1. Introduction to Economics: Social Issues and Economic Thinking Wendy A. Stock PowerPoint Prepared by Z. Pan CHAPTER 12 IMMIGRATION AND THE INTERNATIONAL TRADE OF LABOR Copyright © 2013 John Wiley & Sons, Inc. / Photo Credit: OMAR TORRES/AFP/GettyImages, Inc.

2.  Describe the extent of international migration  Assess the costs and benefits of migration for migrants  Assess the costs and benefits of migration for host and home countries  Define and describe the extent of outsourcing and offshoring Copyright © 2013 John Wiley & Sons, Inc. 2 AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO:

3.  An Immigrant is someone who migrates into a host country.  An Emigrant is someone who migrates out of their home country. Copyright © 2013 John Wiley & Sons, Inc. 3 IMMIGRANT AND EMIGRANT

4. Copyright © 2013 John Wiley & Sons, Inc. 4 INTERNATIONAL MIGRANTS AS A PERCENTAGE OF THE POPULATION

5. Copyright © 2013 John Wiley & Sons, Inc. 5 U.S. IMMIGRANT POPULATION BY STATE 2010

6.  Monetary costs and benefits: the differences in earnings and cost of living across locations, the cost of flying or driving to the host location the cost of moving belongings.  Nonmonetary costs and benefits: changes in the distance from family and friends changes in recreation and leisure opportunities changes in language, cultural, and governmental differences Copyright © 2013 John Wiley & Sons, Inc. 6 COSTS AND BENEFITS FOR IMMIGRANTS

7.  Improvement in earnings opportunities attract immigrants  Higher monetary or other costs of moving reduce immigration  People who are financially secure and have more labor skills are more likely to migrate than others  Younger individuals are more likely to migrate than older individuals Copyright © 2013 John Wiley & Sons, Inc. 7 DETERMINANTS OF IMMIGRATION

8. Copyright © 2013 John Wiley & Sons, Inc. 8 IMPACTS OF IMMIGRATION ON HOST COUNTRY LABOR MARKETS

9. Copyright © 2013 John Wiley & Sons, Inc. 9 IMPACTS OF IMMIGRATION ON HOST COUNTRY LABOR MARKETS

10. The impact of immigrants on local labor markets depends on whether immigrants are complements or substitutes for native workers, which in turn depends on the level of training and skills that immigrants bring to the labor market. Copyright © 2013 John Wiley & Sons, Inc. 10 IMPORTANCE OF IMMIGRANTS’ SKILLS

11. Copyright © 2013 John Wiley & Sons, Inc. 11 SKILL LEVELS OF IMMIGRANT POPULATION IN THE U.S.

12.  Immigration has impacts on product markets in both host and home countries because changes in the size of a population generate changes in the demand for goods and services.  e.g. U.S. tortilla sales revenue grew from $300 million to over $1.5 billion per year between 1980 and 1990 Copyright © 2013 John Wiley & Sons, Inc. 12 IMPACTS OF IMMIGRATION ON PRODUCT MARKETS

13.  Costs – Pressure on host country resources: (public schools, roads, other government services)  Benefits – Contribution immigrants generate (including tax revenue)  The National Research Council estimated that over the course of a lifetime, the average U.S. immigrant pays about $115,000 more in taxes (in 2011 dollars) than he uses in public resources Copyright © 2013 John Wiley & Sons, Inc. 13 IMPACTS OF IMMIGRATION ON HOST COUNTRY RESOURCES

14. Copyright © 2013 John Wiley & Sons, Inc. 14 THE IMPACT OF EMIGRATION ON HOME COUNTRY LABOR MARKETS

15.  Remittances are transfers of money to home countries by workers who have emigrated.  Remittances are an important source of income for emigrants family members in many developing countries  Remittances generate increases in the demand for normal goods and services in the home country. Copyright © 2013 John Wiley & Sons, Inc. 15 REMITTANCES

16.  Outsourcing occurs when someone hires another person or firm to produce a good or service.  Offshoring is the movement of a firm’s production from one country to another.  Controversy surrounding outsourcing arises because the distribution of the costs and benefits of outsourcing are not equally shared. Copyright © 2013 John Wiley & Sons, Inc. 16 OUTSOURCING AND OFFSHORING AS INTERNATIONAL TRADE IN LABOR

17. Copyright © 2013 John Wiley & Sons, Inc. 17 THE IMPACT OF OUTSOURCING ON HOME COUNTRY LABOR MARKETS

18. Copyright © 2013 John Wiley & Sons, Inc. 18 THE IMPACT OF OUTSOURCING ON HOME COUNTRY PRODUCT MARKETS

19. QUESTIONS/DISCUSSIONS Copyright © 2013 John Wiley & Sons, Inc. 19 In a recent speech, a U.S. government official stated, “The physical distance along a great circle from Wausau, Wisconsin to Wuhan, China is fixed at 7,020 miles... [However] One of the defining characteristics of the world in which we now live is that, by most economically relevant measures, distances are shrinking rapidly....” How will the “shrinking distance” between the U.S. and China affect labor markets in the U.S.? Assume that wages for accountants are lower in China than in the United States. Does this mean that accounting jobs in the United States will be lost to China? Explain.

20. Copyright © 2013 John Wiley & Sons, Inc. 20 KEY CONCEPTS Immigrant Emigrant Outsourcing Host country Home country Offshoring