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.