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

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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.

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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

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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

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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.

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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.

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LPRlegal permanent resident
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Sourcehttp//www.uscis.gov/graphics/shared/statis
tics/publications/USLegalPermEst_5.pdf
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CONSEQUENCES OF IMMIGRATION
Immigrants reduce wages, increase total
employment, but reduce employment of natives.
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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?
• 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?

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CONSEQUENCES OF IMMIGRATION

• Empirical approach
• Wi a0 a1immigrant inflowi a2educationi
  ei
• Borjas (2003 NBER)
• Argues city/state level analysis is flawed
• Endogeneity of migration flows (biases a1 to
  zero)
• Potential exits of natives (biases a1 to zero)
• Relevant labor market defined by
  education/experience groups.
• 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.
• Relevant labor market defined by city in earlier
  studies
• Changed labor market to city/occupation in later
  study

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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.

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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.

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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.

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MOBILITY COSTS AND MONOPSONY

• Applications of monopsony model
• Married versus single
• Urban versus rural
• With vs. without children
• Majority versus minority workers.