to other areas.
• Short distance moves are more likely than long distance moves (C larger because of transportation costs and increasing cost of gathering information).
• How will the growth of job information on the internet affect migration?
• If one country has a higher return to education than another, more educated workers will tend to move to the country with the higher return.
U.S. IMMIGRATION HISTORY
• Prior to 1920, U.S. had essentially unrestricted immigration.
• 1921, Quota Law passed.
• set annual quotas based on nationality.
• reduced immigration from eastern and southern Europe.
• 1965: Immigration and Nationality Act
• abolished the quota system based on national origin.
• 1990 amendments allow:
• 675,000 people per year.
• 480,000 reserved for family reunification
• 140,000 reserved for immigrants with exceptional skills
• 55,000 reserved for “diversity” immigrants (immigrants from countries that have not recently provided many immigrants)
• political refugees are permitted without limit.
• Officially recorded immigration in 1996: 916,000
• Illegal immigration estimated at 275,000 per year and 5 million in 1996.

Source:http://www.uscis.gov/graphics/shared/statistics/publications/USLegalPermEst_5.pdfSource:http://www.uscis.gov/graphics/shared/statistics/publications/USLegalPermEst_5.pdf

CONSEQUENCES OF IMMIGRATION

Immigrants reduce wages, increase total employment, but reduce employment of natives.

CONSEQUENCES OF IMMIGRATION
• Other considerations for labor market effects
• elasticity of labor supply
• elasticity of labor demand
• What if immigrants are gross complements to skilled labor?
• Immigrants may increase labor demand through increased product demand.
• Evaluating immigration policy:
• labor market effects
• cost of goods and services.
• tax revenues versus government services
• evidence that those with above a high school education contribute more in taxes than they receive in government services; reverse for those with less than a high school education)
• should immigration policy be driven more by “skills”, family reunification, diversity?
CONSEQUENCES OF IMMIGRATION
• Borjas (2003 NBER):
• “immigration lowers the wage of competing workers: a 10 percent increase in supply reduces wages by 3 to 4 percent.”
• David Card (2005 NBER):
• “Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant.”
• “On the question of assimilation, the success of the U.S.-born children of immigrants is a key yardstick. By this metric, post-1965 immigrants are doing reasonably well: second generation sons and daughters have higher education and wages than the children of natives. Even children of the least- educated immigrant origin groups have closed most of the education gap with the children of natives.”
JOB MOBILITY

Determinants of job mobility:

• compensation package
• deferred pay
• “efficiency” wages
• Non-compete clauses
• what causes firms to offer a package that reduces quits?
• specific training
• large hiring/screening costs
• high monitoring costs (more on this later)
• men vs. women
• men tend to receive more specific training and compensation packages that reduce turnover.
JOB MOBILITY
• large vs. small firms
• large firms tend to invest more in training and have higher screening costs: monitoring problems.
• much of the reason large firms have lower turnover is that their pensions are designed to penalize quitters.
• rural vs. urban areas.
• easier to search in densely populated areas.
MOBILITY COSTS AND MONOPSONY
• For any given level of employment (Na + Nb), the firm will equate ME for each type of labor.
• The more inelastic is labor supply, the greater is the difference between ME and W.
• The more inelastic is labor supply, the lower the wage rate paid.
• LESS MOBILE WORKERS ARE PAID LESS.
MOBILITY COSTS AND MONOPSONY
• Applications of monopsony model
• Married versus single
• Urban versus rural
• With vs. without children
• Majority versus minority workers.