Chapter 10: Worker Mobility

1. Chapter 10: Worker Mobility

2. Worker mobility • movement from one job to another. • this may involve geographical changes, and/or • movement from one employer to another.

3. Determinants of worker mobility • workers move if the expected present value of the net benefits is positive

4. Benefits and costs of mobility • psychic costs and benefits are included as well as direct costs and benefits. • costs and benefits include: • friendships with co-workers and members of the community, • family ties, • working environment, • non-pecuniary job benefits, and • characteristics of geographical locations.

5. Factors affecting the mobility decision • Individuals are more likely to move when: • the difference in wages or salaries is large, • the worker is unhappy in his or her current job or location, • the direct cost associated with moving is low, and • benefits will be realized over a longer time period (T).

6. Geographic mobility • more strongly affected by the “pull” from the destination than by the “push” from the original location. • young workers are more likely to move. • married workers are less likely to move. • most moves are within county and state boundaries. • chain migration is a common phenomenon in international migration.

7. Skills, income distribution, and migration • when foreign countries have a lower degree of income inequality: • the return to human capital is likely to be higher in the U.S., • encouraging skilled individuals to emigrate to the U.S. • when there is a higher degree of income inequality in foreign countries, low skilled individuals are more likely to emigrate to the U.S. • in recent decades, immigrants to the U.S. have been less skilled than in the past.

8. Returns to migration • households generally receive an increase in income as a result of immigration. • wives often experience a decline in income as a result of immigration. • immigrants generally receive an initial income that is below that of domestic workers. • immigrants experience a more rapid increase in earnings than for domestic workers. • rate of growth of immigrant income has been lower in recent decades.

9. Return migration • a substantial share of immigration involves return migration. • this may be a planned return after a period of time working in a high-wage area, or • it may be the result of unrealized expectations.

10. Immigration restrictions • until 1921 - only limited restrictions • Quota Law of 1921 - established limits by country of origin • Immigration and Naturalization Act of 1965 - set cap on total immigrants and reserved most spots for immigration related to family reunification. (No restrictions were placed on the number of political refugees) • Immigration Reform and Control Act of 1986 - provided amnesty for some illegal immigrants and raised penalties on the hiring of illegal immigrants

11. Immigration and employment • immigration increases labor supply in some labor markets. • immigration raises labor demand in all labor markets. • domestic employment (and wages) will rise in those labor markets in which labor demand rises by more than labor supply. • domestic employment (and wages) will fall in those labor markets in which labor supply rises by more than labor demand.

12. Overall effects of immigration on U.S. economy • immigrant labor lowers the cost of goods, benefiting consumers. • immigrants pay more in taxes than they consume in public services (this is especially true for illegal immigrants). • immigrants bring their human capital with them when they immigrate. • empirically, immigration appears to have little, if any, effect on the wage rates or employment prospects of domestic workers.

13. Employee turnover and job matching • employee turnover is the result of job quits and layoffs. • workers will engage in a voluntary quit only if the expected benefits outweigh the expected costs. • economic efficiency may improve as a result of job quits and layoffs.

14. Determinants of turnover • workers who receive a lower wage are more likely to quit. • firms that offer lower wages have higher quit rates. • women have higher quit rates. • job quits increase during expansions and fall during recessions. • layoffs rise during recessions and fall during expansions. • workers are less likely to quit when the cost of quitting is higher.

15. Worker mobility and monopsony • When there are no costs of mobility, the law of one price would apply in labor markets. • Workers shift from job to job until the wage rate is the same everywhere for workers with a given mix of skills and abilities. • Mobility costs, however, give firms some degree of monopsony power in labor markets.