Labor Mobility

The Age Earnings Profiles of Immigrants and Natives in the Cross Section **one-time
Things to remember in cross section: 1st** Lack of skill>> language,
educational credentials,

information about job and place. 2nd** The human capital model>> greater volumes of human capital investment steepened the age-earning profile: learning+assimilation= converged earnings 3rd**Natural selection>> left the best immigrants ability, skill, determination, sacrifices.

Assimilation and Cohort Effect

General definition: Assimilation effect, social psychology, that focuses on desire to maintain balance between experiences and expectations by selectively accepting information consistent with expectations. Cohort effect, social science, to describe

variations in the characteristics of

an area of study over time among individuals who are defined by some shared temporal experience or common life experience, such as skills, birth year, etc.

1st Immigrants age-earnings profile substantially steeper than the natives. The tracing out of the age-earnings profile >> as if there is wage convergence between immigrants and natives, there is none. 2nd The cross-section line CC crosses the native wage at age 40. As if at age 40, the wage of immigrants will pass the wage of natives. In fact, no immigrant group experienced such an overtaking.

The data suggest that there are skill differentials across immigrant cohorts and that these cohort effects are quite large Newly arrived immigrants in 1960 earned about 14 percent less than natives. In contrast, the entry wage disadvantage has hovered around 35 percent since 1980. To determine>> Tracking of specific immigrant cohorts across censuses, therefore, traces out the age-earnings profile for each of the cohorts. The immigrant waves before 1970 >> started with a slight wage disadvantage; ended with =/+ native workers wages in 10-20 years. The cohorts that arrived after 1970, however, start out at a much greater disadvantage, making it unlikely that they will catch up with comparably aged native workers during their working lives.

Decision to Immigrate
1st Skills acquired in advanced. Industrialized economies are more easily transferable to the American labor market>> Industrial structure and the types of skills. 2nd Different types of immigrants come from different countries

Roy model, which describes how workers sort themselves among employment opportunities Each worker makes his or her migration decision by comparing earnings in the source country and in the United States.

U.S. $

U.S. $

U.S.

U.S.

Payoff for skills in the U.S. > Payoff for skills in the source country = all persons who have a skill level exceeding the thresholds are better off in the United States Happen when the payoff for skills in the United States is relatively high. **Positive selection** Immigrants, on average, are very skilled and do quite well in the United States.

Payoff for skills in the source country > Payoff in the United States.

= Workers with fewer than Sy efficiency units earn more in the U.S. and will want to move.

Happen when the payoff for skills in the United States is relatively low.
**Negative Selection** Immigrants, on average, are unskilled and perform poorly in the United States.

Decline in U.S. incomes/ Increasing Migration Cost to U.S.

Extreme high& extreme low skill

Move
Dont move Dont move

Move

Policy Application
>>Most $260 billion(2%) of the U.S. economy, is redistributed from native laborers, whose wages are lowered, to owners of businesses and households that employ labor.

>>Measures the increase in national income that occurs as a result of immigration and that accrues to natives. >>The flow of dollars out of the United States and into Mexico (remittance) is almost 2 percent of the entire Mexican economy.

>>Though native workers in the United States are worse off, Immigrant workers are better off than they would have been had they not migrated to the United States.

Calculating Immigrant Surplus