Worker Mobility

Question 1

What is Worker Mobility?

Answer 1

the movement from one job to another

Question 2

When do workers move?

Answer 2

If the expected benefits outweigh the costs

Question 3

Why is present value used?

Answer 3

To account for migration costs and benefits occurring at different times

Question 4

What is present value of Net Benefits?

Answer 4

( Σ Bt / (1+r)t ) – C - (to the power of t)
Where:
Bt = increased utility in time t from change
T = Years working after change
r = Discount rate
C = moving costs (utility lost in the move)

Question 5

Under what conditions are individuals more likely to move?

Answer 5

• When 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)

Question 6

Are moves more strongly affected by “pull” of new location or “push” from original location?

Answer 6

affected by “pull” of new location over “push” from original location

Question 7

Why are most moves within county and country boundaries?

Answer 7

• Information costs are higher in more distant locations
• Moving costs, especially psychic costs (e.g. stress), are also higher

Question 8

What are the two sources of return migration?

Answer 8

1. Initial migration was a mistake
   - Incorrect expectations
   - Unexpected change(s)
2. Repeat or return migration maximizes expected lifetime utility
   e.g. attorney takes temporary position in Brussels to learn about EU tax law
   - Individuals with low psyschic moving costs continue to look for best job match in EU

Question 9

How do migrants and immigrants differ from the rest of the population?

Answer 9

They are self-selected
- They typically have a lower discount rate than non-immigrants - they care more about future rewards than present ones
- They tend to be younger
- They tend to be healthier

Question 10

What is immigration affected by?

Answer 10

the level of income inequality in the sending and receiving countries

Question 11

When sending countries have a lower degree of income inequality than the receiving country

Answer 11

• the return to human capital is likely to be higher in the receiving country
• skilled individuals are more likely to emigrate to the receiving country

Question 12

When there is a higher degree of income inequality in sending countries

Answer 12

low-skilled individuals are more likely to emigrate to the receiving country
- The Roy model illustrates these points

Question 13

How is inequality measured in graphs?

Answer 13

the steepness of the line
- the flatter the line the more equal
- the steeper the line the less equal

Question 14

The steeper the line

Answer 14

the higher the income inequality

Question 15

What are direct costs and benefits that present value takes into account?

Answer 15

Costs:
- Friendship with co-workers and members of the community
- Family ties
- Working environment
Benefits:
- Non pecuniary job benefits (perks of a job that do not involve direct monetary compensation e.g., option for remote work
- Characteristics of geographical location

Question 16

What determines the skill composition of the immigrant flow

Answer 16

relative payoff for skills across countries

Question 17

What happens if payoff for skills declines in the receiving country?

Answer 17

The effect of a recession in the receiving country

Question 18

With rising female labour-market participation, what are increasing?

Answer 18

the number of tied movers and tied stayers is increasing
- there is a sizeable increase in migration of highly-educated couples moving to urban areas to increase labour-market prospects

Question 19

What is a tied stayer?

Answer 19

an individual who remains in their current job due to constraints or ties, often due to household considerations

Question 20

What is a tied mover?

Answer 20

someone who relocates primarily due to the needs of their spouse or family, even if it means personal or professional sacrifices

Question 21

Describe/draw the immigration graph?

Answer 21

• Immigration shifts supply curve to the right
• assumes that labour supply is more elastic
• more immigrants willing to do jobs at lower wages than natives
  at w2, domestic supply is N3 of overall N2
• In absence of immigration, domestic employment would rise to N1 and wages would rise to W1

Question 22

In the immigration graph, would removing immigrants create the same number of jobs for citizens?

Answer 22

No. N2 - N1 jobs would be eliminated by raising wages

Question 23

What is the effect of immigration on demand?

Answer 23

shifts demand to the right.
- see a shift in industries where immigrants are perfect complements
e.g., agriculture,
- this frees up natives for higher-skilled jobs

Question 24

What are an increase in migration costs equivalent to?

Answer 24

a reduction in payoff to skills

Question 25

What are some traits associated with high or low job mobility generally?

Answer 25

• wages
• specific training
• employer size
• gender
• economic cycle

Question 26

How are wages associated with high or low mobility?

Answer 26

-> All else equal, worker is more likely to quit a low-paying job than a high-paying job
-> research supports this notion
-> Workers who switch jobs tend to have higher wage growth than workers who stay in the same job
-> the job switchers tend to be from a low pay job

Question 27

How is specific training associated with high or low mobility?

Answer 27

-> Firm benefits from paying individual more than MP at another firm
-> Specific training suggests a negative relationship between probability of job separation and job seniority for a given worker
-> graph of probability of separation on the y axis and seniority on the x - the longer you’re in a job the likelihood you’ll switch jobs decreases.
- the graph is consistent with specific training but is also consistent with general training as well.

Question 28

How is employer size associated with high or low mobility?

Answer 28

-> Quit rates tend to decline as firm size increases
-> more possibility for promotion transfer within firm
-> Larger firms pay higher wages (larger firms are more profitable, small businesses are more likely to struggle in comparison)
-> more internal labour markets in larger firms

Question 29

How is gender differences associated with high or low mobility?

Answer 29

-> Research is mixed on whether or not women have higher quit rates
-> Aldo unclear if women are less likely to invest in certain types of human capital due to possibility of labour market interruptions (maternity leave)
-> Women are way more likely to be in caring roles
- No clear relationship between gender and job changes

Question 30

How are cyclical effects associated with high or low mobility?

Answer 30

-> Quit rates are higher when economy is doing better than when it is not
-> Easier to find another job in a booming economy than in a stagnant or declining economy

Question 31

How is location associated with high or low mobility?

Answer 31

-> quit rates tend to be higher in more urban areas because workers have more “local” options for employment
-> cost of changing jobs varies by country
- Higher mobility in U.S., Canada, Australia
- Lower mobility in Europe and Japan
-> Potential explanations include attitudes toward mobility, subsidized housing, and training rates

Question 32

How is earnings profile associated with high or low mobility?

Answer 32

The relationship between turnover and earnings has interesting implications for workers’ age-earning profiles
-> people who quit tend to have increases in salaries
-> people who are laid off tend to have decreases in salary

Question 33

Is more mobility better?

Answer 33

Mobility costs create monopsony power. -> if it hard for workers to switch jobs - more monopsony power for firm.
Firm specific training - firm less likely to provide it if there is high mobility.
With high mobility there may be an increase in general training.
Where there is low mobility you will see more specific training.
-> can have better job matches with more mobility
-> but high mobility may reduce investments in training, thereby reducing productivity

Question 34

Positive Selection

Answer 34

Higher income inequality in receiving country - high skilled workers move

Question 35

Negative Selection

Answer 35

Higher income inequality in sending country - low skilled workers move