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
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: 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.
Table 11.
PERSONS OBTAINING LAWFUL PERMANENT RESIDENT STATUS BY BROAD CLASS OF
ADMISSION AND REGION AND COUNTRY OF LAST RESIDENCE: FISCAL YEAR 2013
Region and country of last
residence
Immediate
Family- Employment- relatives
sponsored
based
of U.S.
Total preferences
preferences
citizens
Refugees &
Diversity
asylees
Other
REGION
Total
990,553
210,303
Africa
94,589
9,502
389,301
77,288
91,095
5,934
320,093
97,485
6,061
586
1,598
South America
79,287
19,003
Unknown
10,127
505
Asia
Europe
North America
Oceania
161,110 439,460
45,618
119,630
14,432
42,612
18,012
19,463
388
95,975 140,097
14,749
57,753
3,439
22,729
45,339
10,563
5,733
797
22,975 161,162
771
30,120
7,580
3,032
770
50
25
11,052
43,772
620
4,113
727
2,169
3,446
133
2,398
1,476
4,612
Source: http://www.dhs.gov/files/statistics/publications/yearbook.shtm
PERSONS OBTAINING LAWFUL PERMANENT RESIDENT STATUS BY TYPE AND MAJOR CLASS OF
ADMISSION: FISCAL YEARS 2004 TO 2013
Type and class of admission
2004
2006
2008
2010
2012
2013
Total
957,883 1,266,1291,107,1261,042,6251,031,631 990,553
Family-sponsored preferences
214,355 222,229 227,761 214,589 202,019 210,303
Immediate relatives of U.S. citizens
417,815 580,348 488,483 476,414 478,780 439,460
Spouses
252,193 339,843 265,671 271,909 273,429 248,332
Children 1
88,088 120,064 101,342
Parents
77,534 120,441 121,470 116,208 124,230 119,746
Employment-based preferences
88,297
81,121
71,382
155,317 159,075 164,741 148,343 143,998 161,110
First: Priority workers
31,291
36,960
36,678
41,055
39,316
38,978
Second: Professionals with advanced degrees, spec. ability
32,534
21,911
70,046
53,946
50,959
63,026
Third: Skilled workers, professionals, and unskilled workers
85,969
89,922
48,903
39,762
39,229
43,632
5,394
9,533
7,754
11,100
7,866
6,931
129
749
1,360
2,480
6,628
8,543
Diversity
50,084
44,471
41,761
49,763
40,320
45,618
Refugees
61,013
99,609
90,030
92,741 105,528
77,395
Asylees
10,217 116,845
76,362
43,550
45,086
42,235
Fourth: Certain special immigrants
Fifth: Employment creation (investors)
Parolees
7,121
4,569
1,172
1,592
758
556
707
623
637
716
643
643
2,292
661
296
248
183
138
32,702
29,516
11,128
8,180
6,818
5,763
Haitian Refugee Immigration Fairness Act (HRIFA)
2,451
3,375
1,580
386
93
62
Other
3,809
4,808
3,175
6,103
7,405
7,270
Children born abroad to alien residents
Nicaraguan Adjustment and Central American Relief Act
(NACARA)
Cancellation of removal
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
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
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.
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.