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 = where B jt = change in utility from new job 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 (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 –Migrants who moved for economic reasons had earnings increase percent more than earnings of nonmigrants. –Migrants who moved for “family” reasons experienced earnings decrease of 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

U.S. IMMIGRATION HISTORY 1965: Immigration and Nationality Act –abolished the quota system based on national origin. –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 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

U.S. IMMIGRATION HISTORY 2014: Senate Bill 744 Increases border enforcement Allows pathway to citizenship for “registered provisional immigrants” who arrived before 2012 –Must pay taxes; not committed certain crimes; not eligible for federal means tested benefits; no credit for prior earnings history in Social Security. Passed by Senate, not by House. 2014: President Obama executive order –Increases border security –Protection from deportation for 4 million undocumented parents of American citizens or legal permanent residents who have been in the country for at least five years’ –Protection does not include a path to full legal status or citizenship, or eligibility for most federal means tested programs.

Source: PERSONS OBTAINING LAWFUL PERMANENT RESIDENT STATUS BY TYPE AND MAJOR CLASS OF ADMISSION: FISCAL YEARS 2004 TO 2013 Type and class of admission Total957,883 1,266,1291,107,1261,042,6251,031, ,553 Family-sponsored preferences214,355222,229227,761214,589202,019210,303 Immediate relatives of U.S. citizens417,815580,348488,483476,414478,780439,460 Spouses252,193339,843265,671271,909273,429248,332 Children 1 88,088120,064101,34288,29781,12171,382 Parents77,534120,441121,470116,208124,230119,746 Employment-based preferences155,317159,075164,741148,343143,998161,110 First: Priority workers31,29136,96036,67841,05539,31638,978 Second: Professionals with advanced degrees, spec. ability32,53421,91170,04653,94650,95963,026 Third: Skilled workers, professionals, and unskilled workers85,96989,92248,90339,76239,22943,632 Fourth: Certain special immigrants5,3949,5337,75411,1007,8666,931 Fifth: Employment creation (investors) ,3602,4806,6288,543 Diversity50,08444,47141,76149,76340,32045,618 Refugees61,01399,60990,03092,741105,52877,395 Asylees10,217116,84576,36243,55045,08642,235 Parolees7,1214,5691,1721, Children born abroad to alien residents Nicaraguan Adjustment and Central American Relief Act (NACARA)2, Cancellation of removal32,70229,51611,1288,1806,8185,763 Haitian Refugee Immigration Fairness Act (HRIFA)2,4513,3751, Other3,8094,8083,1756,1037,4057,270

Illegal Immigration. Between 1990 and 2007, yearly increase in the number of unauthorized immigrants was estimated to be in the range of 350,000 to 580,000 for an estimated 11.8 million in population. Almost three-quarters of all unauthorized immigrants are from Mexico, and about 12% from Central America. Immigration from Mexico Two reasons for the large number of authorized and unauthorized immigrants from Mexico The huge differential in income per capita between the two countries Both countries share a very long border The roughly 12 million Mexican immigrants who live in the United States in 2007 constituted about one-third (⅓ ) of the entire foreign-born population.

Immigration from Mexico The typical Mexican immigrant is less educated than the average American because the educational levels are generally lower in Mexico. Recent immigrants from Mexico come from the middle (a group where 23% of them in Mexico has between 10 and 15 years of schooling) of Mexico’s skill distribution, not the bottom. Surveys done in areas of Mexico suggest that between 80% and 95% of undocumented entrants into the U.S. use the paid (about $1,680 in 2004) services of smugglers (“coyote”). Chances of apprehension (and returned to Mexico) are about 1 in 3.

CONSEQUENCES OF IMMIGRATION 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.” --compares earnings growth across education-experience groups. David Card (2005 NBER): “Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant.” --compares earnings growth across cities

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 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.