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

1. 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. • Probability of an interstate move falls with age but rises with education. • More educated people are more likely to make long distance moves.

2. 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

3. 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

4. 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.

5. 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.

6. LPR=legal permanent resident

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

10. CONSEQUENCES OF IMMIGRATION Immigrants reduce wages, increase total employment, but reduce employment of natives.

11. 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?

12. 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.”

13. 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) • Trade secrets • men vs. women • men tend to receive more specific training and compensation packages that reduce turnover.

14. 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.

15. 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.

16. MOBILITY COSTS AND MONOPSONY • Applications of monopsony model • Married versus single • Urban versus rural • With vs. without children • Majority versus minority workers.