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)
CHAPTER 10. WORKER MOBILITY:
MIGRATION, IMMIGRATION, AND TURNOVER
Economic model of worker mobility
PV of Net Benefits =
T

t 1
B jt  Bot
(1  r )
t
C
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
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)
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
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
Location of Power Couples
• “Power couples” more likely to locate in large cities (Costa and
Kahn 2000)
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.
Hypotheses for location of power couples
1. Higher returns to education in city and the urban
advantage is growing over time.
2. Joint supply problem is a more important problem for
power couples and the city’s ability to resolve the
problem has increased over time.
3. Urban amenities are normal goods and have
become more important over time.
4. 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.
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.
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.
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
Source: http://www.dhs.gov/files/statistics/publications/yearbook.shtm
Source:
http://www.fairus.org/site/News2?page=NewsArticle&id=16859&security=1601&news_iv_ctrl=1007
CONSEQUENCES OF IMMIGRATION
Domestic Labor Supply
Total Labor Supply
w1
w2
n3
n1
n2
• Immigrants reduce wages, increase total employment, but reduce
employment of natives.
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?
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.”
The importance of assimilation to immigrants.
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
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.
Worker quit rates are pro-cyclical
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.
MOBILITY COSTS AND MONOPSONY
ME b
ME
LS
wa
LS
b
a
a
wb
Na
Nb
•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.
MOBILITY COSTS AND MONOPSONY
• Applications of monopsony model
– Married versus single
– Urban versus rural
– With vs. without children
– Majority versus minority workers.