Labour Mobiliti Dr Jakie

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Labour economics by Dr.jackie, USM

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Labour Mobiliti Dr Jakie

  1. 1. LABOUR MOBILITY
  2. 2. Types of labour mobility <ul><li>Change of employer/firm </li></ul><ul><li>Change of occupation </li></ul><ul><li>Change of geographical location* </li></ul>
  3. 3. Question <ul><li>What influences an individual’s decision regarding migration? </li></ul><ul><li>(Migration: an investment in human capital) </li></ul>
  4. 4. Costs of migration <ul><li>Transportation expenses </li></ul><ul><li>Forgone income during the move </li></ul><ul><li>Psychic costs </li></ul><ul><li>Loss of seniority and pension benefits </li></ul><ul><li>Benefits of migration </li></ul><ul><li>Increase in the stream of future earnings </li></ul><ul><li>If expected earnings gain exceeds the combined monetary and net psychic costs, the person will migrate. </li></ul>
  5. 5. <ul><li>N N </li></ul><ul><li>V P =  E 2 -E 1 -  C - Z </li></ul><ul><li>n=1 (1+i) n n=1 (1+i) n </li></ul><ul><li>V P = Present value of net benefits </li></ul><ul><li>E 2 = Earnings from the new job in year n </li></ul><ul><li>E 1 = Earnings from existing job in year n </li></ul><ul><li>N = Length of time expected on new job </li></ul><ul><li>i = interest rate (discount rate) </li></ul><ul><li>n = year in which benefits and costs accrue </li></ul><ul><li>C = direct and indirect monetary costs resulting from move in the year n </li></ul><ul><li>Z = net psychic costs of the move (psychic costs minus psychic gains) </li></ul>
  6. 6. Question <ul><li> What are the determinants of migration? </li></ul><ul><li>Age </li></ul><ul><li>Family factors </li></ul><ul><li>Education </li></ul><ul><li>Distance </li></ul><ul><li>Unemployment rate </li></ul><ul><li>Other factors </li></ul><ul><ul><li>Home ownership </li></ul></ul><ul><ul><li>Government policies (personal tax rates, government spending on services, investment policies, etc.) </li></ul></ul><ul><ul><li>Language </li></ul></ul><ul><ul><li>Immigration quotas and emigration prohibitions </li></ul></ul><ul><ul><li>Political factors </li></ul></ul><ul><ul><li>Union membership </li></ul></ul><ul><ul><li>Quality of life (climate, crime rate etc.) </li></ul></ul>
  7. 7. Wage Narrowing and Efficiency Gains <ul><li>Assumptions: </li></ul><ul><li>Two labour markets, each perfectly competitive and each situated in a different geographical location </li></ul><ul><li>Each labour market contains a fixed number of worker and there is no unemployment in either market. </li></ul><ul><li>Non-wage job amenities and locational attributes are the same in both areas </li></ul><ul><li>Capital is immobile </li></ul><ul><li>Workers possess perfect information about wages and working conditions in both markets and migration is costless </li></ul>
  8. 8. Labour Market A Labour Market B (1 A) (2 A) (3 A) (1 B) (2 B) (3 B) L VMP A , Annual wage VTP A , Value of total product L VMP B Annual wage VTP B , Value of total product 1 $25000 $25000 1 $21000 $21000 2 23000 48000 2 19000 40000 3 21000 69000 3 17000 57000 4 19000 88000 4 15000 72000 5 17000 105000 5 13000 85000 6 15000 120000 6 11000 96000 7 13000 133000 7 9000 105000 8 11000 144000 8 7000 112000 9 9000 153000 9 5000 117000 10 7000 160000 10 3000 120000
  9. 9. <ul><li>Labour will continue to relocate until VMP A =VMP B </li></ul><ul><li>Question </li></ul><ul><li>State the direction of migration and the number of workers who migrate. </li></ul><ul><li>What is the impact of migration on the total value of output? </li></ul><ul><li>VTP before migration = $____ </li></ul><ul><li>VTP after migration = $____ </li></ul>
  10. 10. Efficiency gains from migration COUNTRY A COUNTRY B L L W a W e e f b W 0 D A a g c W e W b 0 W h i j l k m D B Before migration: output A=Oabe; After migration: output A= Oacf Before migration: output B=Ohjl After migration: output B=Ohik
  11. 11. External Effects Migration Externalities <ul><li>Migration externalities </li></ul><ul><li>Real negative externalities: e.g. Congestion, crime </li></ul><ul><li>Pecuniary (Financial) Externalities </li></ul><ul><li>--Losses in the Origin Country </li></ul><ul><ul><li>--Reduced Wage Income to Native Workers </li></ul></ul><ul><ul><li>--Fiscal impacts (government expenditure & taxes) </li></ul></ul><ul><ul><li>--Gains to Owners of Capital </li></ul></ul>
  12. 12. COUNTRY A (destination) (before migration) L W a W e e f b W 0 D A a g c Before migration: Total output? Labour Share? Capitalists share? After migration: Total output? Labour Share? Capitalists share? W a W a W e 0 D A b g c e f L COUNTRY A (destination) (after migration) g
  13. 13. Capital Flows COUNTRY A (USA) COUNTRY B (South Korea) L L S S D D 1 D D 1 W W 0 0 W A W E W E W B Initially: W A > W B Capital flows shift the labour demand curve The wage gap/differential between A and B is reduced. This reduces the extent of migration.
  14. 14. Product Flows (International Trade) <ul><li>Capital and labour are immobile </li></ul><ul><li>Workers in both countries are homogenous </li></ul><ul><li>Assume W us <W Korea </li></ul><ul><li>US Consumers will buy more Korean goods </li></ul><ul><li>Labour demand in Korea ↑ -> W Korea ↑ </li></ul><ul><li>Demand for US products decline. Labour demand in US ↓-> W us ↓ </li></ul>COUNTRY A (USA) COUNTRY B (South Korea) L L S S D D 1 D D 1 W W 0 0 W A W E W E W B
  15. 15. Effects of Illegal Immigration <ul><li>Employment Effects </li></ul><ul><li>Do illegal immigrants decrease the employment of domestic workers on a one-for-one basis? </li></ul><ul><li>Wage effects (substitutes or complements) </li></ul><ul><li>Fiscal effects (taxes, government expenditure) </li></ul>S d S t D L =MRP W L 0 Q d Q t W d W t

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