Worker Mobility Flashcards
What is Worker Mobility?
the movement from one job to another
When do workers move?
If the expected benefits outweigh the costs
Why is present value used?
To account for migration costs and benefits occurring at different times
What is present value of Net Benefits?
( 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)
Under what conditions are individuals more likely to move?
- 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)
Are moves more strongly affected by “pull” of new location or “push” from original location?
affected by “pull” of new location over “push” from original location
Why are most moves within county and country boundaries?
- Information costs are higher in more distant locations
- Moving costs, especially psychic costs (e.g. stress), are also higher
What are the two sources of return migration?
- Initial migration was a mistake
- Incorrect expectations
- Unexpected change(s) - 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 psychic moving costs continue to look for best job match in EU
How do migrants and immigrants differ from the rest of the population?
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
What is immigration affected by?
the level of income inequality in the sending and receiving countries
When sending countries have a lower degree of income inequality than the receiving country
- 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
When there is a higher degree of income inequality in sending countries
low-skilled individuals are more likely to emigrate to the receiving country
- The Roy model illustrates these points
How is inequality measured in graphs?
the steepness of the line
- the flatter the line the more equal
- the steeper the line the less equal
The steeper the line
the higher the income inequality
What are direct costs and benefits that present value takes into account?
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
What determines the skill composition of the immigrant flow
relative payoff for skills across countries
What happens if payoff for skills declines in the receiving country?
The effect of a recession in the receiving country
With rising female labour-market participation, what are increasing?
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
What is a tied stayer?
an individual who remains in their current job due to constraints or ties, often due to household considerations
What is a tied mover?
someone who relocates primarily due to the needs of their spouse or family, even if it means personal or professional sacrifices
Describe/draw the immigration graph?
- 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
In the immigration graph, would removing immigrants create the same number of jobs for citizens?
No. N2 - N1 jobs would be eliminated by raising wages
What is the effect of immigration on demand?
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
What are an increase in migration costs equivalent to?
a reduction in payoff to skills
What are some traits associated with high or low job mobility generally?
- wages
- specific training
- employer size
- gender
- economic cycle
How are wages associated with high or low mobility?
-> 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
How is specific training associated with high or low mobility?
-> 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.
How is employer size associated with high or low mobility?
-> 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
How is gender differences associated with high or low mobility?
-> Research is mixed on whether or not women have higher quit rates
-> Also 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
How are cyclical effects associated with high or low mobility?
-> 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
How is location associated with high or low mobility?
-> 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
How is earnings profile associated with high or low mobility?
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
Is more mobility better?
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
Positive Selection
Higher income inequality in receiving country - high skilled workers move
Negative Selection
Higher income inequality in sending country - low skilled workers move
