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

1. CHAPTER 10. WORKER MOBILITY: MIGRATION, IMMIGRATION, AND TURNOVER • Examine three dimensions of worker mobility • Migration (movement of natives within country) • Immigration (movement from other countries to U.S.) • Turnover (movement from one employer to another)

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

3. 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

4. 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 • Low discount rate (longer time horizon)

5. 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. • Family migration decisions based on family income effects • “tied movers” could experience decreased earnings

6. Returns to domestic migration • A study of men and women in their 20s during 1979-85 • Migrants who moved for economic reasons had earnings increase 14-18 percent more than earnings of nonmigrants. • Migrants who moved for “family” reasons experienced earnings decrease of 10-15 percent. • More often women than men • Earnings loss reduced by job search prior to move • “Power couples” more likely to locate in large cities • Helps reduce “tied mover” costs • Interstate migration increases with education level • Information • Breadth of job market • e.g. college professor vs carpenter

7. 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 2009: 1.1 million • Illegal immigration • estimated at 10-12 million in U.S.

8. Source: http://www.fairus.org/site/News2?page=NewsArticle&id=16859&security=1601&news_iv_ctrl=1007

11. Source: http://www.dhs.gov/files/statistics/publications/yearbook.shtm

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

13. 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?

14. 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.”

15. The importance of assimilation to immigrants.

16. Illegal Immigration • Evidence that illegal immigrant from Mexico nearly doubles the average wage earned in Mexico • Enforcement • Fences • Deportation of illegal • Fines for employer

17. Job Mobility Determinants: • 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.

18. Worker quit rates are pro-cyclical

19. JOB MOBILITY • large vs. small firms • Large firms have greater difficulty monitoring workers • To help reduce monitoring costs, large firms tend to invest more in training, employ higher quality workers, use better capital. • much of the reason large firms have lower turnover is that their pensions are designed to penalize quitters.

20. 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.

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