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

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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)

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CHAPTER 10. WORKER MOBILITY MIGRATION,
IMMIGRATION, AND TURNOVER
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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
• Low discount rate (longer time horizon)

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

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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 (tied movers)
• Earnings loss reduced by job search prior to move

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Location of Power Couples

• Power couples more likely to locate in large
  cities (Costa and Kahn 2000)

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Power couple both husband and wife are college
graduates, Part-power couple one spouse is a
college graduate Low-power couple neither spouse
is a college graduate. Couples restricted to
those in which the husband was 25 to 39 years of
age and the wife 23 to 37.
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• Hypotheses for location of power couples
• Higher returns to education in city and the urban
  advantage is growing over time.
• Joint supply problem is a more important problem
  for power couples and the citys ability to
  resolve the problem has increased over time.
• Urban amenities are normal goods and have become
  more important over time.
• More college graduates moving to city because
  marriage market has improved in city.
• Empirical evidence suggests 1 2 are most
  important explanations
• Important implications for the ability of cities
  to attract the highly educated.

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U.S. IMMIGRATION HISTORY

• Prior to 1920, U.S. had essentially unrestricted
  immigration
• Immigration Act of 1917 prohibited immigration
  from Asiatic barred zone (India, Southesast
  Asia, most of Middle East).
• 1921, Quota Law passed.
• set annual quotas based on nationality.
• 3 of number of foreign-born people of each
  nationality living in the U.S. as of 1910 census
• reduced immigration from eastern and southern
  Europe.
• 1924 Quota reduced to 2 of population in 1890
  census
• 1952 Asian nationals allowed to immigrate
• 1965 Immigration and Nationality Act
• abolished the quota system based on national
  origin.

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U.S. IMMIGRATION HISTORY

• 1965 Immigration and Nationality Act
• quota system based on national origin replaced by
  admissions process tied to relationships with
  U.S. citizens or employers
• 1980 Refugee Act
• 1986 Immigration Reform and Control Act
• imposes sanctions on employers that knowingly
  recruit or hire unauthorized immigrants
• creates two legalization programs, one for
  illegal immigrants in the country before 1982 and
  the other for certain temporary agricultural
  workers.
• 2.7 million people would become lawful permanent
  residents
• 1990 amendments
• Increased limits to 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.

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U.S. IMMIGRATION HISTORY

• 2001 Patriot Act
• Broadens terrorism grounds for blocking would-be
  immigrants
• Increases monitoring of foreign students studying
  in U.S.
• 2006 Secure Fence Act
• Called for 700 miles of double-reinforced fence
  along Mexican border.
• 2012 Deferred Action for Childhood Arrivals
• Allows nearly 2 million young illegal immigrants
  to remain in the U.S. and work legally

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Source http//www.dhs.gov/files/statistics/public
ations/yearbook.shtm
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Source http//www.fairus.org/site/News2?pageNews
Articleid16859security1601news_iv_ctrl1007
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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?
• 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?

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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.
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The importance of assimilation to immigrants.
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Illegal Immigration

• Evidence that illegal immigrant from Mexico
  nearly doubles the average wage earned in Mexico
• U.S. advantage declined during great recession
  and illegal immigration slow.
• Enforcement
• Fences
• Deportation of illegal
• Fines for employer

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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.

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Worker quit rates are pro-cyclical
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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.

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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.