Chapter 10: Worker Mobility

Worker mobility

• movement from one job to another.

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

Determinants of worker mobility

• workers move if the expected present value of the net benefits is positive

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.

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).

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.

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.

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.

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.

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

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.

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.

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.

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.

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.